How to protect yourself in the event of early termination of a tenancy agreement?

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How to protect yourself in the event of early termination of a tenancy agreement? The question is very relevant for both parties, both the tenant and the landlord. Everything largely depends on how the agreement was concluded - in ordinary written form or registered in accordance with the requirements of the law, what points are stated in its terms. If the document is concluded in a simple form, then its termination is carried out by drawing up a bilateral agreement; the termination of agreements duly registered in Rosreestr is carried out in the same official manner.

Why is it unprofitable for the parties to terminate the tenancy agreement early?

Early termination of agreements threatens landlords with the following hassles:

• searching for new tenants;

• downtime of the apartment in case of a protracted process of searching for new tenants;

• unnecessary financial hassle if the owner of the property lives in another area or is often absent from the city, and his presence is required to sign agreements.

It is also unprofitable for tenants to vacate an apartment early for the following reasons:

• the need for financial expenses when searching for new housing through the services of real estate agencies;

• temporary losses when searching for a new apartment;

• possible financial costs if the living space was equipped “to suit you” (for example, existing cosmetic defects were eliminated or wallpaper was re-pasted).

Create a rental chain

The very concept of “sublease” is found quite often in economic practice. How profitable and convenient is it for the main lessor? What is its advantage over regular rent? How to avoid illegal subletting? What to do if the contract with the landlord is terminated early? Here is just an incomplete list of issues that accountants of a variety of organizations have to deal with - both large holdings and small companies.

Yulia Laksha Terminology Renting is the hiring of property for a certain fee that the tenant uses for his own purposes.
The concept of sublease is similar to it and it means the transfer of property to a third party. Such a transaction is regulated by all the rules applicable to rent. For small tenants, the advantage of subletting is that it is easier for them to find a landlord who will provide premises than to contact the owner. It is beneficial for a large organization to use its tenants as intermediaries when renting out its own space to small subtenants. Who allowed it? The most important thing an accountant should start with when concluding a sublease agreement is to find out whether there is permission from the main lessor (Article 615 of the Civil Code of the Russian Federation).

Particular attention should be paid to tenants who rent out state and municipal property. As a rule, it is prohibited to sublease it. It is theoretically possible to obtain permission for such a transaction, but practice shows that such cases are quite rare. And this is where the likelihood of encountering unscrupulous landlords is very high. Having leased state property, they sublease it without the appropriate permits, and problems with the tax inspectorate that arise with the end tenant fall on the shoulders of accountants.

The lease agreement should specify the tenant's right to sublease the property. Therefore, when entering into an agreement, you must ensure that the main lessor allows such a transfer. If there is no such permission, then the tenant will still be able to spend this revenue, and the tax office will only be happy with the extra revenue. But the subtenant will not be able to include the profit in the tax base and offset VAT.

Void agreement Difficulties may arise when the main lessor terminates the agreement with the tenant. In this case, the sublease agreement concluded on the basis of the latter also becomes invalid. A similar situation will arise if the lease agreement is declared invalid (Article 618 of the Civil Code of the Russian Federation). A reasonable solution for a subtenant who is left “on the street” is to contact the main landlord. A new lease agreement is concluded with him without an intermediary, and activities are carried out as usual (Chapter 3 of the Civil Code of the Russian Federation). In addition, the sublease agreement is concluded for a period not exceeding the period of validity of the lease agreement (Article 615 of the Civil Code of the Russian Federation). If the lessor agreed to sublease in the agreement, but did not specify specific terms, then the tenant can enter into sublease agreements without additional permission.

The reasons for termination may be different - for example, violation of the terms of the contract, damage to property, late payment. But even such a “resolution” is possible only on the basis of a court decision (Article 450 of the Civil Code of the Russian Federation).

Utilities may be paid by the subtenant to the tenant or to the main landlord, depending on the terms of the agreement.

Quite often, controversial issues arise regarding the registration of a sublease agreement. And yet, such an agreement must be registered, just like a lease agreement (Article 609 of the Civil Code of the Russian Federation). Many accountants do not consider this measure necessary. But in vain! After all, neither the Civil Code nor the Federal Law “On State Registration of Rights to Real Estate and Transactions with It” contain conditions that “exempt” a sublease agreement from registration. This means that in the event of proceedings, the court has the right to recognize such an agreement as invalid (Information letter of the Presidium of the Supreme Arbitration Court of the Russian Federation dated January 11, 2002 No. 66).

The lease agreement must take into account the possibility of the tenant renting out the property to third parties. If it has already been concluded, and these conditions were not specified in it, then an additional agreement can be concluded.

We don’t need that much. But what about accountants working in companies that are tenants and whose management is interested in subletting property? Renting is often the main activity of a company. It is also possible that the subtenant is also a very important partner. However, the tenant, transferring his property to a third party, takes a significant risk, since the subtenant is not bound by any obligations with him, and this may lead to certain problems.

