Commercial leases

What is happening

A tenant has received the landlord's fifty-page standard lease with a week to agree it. It contains unilateral indexation, a ban on subletting, a security deposit with no return mechanism and structural repairs at the tenant's cost. The tenant needs to know what is critical and to negotiate the rest.

A landlord lets several units in a shopping or business centre and wants a single form of lease that will survive changes of tenant, late payment and arguments about the condition of the premises on return.

The business is relocating while the lease still has several years to run. It needs a lawful way out: termination under the lease, an agreement to terminate, assignment to a new tenant or a sublease.

What the law says

• Leases are governed by Chapter 34 of the Civil Code, which contains special rules for leases of buildings and structures, including rights to the land beneath them.
• A lease of a building or premises for a term of one year or more is subject to state registration under Federal Law No. 218-FZ of 13 July 2015 "On State Registration of Real Estate". An unregistered lease binds the parties but does not protect the tenant, for example, on a change of owner.
• Under the Civil Code a tenant that has performed the lease properly has a pre-emptive right to a new lease, unless the lease provides otherwise. That clause is therefore worth checking at the signing stage.
• Unilateral termination out of court is possible only where the lease or the law provides for it; otherwise early termination goes through the courts on the grounds set by the Civil Code. Exit terms need to be agreed up front.
• Under the Civil Code a security deposit is either set off against the tenant's obligations or returned. The set-off and return procedure is best spelled out, or a dispute over it is almost inevitable.
• Under the Civil Code, inseparable improvements made with the landlord's consent are reimbursable when the lease ends unless the lease provides otherwise. Most leases do, and a tenant needs to see that before starting fit-out works.

What we do

• We draft a lease for your side or review the counterparty's draft, with a risk table and proposed amendments.
• We check the landlord's rights: ownership, the mortgagee's consent, authority to let and sublet, and the permitted use of the premises.
• We agree the key terms: rent and indexation, service charges, repairs and improvements, the security deposit and the exit mechanism.
• We handle negotiations and the disagreement protocol and record what is agreed in wording that can be performed without argument.
• We arrange state registration of the lease and any supplementary agreements where required.
• We support the exit: the termination or assignment agreement, the return-of-premises certificate and settlement of the deposit.

What we will need from you

• The draft lease, or the lease in force with all supplementary agreements.
• A register extract for the premises or the details needed to obtain one, and the floor plan.
• The commercial terms: rent, term, rent-free period and the works planned in the premises.
• Correspondence with the counterparty and the broker on the key issues.
• On exit: certificates, claim letters, details of any arrears and of improvements made.