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Newsletter of the Real Estate and Construction Practice (Issue 3, 2018)

Events

Preliminary results of the state cadastral assessment in Moscow are available

As of 1 January 2018, only budget institutions can carry out a state cadastral assessment (GCA). In Moscow, the responsible authority is the Center for Property Payments and Housing Insurance of the State Budgetary Institution. On 18 September 2018, the institution published the preliminary results of the GCA on its website and will accept comments until 6 November 2018. After that date, Center for Property Payments and Housing Insurance will approve the results.
The GCA results will serve as the basis for calculating land tax, property tax for organizations and individuals, and rent.

(See http://cadastre.gcgs.ru/news/view/42927073113/.)

The legislature changed the approach for determining what constitutes a building

As a result of Federal Law of 3 August 2018, No. 342-FZ, “On Amendments to the Urban Planning Code of the Russian Federation and certain legislative acts of the Russian Federation,” the concept of an object of capital structure and construction object changed. These categories no longer can include a slab on grade or other objects that do not have three-dimensional characteristics. These changes reflect the trend in court practice, which does not recognize concrete slabs or flat areas that do not meet the criteria of a structure as real estate objects. In addition, the concept of noncapital structures and nonconstruction objects has appeared in the Russian Federation Civil Code. These include structures that do not have a firm connection with the land. The characteristics of these objects are that one can dismantle them, move them, and reassemble them, without changing their basic characteristics. Thus, at the moment, the concepts of structure, capital structure, and real estate are not necessarily equal categories.

Regulations for areas with special conditions for territorial use (ZOUIT)

Pursuant to the Federal Law of 3 August 2018, No. 342-FZ, “On amendments to the Urban Planning Code of the Russian Federation and certain legislative acts of the Russian Federation,” another block of changes appears in a separate chapter in the Land Code of the Russian Federation (also see the item immediately above). It outlines the procedure for establishing zones, along with mechanisms for protecting the rights and legitimate interests of the owners of real estate objects within the scope of the Land Code. The most interesting change is the ability to recover losses after the creation of zones. These provisions are a logical outcome of the Decree of the Government of the Russian Federation of 3 March 2018, No. 222, “On the approval of the rules for the establishment of sanitary protection zones and the use of land located within the boundaries of sanitary protection zones,” which, for the first time, appeared with the creation of the ZOUIT (sanitary zones around industrial sites protect inhabitants and their property).
Another interesting innovation is that the legislature intends to correct the situation with the cultural heritage sites (the Russian abbreviation is OKN), for which there are no protection zones. Protection zones existed since 2016, with stipulations for setting their boundaries, but they did not take into account the specifics of individual cultural heritage sites. As the protective zones offer a measure of protection, the aforementioned law stipulates that, to supplement the law of 4 August 2018, the legislature must establish specific protection zones for cultural heritage sites by 1 January 2020.

Bidding on the contract for the construction of Novokosino TPU

As part of the construction of Moscow’s network of transfer hubs (the Russian abbreviation for a transfer hub is TPU), the purpose of which is to reduce traffic congestion and to provide more convenient means of transfer between different types of public transport, the city decided to build a TPU in the vicinity of the Novokosino Metro station. In 2016, the first auction for the right to lease a land plot for constructing the TPU was unsuccessful, and there was no winner. As a result of the new auction to be held on 18 October 2018, the likelihood of naming a winner is high because there was a reduction in the initial contract price by more than 30 percent to 99 million RUB.

(The link to the auction is https://is.gd/p54Xlu.)

Seven Moscow Metro stations opened

At the end of August 2018, one of the largest links of the Kalininsko-Solntsevskaya line of the Moscow Metro opened. The districts of Solntsevo, Novoperedelkino, Rasskazovka–longtime portions of the city–were quite distant from the subway. The extension of the line has had a strong impact not only on the expansion of the construction industry in these areas but also on the development and quality of the infrastructure. The opening of the new stations in these areas is of great importance for the real estate market.

(A news link for the station openings is https://www.mos.ru/mayor/themes/2299/4972050/.)

Developers are obliged to disclose beneficiaries

An order of the Ministry of Construction of Russia requires developers, as of 2 October 2018, to disclose information about all individuals who, independently or jointly with others, own at least 5 percent of the shares in a development firm. The information must appear in the project declaration.

(The link to the act is http://publication.pravo.gov.ru/Document/View/0001201809210024?index=0&rangeSize=1.)

The winners of the architectural renovation competition

The winners of the international architectural and urban planning competition for developing concepts for five experimental sites under Moscow’s new renovation program were: the international consortium of Bofill Arquitectura, S. L., and Master’s Plan LLC for Vernadsky Prospect; Asadova Architectural Bureau for the Golovinsky District; Nikken Sekkei and UNK Project for Khoroshyovo-Mnyovniki; SPEECH for Kuzminki; and Sergey Skuratov Architects for Tsaritsyno.

(The link to the news item is https://www.mos.ru/news/item/45778073/.)

Developers are required to use special accounts

Beginning on 1 September 2018, developers are obliged to use only accounts in authorized banks to receive funds from shareholders, regardless of the date of registration of the first participation agreement in the shared construction of a facility. The list of authorized banks is available on the website of the Central Bank (http://www.cbr.ru/credit/fzlist/fz697list-20180801.xls).

A developer must open an account corresponding to each construction permit. Bank support of a developer’s account involves the credit organization’s control of the funds exclusively for the target expenditure, in compliance with law 214-FZ. In the case of a residential building dependent on funds from the participants of a shared construction arrangement, an authorized bank must open accounts for the customer and the general contractor.