The legislation does not provide specific instructions on how to issue permits for subletting property. But the accountant must take into account all possible factors that can protect the tenant from illegal subletting. The lease agreement must take into account the possibility of the tenant renting out the property to third parties. If it has already been concluded, and these conditions were not specified in it, then an additional agreement can be concluded. A verified tenant can receive unilateral consent in the form of a letter. But it is better to limit the terms in it, as in the contract, in order to avoid controversial issues in the future. If the terms are not agreed upon in advance, the sublease agreement will be equated to the period of the lease agreement (Clause 2 of Article 615 of the Civil Code of the Russian Federation). The most reliable way for you to be aware of the specifics of the transaction with the subtenant is to negotiate the sublease agreement itself.

Sub-sublease Many accountants and lawyers argue about the existence of the concept of “sub-sub-lease”. It is not specified anywhere in the legislation. Does this mean that subletting property is illegal? Not at all. Such expenses can be included in expenses, because there are no reservations in this regard in the legislation (Article 346.16 of the Tax Code of the Russian Federation). The main thing here is to stipulate in the relevant agreement that the subtenant has the right to sublease the property. But this method is fraught with a certain risk, since there is no unambiguous interpretation of such a situation either in the Civil Code or in the Tax Code. Does this mean that the contract can be challenged in court? The right to lease property belongs only to the tenant, provided that the lessor agrees (clause 2 of Article 615 of the Civil Code of the Russian Federation), but the transfer of property for rent by the subtenant is not provided for. Thus, the sublease agreement is contrary to current legislation.

Practice shows that, despite all the controversial issues, the “sublease scheme” is used by many companies. But in order to avoid mistakes and problems with the tax system, it is better to avoid such a system. Another chain looks more transparent: landlord - tenant - subtenant, because all its aspects are fully described in the legislation, and the interaction of all participants is regulated.

Sublease agreement No. 12

…

5. Change, termination, termination of the agreement

….

5.2. The Agreement may be terminated by the Lessor unilaterally:

5.2.1. If a debt arises to pay the rent stipulated by the terms of the contract, taking into account subsequent changes and additions to it, within three months, regardless of its subsequent payment. Termination of the contract does not relieve the Tenant from the need to repay arrears of rent and pay penalties.

5.2.3. If the Tenant fails to provide, within two working days, unhindered access for representatives of the Lessor or balance holder to the Property for inspection and verification.

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How to protect yourself in the event of early termination of a tenancy agreement?

The most important point when terminating a contract early is its correct execution. It is very important, even at the stage of drawing up the document, to reflect in its terms the onset of all kinds of force majeure. So, if the agreements indicate the option of terminating them unilaterally with a month’s notice, then during this period the landlord will have to look for new tenants, and the tenant will have to pack his bags. If penalties are provided for unilateral termination of the contract, the guilty party will have to pay them. If disputes arise between the tenant and the landlord, they will have to be resolved in court.

That is why it is necessary to pay a lot of attention to the drafting of the hiring document, to correctly spell out all the conditions and provide for various unforeseen situations in them. You can use samples from the Internet. It’s better to contact lawyer Ekaterina Mikhailovna Murzakova (8). You can also get advice from her on all issues of civil and housing legislation.

Normative base

One of the options for protecting the parties from unilateral termination of a rental agreement is to include penalties in its terms of payment by the guilty party.

Another way to avoid an unpleasant situation is to provide the possibility of early termination of agreements only by agreement of the parties. This rule of law is of a general nature and is prescribed by Art. 450 Civil Code of the Russian Federation.

In addition, Art. 610 of the Civil Code of the Russian Federation establishes: if the contract has an indefinite duration, either party may terminate it by notifying the other no later than one month in advance.

At the initiative of the lessor

Article 619 of the Civil Code of the Russian Federation establishes a number of comprehensive conditions under which the lessor has the right to terminate the agreement early:

• the tenant violates the rules for using the property;

• spoils it;

• violates rent payment terms more than twice;

• does not make major repairs to the property if this condition is specified in the document.

At the initiative of the tenant

Early termination at the initiative of the tenant is provided for in Art. 620 of the Civil Code of the Russian Federation and possibly on the following grounds:

• the owner does not provide or interferes with the use of the leased property, or it has shortcomings that were not mentioned when concluding the contract;

• the owner does not carry out major repairs of the property if this is his responsibility;

• due to unforeseen circumstances, the property became unsuitable for use.

It is possible to provide for other reasons for early termination of the agreement at the request of any of its parties.

