Bulletin #2 of ART DE LEX Real Estate and Construction practice, November of 2017
News
Mayor of Moscow leaves open the possibility of appearance of new renovation buildings
Sergey Sobyanin, Mayor of Moscow, stated the possible inclusion of new buildings to the renovation program. Therefore, certain amendments can be made to the Federal Law prohibiting enlargement of the list of buildings included in the program.
Previously, Moscow authorities used to assert that it is prohibited to hold extra votes and to include new buildings in the program. This principle ensures stability and keeping of habitual places of residence for tenants of the buildings not included in the program. Renovation project site states that it is one of the program warranties.
Thus, on October 3 at the capital government presidium meeting, Sergey Lyovkin, Head of the Moscow City-Planning Policy Department, declared that inclusion of extra buildings in the Moscow renovation program is no longer possible, that only exclusion from it is plausible. He reminded that all public meetings of housing owners on the issue of inclusion in the renovation program should have been held until July 1, and meeting minutes should have been submitted until July 20.
Warehouses, garages, boiler-houses as new real estate objects?
The Ministry of Economic Development suggests changing of real estate rules, to exclude certain constructions from “grey” zone.
It refers to support structures near residential building, to warehouses and garages, compressor stations and boiler-houses, which are non-residential. It is commonly known that no construction permit to erect such buildings is necessary, and their registration is made on the basis of declaration. Thereby many of them happen to be in “grey” zone, owners fail to register them and to pay taxes.
The Ministry of Economic Development suggests including in the Civil Code of the Russian Federation amendment that such “grey” facilities should be considered as real estate objects, if they firmly connected with land. It is suggested to register such construction as real estate if it has individual utility value and can appear in commercial turnover separately. However, the Ministry gave no explanations on criteria allowing to determine separateness and economic importance of such facilities on land plots.
There is no possibility for developers to act as Renovation Fund subcontractors
Andrey Bochkarev, Head of the Moscow Construction Department, informed that there is no opportunity for Renovation Fund to give development design projects under the program as subcontracts to developers.
Housing stock renovation program is a socially oriented project implemented by the fund established for this purpose. All blocks renovation operator will be only this fund.
In addition, according to him, no one restricts rights of contracting agencies, including those in the structure of development companies, to take part in construction tenders. It is noted that design and general contracting agencies, as well as renovation program equipment suppliers will be determined under Federal Law 223 and No. 441 of the Moscow government decree.
Moscow region: 222 master plans until 2038
At the Moscow Region Duma session, Vladislav Gordienko, Head of the Region Main Directorate of Architecture and City-Planning, reported that over 200 master plans of development shall be accepted in the Moscow region.
By the end of this year, 222 master plans shall be accepted in the Moscow region until 2038. Currently, 78 master plans have already approved, 130 of them are being corrected subsequent to the results of public hearings. However, according to officials, all 100% of documents will be accepted by the end of this year.
Gordienko also mentioned that about 114 mln sq. m. of unbalanced or in-fill housing development are revealed in the course of master plans design. Adoption of land use planning documents will allow to fix the imbalance.
Bills
The proposal to introduce fines for the owners of unauthorized constructions who have not complied with the order for its voluntary demolition
The Bill contains amendments to the Administrative Violations Code, particularly in the Article 9.24, which states that failure to comply with the order for demolition of unauthorized construction within the time specified or to bring it into conformity with the established requirements shall incur an administrative fine, for individuals – 20,000–50,000 rubles or community service for a term up to 50 hours; for individual entrepreneurs and officials – 20,000–50,000; for legal entities – 100,000–300,000 rubles.
The Bill is expected to come into effect on the 1st of July 2018.
Ministry of Construction Industry, Housing and Utilities Sector of the Russian Federation (Minstroy) is drafting an Act on the Apartments (non-residential properties that have necessary conditions for a living)
Ministry of Construction Industry, Housing and Utilities Sector (Minstroy RF) proposed to legislate the term “apartments”. The Ministry has already drafted a bill that determines the legal regulation of the mixed-use buildings and apartments construction. The document contains the following provisions:
- on necessity of introducing the terms “apartments” and “mixed-use buildings”. Furthermore, Federal Law will contain the procedure of non-residential properties transition into apartments.
