If a building is used other than as the lease provides

A hotel in a former office building, a hostel in place of an administrative property, trade where the conditions of use of the plot do not provide for it. For the city, that can be a ground for claiming a contractual penalty from the owner.

Before treating this as a breach, however, and still more before paying a penalty, the owner should check several things.

1. The time limit. It runs from the date of the State Inspectorate's report, not from the date of the demand. The penalty is charged once, so the rule on periodic payments does not apply here. If more than three years have passed since the inspection, the court refuses the claim without going into the substance of the dispute.

2. The wording of the demand. "Use other than for the designated purpose" and "a failure to match the permitted use" are not the same thing. The designated purpose is fixed by the category of the land, and it does not change because a hotel has appeared in the building. That distinction has more than once decided the outcome of a case.

3. The contract as a whole, and not only the clause on the penalty. If the building in dispute is named in the list of structures on the plot, the plot was provided for the operation of that building as well.

4. The calculation, and an application for a reduction. The court does not reduce a penalty of its own motion. A separate written application, with a calculation, is required. Reductions are substantial, down to as little as one month's rent.

That is not the whole list. Every circumstance matters: the date and the contents of the report, the history of the property, the areas, the correspondence with the department, and the remedying of the breach. In disputes of this kind the outcome is more often settled by the detail than by the general legal position.

The defence has to be prepared at the stage of the inspection report, and not after the claim has been received. That is when the body of evidence is formed with which one will have to go to court.

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