The best solution for those who are wondering how to protect themselves in the event of early termination of a rental agreement is to carefully read it, as well as have it read by a competent lawyer, who will point out the pitfalls in the document and the benefits for both parties. Disputes regarding compliance with lease agreements are considered in courts of general jurisdiction.

Return to section Termination of a lease agreement

The Supreme Court set priorities in the case of transferring a municipal plot to sublease

The Supreme Court, in Ruling No. 305-ES21-479 of July 22, dealt with a case in which lower courts came to different conclusions about the presence or absence of a violation of the contract in the defendant’s actions, basing their conclusions on its terms and the rules of the law.

On October 11, 2007, the Administration of the Leninsky City District of the Moscow Region and Inkom-Avtozapchasti LLC entered into a land lease agreement for a period of 49 years. According to the additional terms of the agreement specified in clause 5.1, the actions provided for in clauses 5–6 of Art. 22 of the Land Code (sublease), the tenant can sell only after prior agreement with the lessor.

On August 3, 2015, the company asked to agree on the provision of part of the land plot for sublease and to clarify the procedure for such sublease. The administration reported that it was impossible to sublease the land plot due to the lack of cadastral registration of the land plot planned for delivery. In addition, she proposed concluding a new lease agreement with multiple persons on the tenant’s side, or dividing the land plot and concluding new lease agreements, and subsequently transferring them to third parties.

Since the company entered into sublease agreements anyway, the administration filed a claim to terminate the agreement. Since the claim remained unanswered, the administration appealed to the Arbitration Court of the Moscow Region. The plaintiff considered that the defendant violated clause 5.1 of the agreement, according to which the company had to obtain consent in order to transfer the site to sublease.

In refusing to satisfy the claim, the court of first instance referred to Art. 309, 310, 450, 452, 619 Civil Code, art. 22, 46 of the Land Code, as well as the explanations contained in paragraph 18 of the Resolution of the Plenum of the Supreme Arbitration Court of March 24, 2005 No. 11 “On some issues related to the application of land legislation.” He found that the lease agreement was concluded after the entry into force of the Land Code for a period of more than 5 years, while sublease agreements with third parties were concluded after notifying the lessor. The court concluded that there were no grounds for terminating the lease agreement. At the same time, he pointed out the inconsistency of clause 5.1 of the agreement with the legislation in force at the time of its conclusion.

In turn, the appellate court noted that clause 5.1 of the agreement was not disputed and was not declared invalid. By concluding an agreement, the company acted voluntarily and had to foresee the adverse consequences of untimely fulfillment of its obligations and ensure compliance with the agreement. The court concluded that the tenant had materially violated the terms of the contract and granted the claim. The Cassation Court supported the position of the appeal.

Having considered the company’s complaint, the Supreme Court noted that lower authorities came to different conclusions about the presence of a violation of the contract in the defendant’s actions, basing their conclusions on the norms of the law and the terms of the contract. At the same time, the court of first instance proceeded from the peculiarities of the lease agreement for a land plot located in municipal ownership, concluded for a period of more than 5 years, which does not require the prior consent of its owner for sublease, and the courts of appeal and cassation considered the priority condition of the agreement on the need to obtain prior consent. consent to such disposal of their rights by the tenant.

The Supreme Court also referred to the Resolution of the Plenum of the Supreme Arbitration Court No. 11, in paragraph 18 of which clarifications were given that when considering disputes arising from a lease agreement for a land plot in state or municipal ownership for a period of more than 5 years, concluded after the introduction of this code, it should be assumed that the corresponding rights and obligations under this agreement can be transferred by the tenant to a third party without the consent of the owner of the land plot, subject to his notification. However, the lessor and the lessee do not have the right to provide in the lease agreement conditions under which the lessee can transfer its rights and obligations under the agreement to a third party only after receiving consent from the lessor.

“This clarification is based on the peculiarities of long-term leases, in which, due to legislative regulation, the need for prior consent of the public owner for sublease is not provided, and this rule cannot be changed by agreement of the parties. In the absence of a change in this rule, the clarification is relevant when considering the present dispute,” the Supreme Court noted.

The Court also noted that in paragraph 16 of Resolution No. 11, according to which notification of the transfer by the tenant of a land plot of his rights and obligations under the agreement to a third party must be sent to the owner of the land plot within a reasonable time after the relevant transaction has been completed, allowing the tenant to have information about receipt notice to the addressee, it was also clarified about the lessor's right to make a claim for damages as a measure to protect its rights in the event of the tenant's failure to comply with this obligation.

“Thus, since, due to legislative regulation, the tenant under a land plot lease agreement for a period of more than 5 years has a wider scope of rights, the limitation of which is not allowed by the agreement, the conclusions of the courts of appeal and cassation that clause 5.1 of the lease agreement established additional (special) conditions for preliminary agreement with the lessor on the transfer of sublease cannot be considered justified,” the Court concluded.

