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Thread: Laws about raising commercial rent

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    Laws about raising commercial rent

    Hello everyone!

    I am looking at starting an English school. I found a place, which has rent at an unbelievably low price. It is in a new building, in a town a couple hours outside Moscow. The catch seems to be that they aren't doing any interior renovations. The walls are the basic brick that is the foundation, so we will need to drywall the unit, install bathrooms, and possibly electrical work.

    The rent however, is 90 rubles per m2, and the unit is 220m. A huge lot, bigger than I need for the moment, but my plan is to slowly renovate more and more as time goes on (renovate the first 40-50 metres now, and in the next 1-2 years expand my business backwards in the unit)

    The only hanging point I have, is how much the owner is able to raise the rent during/at the end of our contract.

    I don't want to put in 200,000 rubles worth of renovations, and then be told that the rent is going from 90 rubles to 800 per m2 after 1-2 years.

    Should I be worried about this place?

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    Will you have a contract with the owner?

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    200k rub in renovation? Wow man, times that by 10 and u might be right. I've done what ur talking about and ur going to get it from all sides, and not in a nice way.

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    Quote Originally Posted by razor787 View Post
    The only hanging point I have, is how much the owner is able to raise the rent during/at the end of our contract.
    During the contract period the rent is regulated as it is written in the contract, but at the end of the contract period anything can happen, but you may try to add to the contract that the rent can't be raised more than a certain amount in case you extend the contract, maybe get a contract that renews itself every year unless you choose to cancel it.

    Should I be worried about this place?
    No, but be worried about the contains in the contract, better get a lawyer to help you here.

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    Quote Originally Posted by americaninmoscow View Post
    200k rub in renovation? Wow man, times that by 10 and u might be right. I've done what ur talking about and ur going to get it from all sides, and not in a nice way.
    Yes, of course if I do all 220m2 it will be much higher than 200,000. However I plan to slowly renovate. Start with the first 40m2 or so, and as time goes on, renovate more and more, and expand backwards.

    Quote Originally Posted by Hans.KK View Post
    During the contract period the rent is regulated as it is written in the contract, but at the end of the contract period anything can happen, but you may try to add to the contract that the rent can't be raised more than a certain amount in case you extend the contract, maybe get a contract that renews itself every year unless you choose to cancel it.
    The end of the contract period is where I am worried. I have no experience with contracts, or running a business, so I am apprehensive about renting a place, where I am expected to do all renovations. In my experience so far, contracts in Russia don't seem to be worth the paper they are written on. There is always a way to get around them. I would imagine that a 1-party extension wouldn't hold up.

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    You can write a longer contract, speak to a lawyer.

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    And another thought - try to write specific penalties in to compensate you for your improvement expenses if canceled or unavailable for whatever reason.

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    If you do have any problems later on, tell the owner that you'll get your lawyer to report, write letters to Rospotrebnadzor, Russian watchdog, just the mention of this agency sends a shiver down most businesses, if you do, just make sure your business is lgeit too.

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    Am I missing something here? How is it profitable or even reasonable to pay to renovate a place that you are only renting, unless of course you have a lease with option (the right) to buy?
    I mean without that lease option to buy, you lose all of your investment in the renovations, once/if the landlord kicks you out or unreasonably raises the rent.
    I do know there is this thing with residential rentals where Russian tenants expect to pay for renovations and repairs themselves, but I even think that is outrageous and try to make it clear upfront to the landlord that iI am only paying for some simple, standard wear-and-tear type repairs, like light bulbs and maybe a blown fuse.
    I am fascinated by Russia, this country with frigid weather, hard souls, and hot girls!

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    Quote Originally Posted by nicklcool View Post
    Am I missing something here? How is it profitable or even reasonable to pay to renovate a place that you are only renting, unless of course you have a lease with option (the right) to buy?
    You are missing that in case the rent payment is low enough, and the contract goes for a long enough period of time, it may be beneficial for both party's that the renter pay renovation and in return have a low rent payment, but it is not without risk for both, a shitty renovation is more expensive than a ok renovation when you add the cost of renovation of the renovation on top of it, and as the renter there is a risk that you renovate in a nice and expansive way and then they kick you out before time.

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    Quote Originally Posted by nicklcool View Post
    Am I missing something here? How is it profitable or even reasonable to pay to renovate a place that you are only renting, unless of course you have a lease with option (the right) to buy?
    I'm not an expert but have seen some commercial leases - and it's not at all uncommon to lease in 'unrenovated' form, usually with longer lease terms (e.g. 5 to 7 years).

    The leases get complicated in terms of allowable increases (inflation or currency adjustments), and sometimes very detailed provisions for whether the renovated space has to be returned in original condition (yes, sometimes, they rip everything out, even down to bare walls) or the space left in useable shape (like basic office set-up with furniture removed) etc. In other cases the landlord invests in the upgrades and keeps it all, with mechanisms to share/pay for those upgrades, esp those specific to the lessee.

    The basic logic is: apart from really simple office space, many / most commercial users have specific requirements and demands; a restaurant has different requirements than a clothing shop. The more simple and standardized the lessee's requirements, the easier this is to work out in advance.

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