The landlord is dead, long live the landlord. Who should you pay the rent now?

Do you recall the quote from Bulgakov that says, “While it is true that man is mortal, that is only half the problem. The real issue is that he can sometimes die unexpectedly?” But it's even worse when that person is your landlord. This is precisely the predicament encountered by the client of the legal firm Tsentralny Okrug, who was notified about the landlord's passing. The prospective heir said that he was the successor under the lease agreement and shared additional bank details regarding the process of transferring rent payments. 

The tenant in this scenario has a valid question: is the designated heir the rightful recipient of rent payments under the lease? Is it necessary to continue making rent payments before the heir obtains a certificate of inheritance rights? And if there are several heirs, which one should be paid? 

Anna Kalacheva, a lawyer of the Tsentralny Okrug Law Firm, clarifies that according to the law, the lease agreement does not end when the landlord dies. Instead, the rights and responsibilities of the landlord are transferred to their heirs, while the tenant is still required to continue making rental payments. Nevertheless, until the heirs receive a certificate of inheritance rights, the tenant cannot have complete certainty that the intended heir is the rightful successor according to the lease agreement. Avoiding lease payments until the heirs obtain a certificate of inheritance rights is not advisable, as it may result in the tenant facing penalties for failing to fulfill their obligation in a timely manner. 

We provided the client with multiple solutions and discussed the potential challenges associated with each one. 

1. Rent payments can be transferred to the current account of the deceased landlord. This method is referenced in the appeal decision of the Moscow City Court on August 18, 2017, in case number 33-30409/2017. Therefore, the general jurisdiction court, while recovering the debt and penalty from the tenant under the lease agreement, stated that “until the parties (OOO, tenant) and the new owner of the building modify the agreement, the OOO is required to transfer the rent according to the specified order (specifically, to the current account) in the agreement after the death of the individual entrepreneur.”

2. You can transfer money to the notary's deposit by submitting the necessary application in order to fulfill your obligations under the lease agreement. Because the payments for the use of inherited property are considered part of the estate until the dispute over the property is settled and the rightful heir(s) is determined, it is necessary to place the money in the custody of a notary. This option is specifically allowed by subparagraph 3 of paragraph 1 of Article 327 of the Civil Code of the Russian Federation, as well as Article 87 “Fundamentals of the legislation of the Russian Federation on notaries” (approved by the Supreme Court of the Russian Federation on February 11, 1993 No. 4462-1). 

3. Funds can be deposited into the discretionary manager's account when the notary finalizes the trust management agreement, in order to fulfill the obligations stated in the lease agreement, as per Article 1173 of the Civil Code of the Russian Federation. This choice involves extra expenses for paying the discretionary manager's fees and expenses, as well as for paying for notarial acts. As a result, in many cases, individuals who may potentially inherit assets tend to avoid seeking the assistance of a notary to finalize such an agreement.

4. After evaluating the potential dangers, the tenant has the option to promptly transfer the lease payments to the account of the intended heir.
   The potential outcome is demonstrated in the ruling of the Twentieth Arbitration Court of Appeal on January 30, 2023, in case number A68-6770/2022. In this regard, the appellate court emphasized that “Paying back overdue rent to one of the co-owners, the tenant's corresponding obligation is completely discharged and protects them from any future claims by the other co-owner for the same debt.”

Anna Kalacheva explains that after carefully considering the advantages and disadvantages of each option mentioned above, and considering the current practices in law enforcement, the safest choice was recommended to the client: transferring the money to the notary's deposit. Despite the extra expenses involved in paying for notarial acts, this approach will enable the tenant to reduce risks and protect him against potential legal disputes in the future.