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Can I break the lease contract if I want to move apartments due to the drop in rental prices?

Michael Bartley, General Director, Four Squares

Rental prices are well below their pre-crisis levels so it makes sense to significantly renegotiate your existing contract, move to a cheaper place or upgrade to a larger apartment for the same price. Apart from saving money, friends have told me they got a lot of satisfaction from dictating terms to landlords who have been raising prices year after year.

Before moving apartment you have to officially terminate your existing lease agreement. There are two types of lease agreement in use currently and your rights are dependant upon which one you signed. The first is a “Lease of Residential Accommodation” or “Naim” lease agreement (in Russian its called договора найма жилого помещения), which is signed when the tenant is a private person. The second is a “Lease agreement” (in Russian its called договор аренды), which companies (or other legal entities) use when signing on behalf of their employees.

The “Naim” agreement is governed by article 687 of the Russian Civil Code and states that the tenant can terminate the lease with 3 months notice. Most of these agreements have a 1-month notice period inserted in them by the real estate broker, and landlords on the whole accept this.

The Lease agreement is governed by article 620 of the Russian Civil Code, which does not give a notice period. Here you should abide by any termination term set in the agreement, if there is no term then the tenant can terminate with 3 months prior notice.

Most landlords and tenants accept whatever termination clause is inserted into the agreement. Court cases are rare.

Galina Tkach, Leasing Department Director, IntermarkSavills

Photo Oleg Migachev

In accordance with Civil Code of the Russian Federation the Tenant has a right to break the lease agreement by giving three months notice of termination. Although in practice, many signed lease agreements have the inclusion of only a one month termination notice. In order to terminate the agreement, the first step should be to contact the Landlord to inform him of your intentions and request a meeting so as to sign a formal termination notice and termination agreement. Only by conducting the process in a formal manner can you prevent future problems arising such as the Landlord withholding your security deposit and not refunding it to you. If you are not able to meet with your Landlord you will need to prepare a letter of termination and send it to him by post.

If your contract requires three months notice in order to terminate the lease but you urgently need to move out of the apartment, an effective course of action would be to send the termination notice to the Landlord as soon as possible and offer to assist him with finding a new tenant for his property. If he is amenable to this you can then contact your real estate agency and ask them to start contacting suitable applicants and begin the process of marketing, advertising and preparation of the property for viewings. However, if the Landlord declines your solution he has the right to do so and you will be required to pay the rent for the full three month period. From our experience however, in 80% of cases we are able to find a new tenant within one month and as a result save the client two months rent which are good results, especially in a time of crisis.

Constantin Kovalev, Managing Partner, Blackwood

Russian legislation envisages three ways to terminate lease contracts:

1. upon consent of both parties,
2. by court decision should one party require to demand such a decision, because the second party has committed serious breaches of the agreement as well as due to other reasons stipulated by the law or the agreement,
3. by one of the parties, if this right is envisaged by the law or consent of the parties.

All these ways to terminate the agreement may be applied to the lease agreement of residential space but with some nuances.

If a tenant leases residential space by agreement of commercial leasehold, article 687 of the Civic Code of the Russian Federation envisages his right to terminate the lease agreement unilaterally and vacate the residential premises after sending a written notification to the Lessor three months in advance provided that other people who live in these premises give their consent. That means that after sending the written notification, it will be necessary to make 3-month rental payments. This norm is imperative, therefore it may not be changed. In practice, lease agreements usually stipulate a shorter period. Since this term contradicts the compulsory provision of the law, it is considered to be null and void and should the leaseholder demand the tenant to pay for three months of lease, the tenant will be obliged by the law to fulfill his requirement.

The law doesn’t envisage the right of the leaseholder to terminate the lease agreement unilaterally but it may be included in the lease agreement. In this case, both parties are entitled to envisage any period of notification of the leaseholder since the law doesn’t put any restrictions.