Bulletin of the ART DE LEX Real Estate and Construction Practice (Issue 5, 2019)

DEVELOPMENTS

А) A new record in the office real estate market has not been set, as the Tinkoff Group will not transfer its headquarters to the Aquatoria business center. The deal could have been the largest in the history of office real estate in Russia, with a total area of 68 thousand square meters. Thus, Sberbank, which first rented and then bought an area of 56 thousand square meters in the South Port business park, continues to hold the record. (https://www.vedomosti.ru/realty/news/2019/08/20/809199-tinkoff-krupneishuyu-sdelku?utm_referrer=https:%2F%2Fzen.yandex.com)

B) As expected, buying a home using escrow accounts is more expensive for buyers. According to experts' average estimates, the price in such transactions is approximately 10% higher. At the same time, not everyone assesses the situation in a negative light: There is an opinion that the higher cost is fully justified by increased guarantees for buyers. (https://www.kommersant.ru/doc/4066366)

C) Effective 31 July 2019, transactions with common property ownership have been simplified. Previously, all of them had to be performed in a notarial form. Now, the rules for such transfers or mortgage transactions that are completed by all participants in common property are simpler. However, if only one of the participants in the common property alienates its share, then such a transaction, as before, is subject to notarization. (http://publication.pravo.gov.ru/Document/View/0001201908020064?index=0&rangeSize=1)

D) Lawmakers have promptly solved the problem related to fraudulent actions when using electronic data services (EDS) for real estate transactions. It was previously discovered swindlers were gaining access to EDS accounts and using them to sell the owners’ apartments. The authorities admitted that using EDS to execute remote real estate transactions is flawed and involves risks, and they applied to Rosreestr to prohibit transactions through EDS. Starting on 13 July 2019, such remote transactions can be made only if the owner of the real estate sends a corresponding application with all the relevant information to Rosreestr. Such transactions will not take place by default. In fact, this means a step backwards in the digitalization of real estate transactions. (http://publication.pravo.gov.ru/Document/View/0001201908020064)

E) Perhaps the fate of the square at Paveletsky Station will finally be resolved. There are reports that a construction project for a five-level shopping center with a total area of 70 thousand square meters and landscaping has been agreed. Since 2010, the construction site has been frozen due to legal proceedings against Mukhtar Ablyazov, the owner of BTA Bank, whose interests purchased the project in 2007. (https://www.cian.ru/novosti-soglasovan-proekt-tts-dolgostroja-pod-paveletskoj-ploschadju-296494/)

F) The former headquarters of the infamous developer SU-155 may find a new owner. According to media reports, the developer Granel is interested in offices with an area of more than 7.5 thousand square meters with a plot of land. The deal could be worth 1.2 billion rubles, which corresponds to its market value. If the transaction goes through, it will be one of the largest deals in the office real estate market in 2019. (https://www.cian.ru/novosti-granel-planiruet-priobresti-byvshij-glavnyj-ofis-su-155-297224/)

G) Rossium, which is controlled by Roman Avdeev (INGRAD), is in talks with Renaissance Development on the purchase of the office part of the Neva Tower high-rise complex, currently under construction. The subject of the deal might be 50-57 thousand square meters of office space, the price of which is 15-17 billion rubles. (https://realty.ria.ru/20190827/1557940836.html)
H) According to media reports, the government plans to relocate most of the ministries (except the Foreign Ministry and the security bloc) to within the city limits of Moscow. Implementation of this plan will require up to 400 thousand square meters of space. However, according to experts, now the complex is free to use only about 110 thousand square meters. The Ministry of Economic Development is in charge of the move. (https://www.cian.ru/novosti-v-moskva-siti-pereedut-pochti-vse-ministerstva-297397/)

JUDICIAL PRACTICE

А) The Supreme Court of the Russian Federation has ruled in an interesting dispute over the sale of a share in common ownership. The essence of the dispute is that after the division of the property, one of the ex-spouses owed 162 thousand rubles to the other ex-spouse. She did not have any money but had an interest in half of the land plot. At the same time, the second half of the land plot belonged to a completely different owner other than the former spouse. The ex-husband filed a lawsuit to compel the ex-wife to sell her share to the second owner of the land plot (who was involved in the case by a third party). The district and regional courts dismissed the claim. The Supreme Court overruled the lower courts, holding that the co-owner, who had expressed the desire to acquire a second half share in the right to the land, should be brought into the case by the defendant. It is possible to satisfy the claim if the co-owner deposits the necessary amount with the Judicial Department. (http://vsrf.ru/stor_pdf.php?id=1776052)

