Suspension of Right to Determine Rental Fee in Foreign Currency
The Law of the Republic of Belarus dated July 18, 2022 No. 197-З “On Amendments to Laws on the Securities Market” (the “Law”) from September 23, 2022 to January 1, 2024 suspends the operation of the norms of legislation (para. 2 of clause 1 of article 298 of the Civil Code and para. 2 of Article 11 of the Banking Code), which directly allowed for the right to determine in contracts the cost of rental fee in foreign currency.
Based on the analysis of the Law, this provision applies to both movable and immovable leased property. At the same time, relations arising from finance leasing agreements as a type of lease do not fall directly under the specified restriction, in our opinion.
Now, before September 23, 2022, changes shall be made to the existing lease agreements in terms of bringing them into line with specified order of the Law.
What to do with existing and new lease agreements?
Under the current agreements, the parties shall agree on the amount of rental fee in Belarusian rubles and conclude an additional agreement. Under newly concluded agreements, the parties shall determine the rental fee in Belarusian rubles.
It should be noted that the binding of a rented square meter of real estate to foreign currency in the contracts generally met the needs of the Belarusian real estate market, and no longer raised any questions neither from tenants, not from property owners, since this primarily protected interests of the latter.
Therefore, from the point of view of the property owners, the issue of protecting their interests becomes relevant. The following are seen as possible alternatives to determining the rental fee in the contract in Belarusian rubles: 1) wider use of other types of rental fee (% of revenue); 2) linking the rental fee to some other equivalents other than foreign currency, for example, to the cost of individual goods (for example, oil) or to conventional units (special drawing rights), which the Civil Code directly operates with; 3) development and use in the contract of additional conditions for changing and/or terminating the contract.
Of course, the effectiveness of the use of certain alternatives shall be confirmed by law enforcement practice or explanations from the regulator, which have not established yet.
The changes also provide more leeway for tenants to negotiate acceptable rent terms, especially in the real estate market, which has already become a “tenant market”, allowing them to define rules of the game in rental realtions much more.
If you need any assistance with rental relations or other issues in the field of Real Estate and Construction, please contact us.
Author: Matsvei Haradnik