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Can I re-negotiate the lease agreement now that rental prices are falling?
By Michael Bartley, General Manager, Four Squares

For the last eight years we have seen landlords literally “raising the rent through the roof”, sometimes several times in the same year (even though this is technically illegal). We, as renters, had few options, either pay up or go through the time-consuming and costly process of finding a new place to live. Now that rents are falling, can we re-negotiate a better deal with our landlord? The answer is, basically, yes.

The Russian civil code does not contain any clauses forbidding the tenant from trying to renegotiate the contract. Both landlord and tenant base their relationship on the existing lease agreement, which is usually signed for one year with a fixed price and a one-month termination clause for the tenant. The tenant, therefore, can propose a new rental price at any time. The worst case scenario is that the landlord refuses, in which case you have the choice of accepting this or initiating the one-month termination clause (if there is no termination clause in the agreement the tenant can give 3-months notice based upon Article 687 of the civil code). It is more likely that the landlord will accept a rental decrease or negotiate a compromise. If the landlord does agree to lower the rental price then both the landlord and tenant should sign an attachment to the main lease agreement, stating that the new rental price replaces the original rental price stated in the lease agreement.

If you signed your agreement before October 2008 (at pre-crisis prices) and you still haven’t renegotiated your agreement, then the chances are that you are paying too much rent.

Here is a list of reasons to give your landlord:

Rental prices have fallen more than 20% (up to 50% for the most expensive properties) since October 2008.

Supply of rental properties has increased 20-25% since the crisis. In addition to the slower take up of existing housing stock, there has been an influx of new properties from sellers on the residential sales market who cannot currently sell their properties and are now renting them out.

There are now 20% less expatriates renting properties than before the crisis, and expatriates account for 50% of the elite rental market in downtown Moscow.

Many of the expatriates remaining in Moscow are forced to reduce expenses and rent is a major expense item.

Salary freezes and reductions for expatriates and Russians are common.

Something is better than nothing – in times of financial uncertainty the landlord doesn’t want to lose you and it might take him six months to find another tenant.

So, be bold, be confi dent – this crisis opportunity won’t last forever. Good luck!

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