B) Within the framework of the tax dispute, the Supreme Court has explained the distinction between movable and immovable property. The tax office had determined that technological equipment of the timber factory, installed on the foundation of the shop, qualified as real estate for taxation purposes. The tax authorities relied on the provisions of the Civil Code and established, based on expert opinion, that the movement of the technological equipment would be impossible without disproportionate damage. Three instances of the case agreed with the arguments of the tax authorities. However, the Supreme Court reversed the lower courts and remanded the case for a new hearing. The Supreme Court agreed with the position of the timber processing plant that the technological equipment could be dismantled, even if installed on the foundation, and therefore is not real estate. At the same time, the position of the judges of the Supreme Court is flawed in its legal theory. As a reason for overruling the lower courts, the three judges recognized the classification of the production line, transporter and fire protection system as "machines and equipment" according to the All-Russian Classification of Fixed Assets OK 013-94. At the same time, the Classification treats equipment as a separate group of fixed assets that are not part of buildings and structures, even if they are on the foundation. Thus, the technical legal document, rather than the Civil Code, predetermined the qualification of an object as movable property. (http://kad.arbitr.ru/Kad/Card?number=%D0%9005-879%2F2018)

C) The Supreme Court sided with the owner of the right of preferential purchase of leased real estate in a dispute over the distribution of premises based on the results of the investment contract. The essence of the dispute was the distribution of premises in the restored mansion between the investor and the Moscow City Government, in which the investor's share of the total amount of premises under the act fell within the scope of the act, which were leased out by the Moscow authorities even before the investment contract was concluded. The lessee contested this distribution, arguing that the inclusion of its premises in the investor's share deprives it of the right of preferential purchase, which it has, as long as the subject of the lease is in state ownership. The highest court upheld this position. (http://kad.arbitr.ru/Kad/Card?number=%D0%9040-51902/2017)

D) The tenant of land that is limited in circulation has additional guarantees in determining the rent, the Supreme Court has decided. Rents for land that is limited in circulation and federally owned may not exceed the amount of the land tax, in accordance with the Russian Government's Decree No. 582 of 16 July 2009. However, there is no such direct rule for undivided property. The lower courts disagreed with the tenant's arguments, refusing to take this approach. But the Supreme Court listened to them and remanded the case for a new hearing. (http://kad.arbitr.ru/Kad/Card?number=%D0%9041-51086%2F2018)

E) The reliability of the register is reflected in one of the latest published cases of the Supreme Court of the Russian Federation, in which the interests of a buyer of an apartment, who relied on the information of the Uniform State Register of Property during the transaction, were protected. The judges rejected the Moscow State Property Department's refusal to consider the transaction as invalid, despite the fact that the seller's registration of ownership of the apartment was illegal. At the same time, it was noted that the disputable situation arose due to the long inaction of the plaintiff himself, who did not take any action on the registration of the apartment, creating the conditions for the loss of property. (https://vsrf.ru/lk/practice/cases/10311520#10311520)

PENDING LEGISLATION

А) The Ministry of Agriculture is concerned about the problem of abandoned agricultural land and proposes legislation to simplify the seizure of such land by shortening the period of the seizure procedure. Under the Ministry's proposal, instead of recording the non-use of land and then waiting three years, the same three years could be determined retrospectively and the land withdrawn at once. However, it is not yet clear how to establish the fact of prior non-use. The bill is under discussion. (https://regulation.gov.ru/projects#departments=2&kinds=6&npa=94052)

B) A draft law aimed at supporting bona fide purchasers of residential real estate is in the public discussion stage and undergoing anti-corruption review. It would reduce the statute of limitations on claims for withdrawal of their real estate from ten years to two years. (https://regulation.gov.ru/projects?type=ListView# )

C) Hundreds of thousands of hectares of land, which is currently limited in circulation due to being within aerodrome areas, can be put into civilian circulation for development purposes. The Ministry of Transport is drafting a bill on the optional use of the seventh subzone, without which the area of restrictions is reduced several times. According to officials, this will not lead to a reduction in the safety of aviation operations. (https://erzrf.ru/news/minstroy-podderzhivayet-predlozheniye-mintransa-o-sokrashchenii-priaerodromnykh-territoriy-no-vopros-pridetsya-otlozhit-do-2021-goda)