Judicial practice

  • The Supreme Court of the Russian Federation reaffirmed the inseparable nature of a land plot and the buildings on it, as enshrined in Article 1 of the Russian Federation Land Code and Article 552 of the Civil Code of the Russian Federation. This principle applies to all registered land owners and is a right the law establishes. In addition, in order to protect against a violation of this right, the limitation period for claims specified in Article 304 of the Civil Code of the Russian Federation of 14 August 2018, No. 49-KG18-26, does not apply.
  • The question of procedures for leasing land plots, based on the preferential right to conclude a lease agreement, in connection with real estate objects on a disputed land plot, often appears before the Supreme Court of the Russian Federation. In a recent ruling, the Economic Disputes Board confirmed that, in order to exercise this right, it is necessary to have a structure on the land plot, which means that buildings with a 3 percent degree of integrity do not meet this criterion. The Supreme Court of the Russian Federation, therefore, avoided a formalistic approach to resolving the dispute. See the determination of the Supreme Court of the Russian Federation of 18 September 2018, No. 303-ES18-13551, in the case No. A51-10310/2017.
  • The Supreme Court of the Russian Federation has yet to resolve disputes arising from ways to protect a violated right. A real estate sales agreement illustrates the problem: on one agreement, a cadastral number was invalid because the object no longer existed. The courts initially declared the contract invalid and ordered that the seller return the money, which it described as unjustified enrichment. In the second round of appeals, the court refused to satisfy the claim, based on an incorrect method of protection. The Supreme Court of the Russian Federation referred the case to the Economic Disputes Board for consideration, arguing that the court had a duty to consider the merits of the case. See the determination of the Supreme Court of the Russian Federation of 10 August 2018, No. N 304-EC17-11096, in case No. A45-8173/2015.
  • The Supreme Court of the Russian Federation has established a cadastral registration procedure for land plots that do not meet the minimum requirements established in the regulatory legal acts. In such cases, the courts should consider not only the formal criteria the local self-governing bodies establish but also common sense. Thus, if a land plot does not meet the minimum size requirements but already is in use (for example, it has a dwelling), the inability to increase its area cannot serve as grounds for refusing to enter it into the cadastral register. See the determination of the Supreme Court of the Russian Federation of 17 September 2018, No. 307-KG18-13270, in case No. A05-10980/2017.

Draft normative legal acts

The extension of Moscow’s renovation model throughout Russia (Draft Law No. 550294-7)

A bill before the Russian State Duma extends the renovation program Moscow implemented in 2017 to the entire country. According to the draft, renovation is the “reconstruction or demolition of housing that is not subject to capital repair, housing slated for renovation, along with municipal, transport, and social infrastructure objects in a territory, and programs for improving inhabited territories.” As a result, the demolition of residences can take place, based not only on a certain construction year or series but also specified criteria. As with the Moscow Renovation Fund, the draft law specifies that each governing entity is to establish its own renovation fund that will finance the entire project, starting with the planning stage and ending with the occupancy of new residences. One of the goals of the bill is to ensure the rights of citizens to a quality urban environment. This involves not only the quality of the public infrastructure but also the architectural appearance of the residential buildings. The State Duma already sent the bill to the relevant committee. (The draft law is at http://sozd.parliament.gov.ru/bill/550294-7.)

Regulating the transfer of residential premises to nonresidential premises in apartment buildings (Draft Law No. 542922-7)

Draft amendments to the Housing Code of the Russian Federation propose to make it more difficult to transfer premises from residential to nonresidential use in apartment buildings (hereinafter MKD). A general meeting of owners of premises will have to give their consent to the transfer of premises from residential to nonresidential use. Previously, only changes in the usage of common building property required the owners’ consent. The draft law also establishes a special category of adjacent premises, that is, those which share a common wall with or are located directly above or below the premises under consideration for nonresidential use. For the first time, the draft law mentions the residents using a certain entrance as one of the constituent elements of the general meeting of owners. In accordance with the draft law, the transfer of a premise from residential to nonresidential use only can take place under certain conditions:

  • If there is only one entrance to the building, a vote on transferring property requires a quorum of more than two-thirds of the total number of owners as well as more than 50 percent of the owners of adjoining premises.
  • In the above case, consent for the transfer requires the support of a majority of participants in the general meeting.
  • If there is more than one entrance to the building, the quorum required for a transfer is 50 percent of the owners, more than two-thirds of the owners having a common entrance with the premises to be transformed, and 50 percent of all the owners of adjoining premises.

Consent for transfer, in this case, requires a majority of participants in the general meeting as well as a majority of votes from the owners of premises having a common entrance with the premises to be transformed.

With this draft law, the legislature hopes to ensure the interests of residents who feel the greatest impact from the formation of nonresidential space.

(Reference to the draft law is at http://sozd.parliament.gov.ru/bill/542922-7.)

A draft law on extending guarantees for shareholders to nonresidential premises

A proposed law would revise the requirements for participants of shared construction for apartment buildings who purchase parking spaces and nonresidential premises with an area up to seven square meters, such as storerooms. The bill proposes to shift such participants from the fourth phase of creditors, as specified in the current legislation, to the third phase. It also will establish for such participants the rights of claim that are similar to those who purchase residential premises.

(Reference to the draft law is at https://regulation.gov.ru/projects#npa=83624.)