- introduction of the terms “apartments”and “mixed-use buildings”, identifying legal regulatory aspects for the common property of the premises owners, defining charges for residential properties and utilities, and managing the mixed-use building. It is proposed to establish the legal framework for the transition of non-residential properties, used for permanent residence of the individuals and located in previously non-residential buildings, into apartments.
- apartments are considered to be structurally separated premises in the mixed-use buildings that provide direct access to the common areas of such buildings; that are designed for the dwelling of the individuals and for domestic and other purposes related to their dwelling.
- identifying the procedure for the transition of non-residential properties into the apartments. Thus, owners of the non-residential properties in the buildings, that were brought into operation by the 1st of January 2019, are entitled to convert such properties into residential ones by the 31st of January 2021.
The State Duma wants to introduce the electronic mortgage bonds
Non-use of paper will reduce the amount of paperwork during the execution of a mortgage, and in the future, it will enable the housing loans to be operated online. The introduction of electronic mortgage bonds is expected to allow: a) eliminating many bureaucratic changes; b) reducing operational expenses of banks and facilitating the verification of the documents for the transactions.
The Committee of the State Duma on Natural Resources, Property and Land Relations recommended to the second reading amendments to the Act on a mortgage, related to the state registration of the real estate. The final version of the document will be adopted by the end of the year.
A mortgage bond is a registered security, which entitles its legitimate owner (usually a bank) tomeet mortgage obligations by the debtor. It also certifies the lien on the propertyencumbered with a mortgage. The document provides the possibility for granting the mortgages and operating them in electronic form.
Putin released “renovation difference” from personal income tax
The President of Russia signed the law on the exemption from payment of personal income tax on earnings, obtained during the realisation of the renovation program in the city of Moscow. In particular, the difference in price between the old flat and the obtained one during the renovation is exempted from taxes, and the owner will be free of state duty payment during the registration of rights of the housing obtained as part of renovation.
Moreover, the tax is not paid for the Renovation Fund income as well as the income earned by the participant of the renovation program in exchange for his old apartment. If the participant of the renovation obtains a new apartment and wants to sell it, the duration of the old flat ownership will be considered. If he has owned it for more than three years, the income for the new flat sale is not subject to tax.
ADMINISTRATIVE AND JUDICIAL PRACTICES
The urban planning and land commission (UPLC) of Moscow had refused to change Land use and Building policy (LBP) because of proximity of a cultural heritage site borders
At the session, on October 5, UPLC admitted the absence of necessity of changing LBP to extend area and height relating to the land plot, which is situated on Bolshoi Sukharevskii alley.
In accordance with the urban plan the land plot, it has a permit for hotel services, possible height of constructions and area of the land plot is regulated by existing LBP.
Investors, who are interested in development of that territory, applied to UPLC to extend the total area of the land plot to 1 000 m.sq., and to increase the height of possible constructions to five floors. The commission (UPLC) refused an investor’s request, explaining the land plot is in close proximity to a cultural heritage site.
The Urban planning and land commission (UPLC) of Moscow refused to change LBP and protected “Palaty” (buildings of 17th century) on Yauzskaya St.
At the session on October 26, the commission (UPLC) admitted the absence of necessity to change LBP for extending area of potential reconstruction on the land plot, which is situated on Yauzskaya street.
Investors were intended to perform a reconstruction of building by extending useful floor space of the basement and the loft. However, the commission refused an investor’s request , explaining the building is valuable and historical object, that has a cultural heritage site indications.
The Federal Tax Service (FTS) made it clear that changing an information about the permitted using of land plots is not a reason to apply the increase coefficient in tax calculations
By FTS opinion only the fact a first state registration of a land plot is a sufficient factor to apply the increase coefficient “two” in the land tax calculations. The FTS position is based on the explanation of the Ministry of finance, which was given before.
Rosreestr and Ministry of Construction and Housing (Minstroy) give official explanations on a legal status of several apartment buildings (SAB) on the one land plot
The article 16 in Federal Act “On the entry into force of the Housing codex of Russian Federation” provides, that granting of authorization of the initial operation for several apartment building and other immovable assets, which are parts of that buildings, may occur, only if an information about the land plot borders are registered in Rosreestr.
