On 18 July 2012, a draft resolution of the Plenum of the Supreme Arbitrazh Court of the Russian Federation "On amendments to the resolution of the Plenum of the Supreme Arbitrazh Court of the Russian Federation dated 17 November 2011 №73 "On certain issues in practice of application of the rules of the Civil Code of the Russian Federation on lease" (the "Draft") was published on the website of the Supreme Arbitrazh Court (the "VAS"). The Draft develops the VAS's position on the validity of agreements with respect to future real property, and introduces other important novel concepts. Its adoption is expected shortly.

Ownership should not be a prerequisite to a lease

The VAS diverges from the formal interpretation of article 608 of the Civil Code, in accordance with which only the registered owner of a property has the right to lease it. Established court practice required the lessor to have the registered ownership title to the property at the moment of the lease, and its absence leads to the lease agreement being void.

The Draft explicitly renounces this approach and stipulates that, if the lessor was in lawful possession of the newly created or conveyed real property at the conclusion of the lease agreement, then that is sufficient for the agreement to be valid. By the same token, the absence of a commissioning permit in respect of the capital construction object cannot be a sole ground for the invalidity of the lease agreement.

Therefore, the VAS has cleared the way for conclusion of the future real property leases developing the position stipulated in the Resolution of the Plenum of the VAS №54 dated 11 July 2011 on the sale and purchase of future real property.

Absence of registration of a long-term lease does not make it unconcluded

In one of the proposed solutions to the issue of determination of the leased property, and the terms of the long-term lease agreement before its state registration, the VAS places a priority on the actual relationship between the parties: if the parties have actually reached an agreement on the transferred property, rent and other terms, then the absence of state registration should not lead to the agreement being declared unconcluded and the application of the unjust enrichment rules of the Civil Code. The property should be used in accordance with the assumed undertakings, and a penalty should be imposed in case of breach.

Lease of a part of real property is now permitted

The lease of a part of real property is not explicitly prohibited by the Civil Code, but the lease registration formally requires a cadastral passport in order to properly identify the leased object. This renders the lease of a part of real property, which has no such passport, impossible.

In one of the proposed solutions to this issue, the VAS stipulates that if the parties agree on the subject matter of the lease by way of a graphical or textual description of a part of real property, then this will be sufficient for the state registration of the lease.

Unilateral amendment of rent is under the court's supervision

A provision which specially protects tenant's rights if the landlord is entitled to change the rent unilaterally is one of the most important new concepts introduced by the VAS. If the landlord increases the rent by an amount which significantly exceeds changes in median market rates, the court should deny recovery of the rent in the amount exceeding such change. Although consistent with European practices, this approach is not based on the existing Civil Code provisions.