More often than not, to lease an office in Moscow, an entrepreneur (regardless of whether he is an RF resident) applies to an estate agent. He can of course look for office premises independently on an online advertisement page or in printed publications where information on leasing office premises is given. The problem is that the information in such publications and on such internet sites is as a rule not checked by editors or moderators. And you will probably still go to an estate agent anyway, as it is estate agents who publish all these advertisements. After all, online advertising pages and newspapers are cheap publicity – the simplest and most accessible channel for attracting clients.
If you use the services of an estate agent in choosing premises, you will have to pay for this service. The cost usually depends on the amount of the lease payment, and comprises from 50% to 100% of the monthly lease rate. In the case of big companies, this can often come to several tens of thousands of dollars. As a rule, payment becomes due when the lease agreement is signed.
What do you get for paying an estate agent?
1. A direct choice of premises meeting set criteria. For this, the customer’s requirements are established, the market is analysed and information on suitable premises is provided.
2. An estate agent represents the client’s interests in negotiations, provides assistance in obtaining the most favourable commercial terms for the deal, such as a reduction in the lease payment, lease “holidays” for the moving-in period, and preparation of the premises for use.
Online advertising pages and newspapers are cheap publicity – the simplest and most accessible channel for attracting clients.
At first glance, this is all quite logical, but one should not forget that the estate agent’s remuneration depends on the monthly lease payment, i.e. the higher this is, the higher the agent’s commission. So it is not necessarily the case that matters of payment holidays or possible reduction of the lease payment will be decided in your favour.
It should be noted that this is not specifically a feature of the Russian market. This sort of thing happens in the West too. Western estate agents operating in the Russian market usually have departments for work with lessees and for work with owners. It often happens that the agent will be representing the interests of both the owner and the lessee in the same deal, so is receiving commission from both parties. Naturally this is the most profitable sort of deal for the agency management. And the lessee’s interests come a poor second.
The cost of the commission often includes legal work on the deal. This is certainly very convenient, but it should not be forgotten that the estate agent’s main job is to complete the deal as quickly as possible, minimising the labour costs. So if you decide to work with an estate agent, it is better to apply for assistance to your own regular lawyer or to a consultancy company specialising in provision of legal services. Payment for such services in a deal can be from $200 upwards, depending on the lawyer’s qualifications.
In Moscow, business centres are divided into three classes: A, B and C.
What is the most important thing in choosing office premises? It probably has to be the price – particularly for small and medium businesses, including those of foreign entrepreneurs in these categories opening their own businesses in Moscow. The lease rate per square metre of office property depends on the business centre’s class and location. In Moscow, business centres are divided into three classes: A, B and C.
A-class business centres are the most expensive, are fitted with up-to-date engineering systems, have underground parking and are located in the most prestigious parts of the city. The lease rate is from $800 to $1500 per square metre per annum, depending on the location.
B-class business centres are cheaper. They may be some way from the centre of the city. They are mainly reconstructed Soviet industrial and administrative buildings built from the 60s to the 80s. The lease rate is from $500 to $750 per square metre per annum, depending on the specific features.
Class C is the most economical. These are also Soviet administrative buildings from the 60s to the 80s, but a long way from the centre, which have been converted into office space. The façade and the vestibule have sometimes not been reconstructed since the place was built, and only cosmetic decoration has been done. The premises do not have through-flow ventilation or air conditioning. The lease rate is from $250 per square metre per annum.
The managing organisation running the building is responsible for the functioning of the infrastructure. You can tell how well the building is run from the condition of the common use areas, the surrounds and the opinions of lessees.
You can tell how well the building is run from the condition of the common use areas.
After you have chosen the premises you consider most suitable for your means and type of work, the lease agreement is drawn up and signed. The lessee submits copies of documents establishing his right to the company.
These usually consist of:
- Articles of Association;
- a state registration certificate;
- a protocol about the appointment of a manager;
-an order concerning the manager taking up his post and the appointment of a Chief Accountant;- the passports of the manager, Chief Accountant and founders;
- and a certificate of the Ministry of the Russian Federation for Taxes and Dues that the legal entity in question has been registered with the tax authorities.
The owner of the premises has to be asked for the documents establishing the rights of the managing company and a copy of the certificate of registration of the property rights to the real estate in question. It is also desirable to order a copy of an extract from the Unified State Register of Property Rights.
The extract can be ordered from the registration office, for which you need to supply the cadastral number of the property indicated in the certificate. This document enables you to make sure that there are no attachments or encumbrances on the property which would prevent the leasing rights being assigned.
There are two types of agreement: short term, for less than a year, and long term, for a year or more. A long term agreement must be registered and is considered to have been concluded only from the moment of its registration.
Relations between the lessee and the lessor are regulated by the lease agreement. As in any commercial agreement, it includes its own finer points, which can be pitfalls for an entrepreneur not well versed in these matters, and particularly for a foreigner. Your best protection against unpleasant surprises is to employ a lawyer.
The agreement must include the following:
- the address of the property being leased, its area, and a reference number for it;
- the lease rate and payment procedure;
- the procedure and time limits for handing over the property to the lessee;
- liabilities of the parties;- terms of cancellation of the agreement;
- force-majeure circumstances.
A plan of the property being leased is attached to a supplement to the agreement.
Your best protection against unpleasant surprises is to employ a lawyer.
It is not impossible that even after the lease agreement has been signed and the estate agent has been paid for his services (if he prepared the deal), you may still not be able to move into your new office. Why not? This can happen if for some reason the acceptance act for the premises, which is a supplement of the lease agreement, has not been signed. It is this which gives you the right to use the premises. Therefore you must insist that payment is made only after the acceptance act for the premises has been signed.
Roman Nakhayev, head of the development section of Realty Guide