Rosreestr officials noticed that there is no rules, prohibiting an authorization of several apartment buildings on the one land plot. At the same time, there is a requirement of registered information about that land plot in the Unified state register of real estate (USRRE).
The similar position on that question were taken by Minstroy. Officials have also admitted that granting of authorization of the initial operation for several apartment buildings and other immovable assets on the one land plot is not contrary to housing legal regulation.
The practice on reviewing cadastral value of real estate objects is gaining momentum
From January to October 2017 special commissions, which were established at Rosreestr, have considered more than 37 000 of requests in relation to more than 71 600 objects. It represents 0.04 per cent of the overall number of real estate objects, an information of which were registered at USRRE. The overall quantity of requests have increased by 45 per cent compared to last year (2016).
During last ten months 54.1 per cent of decisions of commissions, which are reviewing value of real estate objects, are positive and in favour of complainants.
Rosreestr does not examine cadastral valuation of real estate objects, but it is involved in errors recovery process, if the owners have doubts of correctness of data.
The Federal Act on State cadastral valuation came into effect on the 1 January 2017. The new federal act provides an introduction of the post of state cadastral evaluators and delegates authority to define a cadastral value to state budgetary institutions.
The Supreme court held the fact of the hindering behavior of a bidder to achieve a fine price is enough to admit invalidity of an auction
The College of economical disputes of the Supreme Court (CED SC) on case N A57-15765/2011
Circumstances of the case: the insolvency official had announced the secondary bidding putting up the land plots of the debtor on public auction. Courts of all levels have tried to qualify the behavior of one of the bidder, who had made almost 200 new bids during 90 minutes. The unscrupulous bidder did not win an auction, he cancelled his bids, but the price for the land plot were considerably below than expected because of actions of the last bidder.
Decision: courts of all levels held that acts, manipulating prices and offers in auctions are inadmissible and should be prevented, however parties of the case could not establish affiliations of bidders and prove facts of using technical devices in bad faith. So, the claim of the disgruntled seller was unanimously rejected by lower courts.
Supreme court position: CED SC held that lower courts should take into account the motives and actions of unscrupulous bidder and analyze how his behavior may change a nature of an auction. At the same time the high court noticed, that the person de facto was hindering to other participants of the auction to make real bids, which allowing to worth an asset within reasonable expectations of average actor on the market. That acting in bad faith had led to deprivation of opportunity to form a fine price for the land plot. When other participants of the auction are deprived an assurance of contest on prices, the purpose of that auctions were reversed, it starts to lose main meaning (to determine a winner by a fair contest). Finally, circumstances of that case showed the necessity to admit that “idea-transformed” auctions are null and void.
The Supreme court held contracts, providing selling buildings, suppose transfering not only property rights on a building, but also a right to use a land plot, where is situated that building
The College of economical disputes of the Supreme Court (CED SC) on case N A56-33380/2016
Circumstances of the case: In 2002 Faeton-invest LLC sold two buildings to Farmakor LLC. These two buildings were situated on the land plot, which was under the ownership of Faeton-Invest. In 2014 Faeton-Invest were forced into bankruptcy. In 2016 Faeton-Invest filed a lawsuit, where it demanded to return unjust enrichment. According to claimant allegations the defendant Farmakor were utilizing the land plot, where there were acquired buildings, without any legal basis. The claimant also detailed that the contract, which were concluded in 2002, did not provide transferring possession rights on the land plot. In this way, the cost calculations of unjust enrichment could be based on the average rental rates, which were established by local authorities.
Decision: courts of all levels, excepting 13th arbitrazh appellate court (AAC) upheld position of the claimant and decided to return unjust enrichment on alleged calculations. However, 13th AAC has totally disagreed with other courts, since the land plot possession right was also acquired by the contract, even the parties did not consider it explicitly.
Supreme court position: CED SC upheld position of 13th AAC. The high court explained that if the land plot and a building on it sold separetly, i.e. the specific land plot could not be acquired with the building, in that cases this land plot are under shared ownership of seller and buyer of the building. This kind of ownership comes into effect from the date of the state registration of buyer’s legal title to the building.
Therefore, there is no unjust enrichment in that case, but the claimant has an opportunity to take back a compensation for non-payment of the land tax during all period of possession of the land plot.
translated by
Denis Mukhametgaliev
Anastacia Pashkova