In addition, the Supreme Court pointed out, clause 5.1 of the lease agreement directly provides that the tenant can exercise the rights provided for in clauses 5, 6 of Art. 22 of the Land Code, after prior agreement with the lessor. Considering that the controversial legal relationship arose from a long-term lease, subject to regulation in conjunction with clause 9 of Art. 22 of the Land Code, clause 5.1 of the lease agreement could not be interpreted and applied by the courts when resolving this dispute as limiting the rights of the tenant of a long-term lease when transferring to sublease. The opposite, as the court of first instance rightly pointed out, is contrary to the law, i.e. clause 9 art. 22 of the Land Code of the Russian Federation, which imperatively established the freedom of a tenant to transfer a land plot under long-term lease into sublease without the consent of the lessor.

The Supreme Court noted that clause 9 of Art. 22 of the Land Code also contains specifics when terminating a lease agreement: early termination of a lease agreement for a land plot located in state or municipal ownership and concluded for a period of more than 5 years, at the request of the lessor, is possible only on the basis of a court decision in the event of a significant violation of the agreement by the tenant. The court of first instance concluded that there were no violations in the actions of the tenant when transferring parts of the leased land plot to sublease, and therefore did not recognize the existence of grounds for terminating the contract.

The Supreme Court indicated that, referring to clause 3.3 of the agreement, which contained the grounds for its termination when transferring a land plot to sublease without the consent of the lessor, the courts of appeal and cassation did not take into account that this clause could not regulate controversial legal relations due to the above-mentioned features rental agreement. In addition, as it was expressly stated in it, it regulated the grounds for unilateral termination of the contract by the lessor, i.e. in an out-of-court procedure, as opposed to what is provided for in a controversial situation. Thus, the Supreme Court upheld the decision of the first instance.

In a commentary to “AG,” junior lawyer of Land Law Firm Tariel Harutyunyan noted that the ruling of the Tenth Arbitration Court of Appeal demonstrates the approach applied in the recent Supreme Court Ruling dated March 23 in case No. A40-32015/2020, in which the Supreme Court demanded that the agreement be interpreted consistently, accepting taking into account the literal meaning of words and expressions, comparing the clauses with other terms and meaning of the contract, as well as ascertaining the general will of the parties, taking into account the purpose of the contract.

“In the given vector, the appellate court turned primarily to civil law and to the clauses of the lease agreement on the mandatory preliminary approval of such a sublease with the lessor, as well as on the lessor’s right to early termination of the agreement when transferring a land plot to sublease without such approval. However, the appellate court did not take into account the imperative provisions of paragraphs 5, 6 and 9 of Art. 22 of the Land Code of the Russian Federation, establishing the right of free transfer by the tenant of a land plot under long-term sublease without the consent of the lessor, which was noted by the AS of the Moscow Region and the Supreme Court,” said Tariel Harutyunyan.

Thus, the lawyer noted, taking into account clause 2 of Art. 607 and paragraph 2 of Art. 615 of the Civil Code of the Russian Federation, which allows for the possibility of establishing by law the specifics of leasing land plots, courts should refer to the imperatively established clause 9 of Art. 22 of the Land Code of the Russian Federation, which provides for the transfer by the tenant of his rights and obligations under a lease agreement for a land plot located in state or municipal ownership, only with the condition of notifying the lessor about this, and not receiving his prior consent. This position is confirmed, for example, by Resolution 21 of the AAS and decisions of the Supreme Court (Determination of February 19, 2021 No. 306-ES19-28137 in case No. A12-6098/2019 and Determination of March 25, 2021 No. 309-ES19-2080 in case No. A34-1087/2018).

Igor Ershov, head of the arbitration practice of the Moscow Law Office "Halimon and Partners", pointed out that the Supreme Court identified several problems: the relationship between the contract and the law, the incorrect application of substantive law norms by appeal and cassation (the norms of Article 22 of the Land Code and Article 422 of the Civil Code), ignoring by these courts the provisions of the Resolution of the Plenum of the Supreme Arbitration Court No. 11.

“I believe that the mistake of the courts of appeal and cassation when considering this dispute is that they did not take into account the norm of Art. 422 of the Civil Code, according to which the contract must comply with the mandatory norms in force at the time of its conclusion, which is also stated by the Economic Collegium in relation to the norm of paragraph 9 of Art. 22 of the Land Code,” noted Igor Ershov.

The appeal and cassation, it would seem, applied the principle of freedom of contract to the relations of a legal entity and a public legal entity, but did it in such a way that they gave priority to the interests of the administration, without applying the applicable rules of substantive law and ignoring the explanations of the Resolution of the Plenum of the Supreme Arbitration Court No. 11, he pointed out .