To run a business of any type, an office space is needed in many respects. In most cases, office spaces are provided for rent. The founder of Law Firm Artyushenko and Partners, Andrey Artyushenko, is sharing what things you need to pay attention to in the entering into a rental agreement and how to avoid troubles.
- What potential risks can the tenant of an office space face?
- There are so-called obvious risks that many tenants simply do not pay attention to. Before signing the rental agreement for an office space, I recommend to pay attention to the following:
- Checking the landlord’s title to the property that is provided for rent
At first glance, this seems to be quite a simple action, but in practice, surprisingly, the problems with the landlord’s right to let the property occur frequently. If the landlord has no right to let an office space, the agreement will not be valid, according to the Civil Code of the Republic of Kazakhstan. To avoid unexpected eviction or claims from the relevant state tax-related bodies as to the unlawfulness of inclusion of rent payments in the expenditure side, the tenant, before entering into the agreement, should request the landlord to present the documents certifying the landlord’s right to let the office space. Among other things, in the absence of such documents, you will not be able to register the agreement. If the landlord is the real owner of the property, ask him/her to prove the title to the property by presenting the relevant ownership certificate or a reference from the website egov. If it is the sublets, it is necessary to get acquainted with the terms of the main contract, because the Civil Code of Kazakhstan sets certain restrictions when providing the office space in sublease.
- In the conclusion of the rental agreement of an office space, you should request the landlord to present the plan of the office space
The copy of the plan must be attached to the agreement, since it often happens so that the information in the plan does not match the information on the office space you are going to rent, or even it is impossible to determine on the plan which office space and where you are offered for rent. It is important to understand what for you are going to pay the rent. Sometimes the office space includes part of the common area, which is not correct from the point of view of the law.
Although often there is no such provision in the rental agreement, the Civil Code states that the current repairs have to be made by the tenant, unless otherwise is provided in the agreement.
- Calculation of the consumption of utilities in the common areas.
The situation with obliging the tenant to pay for consumed utilities in the common areas is possible. To justify such a term from the landlord, there must be objective peculiarities of the location of the office space. Therefore, it is necessary to carefully check what has been assigned by the landlord as the utilities consumed in the common areas and what formula he used for that, and so on.
- Before renting an office, request the letter of intent from the landlord.
This is done so the landlord could determine its commercial risks in advance and all the expected costs. This list should include payment of utilities in the common areas, marketing fees if there are such (and how they are calculated and how paid), and penalties for early termination of the rental agreement. If the tenant was given such information initially, it would be fewer controversies during the signing of the agreement. Unfortunately, in spite of the market, many rental agreements of office space are signed blindly.
- How to avoid trouble in case of entering into the agreement?
- Very often, tenants do not understand legal terminology. I recommend you to go to the end with the understanding of the terms of the agreement, because I myself has faced it many times that the landlord is trying to explain one thing, but unfortunately states the other thing in the rental agreement. Therefore, only by joint efforts it is possible to understand what exactly the landlord wants. Also, I recommend you to write the agreement in simple language. We, lawyers, love to make the wording of the rental agreements sounding more complicate. Sometimes this complicate wording is needed, when we talk about some complex structured products involving international funding or international clients, and the like. But when we talk about the two resident entities, who, in fact, are not lawyers, but often just ordinary businesses, the simpler the wording they use in the agreements, the better. Also, I recommend signing each page of the agreement, so that no of the parties could replace any page of it with another one, and as a result, no need to bind the document.
-Tell us, please, about the terms of registration of the rental agreement?
- The rental agreement for an office space is subject to registration in authorities, if its duration is longer than one year. In practice, contracts are concluded for 11 months, and upon the expiry of that period they are automatically prolonged, if the parties do not wish to terminate it. It should be understood that such an agreement will be subject to registration. But if the tenant knows clearly that it will rent this office space for more than a year, I would recommend to conclude the rental agreement for the entire term wished, as in such case it will be possible not only to register the agreement, but to fix the procedure for calculation of utilities and the rental in accordance with the Civil Code of the Republic of Kazakhstan .
- Whether to conclude a new rental agreement, if the owner of the office space has changed, or not?
- Many people have a fear that the owner of the office building can change suddenly. These fears are absolutely ungrounded, because there is an article in the Civil Code stating clearly that if the owner has changed, the previous rental agreement continues staying in legal force and effect. The tenant is not obliged to re-execute the rental agreement.
- Is it lawful to raise the rental, if the U.S. dollar to tenge exchange rate has increased?
- I can say expressly that our laws allow to tie the cost of the rental to the U.S. dollar to tenge exchange rate, and there are mechanisms and ways to fix it. However, these rules are applicable to the long-term contracts only. That is, if your rental agreement is concluded for 11 months, and if during these months the landlord tries to raise the rental rate, referring to the increased U.S. dollar to tenge exchange rate, it's not lawful, because only in long-term contracts there can be a provision about increasing the rental due to exchange rate changes, and only providing that this provision is included in the agreement. Unfortunately, not everyone knows it.
- Is it possible to specify absolutely all the possible risks in the rental agreement?
- Some people say that the contract provisions cannot cover all risks, but in fact, it is possible to cover them all, if, of course, you know the subject of the contract. Only competently stated provisions of the contracts, where the parties to the contract perfectly know the subject of the contract and understand which risks may arise and which not, can cover whatever you need. Therefore, only professional advice can help you avoid a lot of risks.
I do not recommend using sample contracts and patterns, because the laws experience rapid change, new practice appears, new experience gained, and all this must be reflected in the contract. The sample contracts do not reflect all this, as they are usually not updated for years. So paying attention to all these aspects is very important.
Finding a premise for commercial rent and signing the relevant contract seem to be a simple process, but despite the renting of a residential space, this area of services is subject to other rules of business. Most companies address this issue by hiring a broker who is looking for a suitable property for rent. This is done for many reasons, since the important parameters in the selection are as these: location, business center grade, availability of a parking lot and communications, the area, and other important parameters. But for the conclusion of a rental agreement, discussion of the terms of the renting and the signing of the contract it is better to hire a lawyer with relevant experience.
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