Commercial Disclosures and Due Diligence in Russia

During commercial real estate leasing in Russia (for example, for a warehouse, restaurant, medical clinic, or beauty salon), the burden of checking documents (Due Diligence) is shifted almost entirely onto the shoulders of the leasing party (the tenant company's lawyers). Unlike the residential sector, errors in corporate B2B leasing lead to multi-million ruble fines from tax authorities, Rospotrebnadzor (Health & Safety), or fire inspectorates.

1. Checking Title Cleanliness (Bans on Registration Actions)

The main risk for any business (retailer) in Russia is that commercial lease agreements for 5, 7, or 10 years must be mandatorily registered in the state Rosreestr as an "encumbrance."

For Rosreestr to approve and stamp a 5-year contract (for instance, to obtain an alcohol sales license for a restaurant, which is not issued without a long-term "clean" lease), the landlord (or tenant's lawyers) must order an "Extended EGRN Extract" or use online references. Business lawyers must uncover:

• Is the shopping center mortgaged to a bank? (Usually, yes. This means written consent from the pledgee bank is required to lease this office, otherwise the contract can be invalidated).
• Are there any arrests by bailiffs (FSSP) for the owner's unpaid taxes? If the building is arrested for debts, Rosreestr will suspend the registration of the long-term lease, and the million-dollar restaurant will not be able to get a license to sell alcohol.

2. Permitted Use (Designated Land Purpose)

In Russia, land and buildings are strictly divided into "Types of Permitted Use" (VRI). If a foreign company (factory) rents a million square meters of "agricultural" fields without uncovering this fact in the documents, and builds a chemical plant (logistics center) there, the state has full right to demolish everything with bulldozers as "misuse or illegal construction."

A Unique Russian Trap: Apartments (Aпартаменты).

Many offices and residential complexes in the RF are sold with the legal status of "Apartments". According to the Civil and Housing Codes of the Russian Federation, Apartments are legally classified as "non-residential multifunctional premises" (commercial).

• The Result: The landlord is not obliged to provide apartment tenants with the protections of the Housing Code (no permanent residence registration, no strict standard for soundproofing or mandatory heating, and your neighbor could be a noisy dental clinic). Any lease in an "Apartment" is closer in spirit to a corporate commercial transaction without social guarantees.

3. License Approvals and Fire Safety (EMERCOM)

This is a zone of maximum financial responsibility: In Russian commercial leasing, by default, the owner transfers only "bare concrete walls." All approvals from supervisory authorities for the specific type of business (medicine, school, spa salon) fall exclusively on the business tenant.

A Frequent Clause in a B2B Contract in the RF: "The Tenant undertakes to independently and at their own expense obtain approvals from SanPiN (Sanitary Services), Rospotrebnadzor, EMERCOM (Firefighters) to conduct their statutory activities inside the leased non-residential premises."

The landlord (Mall or warehouse owner) must only provide a basic certificate for the whole building (that it is not collapsing on its own). Equipping a specific store with sprinklers, a smoke exhaust system, or fire shields, and then passing the audit of potentially corrupt inspectorates, is the business's problem, not the owner of the concrete walls.

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