From time to time I am involved in transactions where a Tenant of a parcel of land agrees to by the land that it currently leases.
Given that transfer of title to real property is subject to State Registration and that such registration can take several months, often it is important to understand when the tenant can stop paying the rent.
Obviously, after the state registration of title the former tenant obtains all rights to the property, but is it possible to stop paying the rent prior to such registration?
A recent case reviewed by the High State Commercial Court of Russia provided the following reasoning.
Agreements for the sale and purchase of land enter into force upon the signing and are valid regardless of the state registration of the purchaser’s title to the land.
The possession of thei land has been passed to the tenant under the lease agreement (i.e. prior to the sale and purchase) . Therefore there is no need to sign a separate document confirming the passing of the possession of the land to the purchaser.
Courts would often state that from the moment of the signing of the sale and purchase agreement the tenant no longer has an obligation to pay the rent. In cases with Public Land the situation is somewhat different.
Pursuant to provisions of current land legislation, the use of land in Russia requires payment.
There are the following forms of payment for the land:
- rental payments or
- land tax.
When public land is first leased and then purchased by the tenant, it is necessary to take into account the status of the seller/landlord from the perspective of tax legislation.
In these relationships the landlord (a public authority) is not a payer of the land tax, while the purchaser (former tenant) is not payer of the land tax either because it has not become the owner yet.
Therefore until the state registration of the purchaser’s title to public land the purchaser (i.e. the former tenant) is required to pay the rent until the state registration of the purchaser’s title to the land.
This post first appeared on Business Lawyer, St. Petersburg, Russia, please read the originial post: here
