Client Bulletin

RENT A MANSION IN THE HISTORIC CENTER OF MOSCOW FOR ONLY RUB 1 PER SQUARE METER PER YEAR!

In September 2014, lawyers of the Real Estate and Construction Practice of the ART DE LEX law firm succeeded, for the first time, in establishing an annual reduced rental rate of RUB 1 per square meter per year, with a lease term of up to 49 years, for a bona fide tenant who had restored a property that the Moscow government had designated in 1996 as a “cultural heritage site of federal importance.”

In January 2012, the Moscow government launched a program to rehabilitate cultural heritage sites in poor condition and transfer them to long-term usage of 49 years. The program featured a reduced rent of RUB 1 per square meter annually after the restoration of the site (Resolution 12-pp of the Government of Moscow, dated 24 January 2012).

The model was the “1 euro principle,” which is well known outside Russia as a means of attracting investors in the restoration of historic buildings. For example, some EU countries have applied this concept to the sale historic castles, mansions, and palaces. In return for being able to acquire a property for the symbolic “one euro” price, the new owner must undertake its full restoration and recovery.

Initially, the Moscow government gave the preferential rental rates to tenants who were successful bidders in auctions of these historic sites. Later, the government extended elements of the program to tenants who had obtained leases before January 2012 for dilapidated cultural heritage sites without an auction and who subsequently had fulfilled their obligations of restoring them. Until recently, however, this category of bona fide tenants did not enjoy the steeply discounted rental rates.

Recently, the current official rental rates for those tenants had risen to market levels. The official rates no longer provided a financial incentive to attract investments needed to conserve Moscow’s cultural heritage sites and improve its unique blend of historic and modern buildings.