Russian Federation: Changes In Real Estate Legislation Q3

Last Updated: 14 November 2018
Article by Karina Chichkanova

AMENDMENTS TO THE FEDERAL LAWS

Amendments to the Russian Federation Town-Planning Code

Summer 2018 saw the adoption of a number of federal laws amending the RF Town-Planning Code.1 Here are the main changes important for developers:

  • After September 1, 2018, when a construction permit2 is issued, the competent authority will check that the documents submitted comply with the town-planning regulation and the PPT/PMT3 (if they need to be developed) on the issuance date of the GPZU,4 and will also check that the facility can be sited on the land plot according to the land plot's permitted use and the restrictions of the land and other legislation and in effect on the date the construction permit is issued.
    After September 1, 2018, generally, a commissioning permit5 will be denied if the property does not comply with the land plot's permitted use and/or the restrictions of the land and other legislation on the date the commissioning permit is issued.
  • After September 1, 2018, when expert review of the DD6 is done it is checked for compliance with the requirements of technical regulations that were in effect on the date the GPZU was issued, provided not more than one and a half years has passed since that date. If more time has passed, when expert review of the DD is done it is evaluated for compliance with the requirements of technical regulations that were in effect on the date the DD was received for expert review.
  • The RF Town-Planning Code preserves the cases where SCS7 is done (facilities for which SCS is done (SCS facilities)). However, after September 1, 2018, SCS in the form of on-site inspection is also done for other facilities and for SCS facilities after construction/reconstruction work has been completed and before the commissioning permit has been received, if there are certain grounds to do so, or on the basis of requests and applications or information from the government authorities (officers of the state supervision authority), or from the mass media that there were violations of the established requirements in the construction or reconstruction of permanent structures.
  • A separate chapter of the RF Town-Planning Code regulating the demolition of capital structures entered into force on September 1, 2018. It sets requirements for demolition and how it is done.
    Among other things, an article has been introduced on the demolition of unauthorized structures. It states that there are two options for unauthorized structures: demolition or court- or local government authority-ordered bringing of the structure into compliance with the established requirements. The relevant procedures have been introduced.

Other amendments to the RF Town-Planning Code, in particular, introduce definitions of the terms "capital structure" and "non-capital structure or facility"; a classifier of capital structures for design and maintaining the register of expert review reports on design documentation; mandatory expert review of DD for large public facilities; and expand what is covered by an expert review of DD, etc.

Amendments to the Russian Federation Land Code

The federal laws that amended the RF Town-Planning Code are also amending the RF Land Code. Here are the main changes important for developers:

  • A new chapter XIX of the RF Land Code entered into force on August 4, 2018. It is devoted to use-restricted zones. There is a list of 28 use-restricted zones, and based on its wording we can conclude that it is an exhaustive list.8 The Russian Federation Government has to approve the regulations for each type of use-restricted zone (other than the use-restricted zones stipulated by federal laws). Among other things, such regulations must state the restrictions on the use of land plots within the boundaries of use-restricted zones. Chapter XIX also includes the content of the decision establishing/varying a use-restricted zone (other than the use-restricted zones stipulated by federal laws); and the consequences of establishing a use-restricted zone. In particular, the titleholders of land plots and other immovable properties will be compensated for losses caused by the establishment of the use-restricted zone.
  • Chapter V.7 of the RF Land Code entered into force on September 1, 2018. The chapter covers how to set up a public easement, including for siting utility infrastructure facilities; arranging road or rail crossings with public railways; siting roads and tracks in tunnels; and how surveys are done for linear facilities. One of the ways of setting up such easements is for interested monopolies to apply for an agreement for a public easement for various terms.9 A public easement can be set up on land plots of any form of ownership. If the public easement has made it impossible or very difficult for the owner of the plot or the immovable property on the plot to use the plot or property, the owner can request that the plot or property be bought out at market price with compensation of losses.

Federal Law No. 339-FZ On Amendments to Part One of the Russian Federation Civil Code and Article 22 of the Federal Law On the Enactment of Part One of the Russian Federation Civil Code of August 3, 2018

Russia's Civil Code has also been amended in light of the new developments in the RF Town-Planning Code on unauthorized structures. For example, the RF Civil Code now clearly states that a building/structure/facility is not an unauthorized structure if it was erected or created in violation of the restrictions on use of the land plot established by law, but the structure's owner did not know and could not have known about those restrictions.

The Law envisions a mechanism for legalizing an unauthorized structure by bringing the structure into compliance with all of the established legal requirements. A court may render such a decision, and, in certain cases, the local government authority of a settlement, urban district or municipal district can issue such a decision.

If these circumstances stipulated by the RF Civil Code exist, and if the unauthorized structure is made compliant with the legal requirements, it is possible for the ownership of it to be acquired by the person who holds the land plot:

  • in ownership;
  • in lifetime inherited use;
  • in permanent (unlimited use);
  • in lease for construction purposes.10

Also, the time period for demolition has been adjusted and the time period for bringing an unauthorized structure into compliance has been defined. In the first case it is from three months to one year, while in the second it is from six months to three years.

It has been established that the local government authorities cannot adopt decisions on whether to demolish or bring unauthorized structures into compliance, inter alia, for structures on privately owned land plots (unless keeping the structures poses a hazard to human life and health), for properties to which ownership title is registered in the EGRN (property register), for an apartment house, single-family home or garden cottage.

Federal Law No. 175-FZ On Amendments to the Federal Law "On Participation in the Shared Construction of Apartment Houses and Other Immovable Properties and Amendments to Certain Legislative Acts of the Russian Federation" and Certain Legislative Acts of the Russian Federation of July 1, 2018

The Law entered into force on July 1, 2018 (except for certain provisions), and is intended to transition from shared construction to project finance. In particular, if the SCA11 with the first shared construction participant is submitted for state registration after July 1, 2019, money can only be raised from shared construction participants using escrow funds. Currently, the escrow mechanism can be used at the developer's discretion. When escrow accounts are used, a number of requirements stipulated by Federal Law No. 214-FZ do not apply (for example, the requirements that the developer have a certain amount of its own funds, that there be no liabilities under credit facilities, loans, etc., and also that the performance of the SCA be secured by pledge, and others).

In addition to this, Federal Law No. 214-FZ now includes provisions allowing the developer to build under several construction permits at the same time, including in accordance with an approved PPT. Now developers can also use shared construction participants' funds to acquire land plots.

Federal Law No. 174-FZ On Amendments to the Federal Law On the Procurement of Goods, Work and Services by Certain Types of Legal Entities and the Federal Law On the Contract System in the Procurement of Goods, Work and Services for State and Municipal Needs of June 29, 2018

This Law states that when they do procurement using their own funds (without raising public funds) all state unitary enterprises (GUP) and municipal unitary enterprises (MUP) are subject to the requirements of Federal Law No. 223-FZ On the Procurement of Goods, Work and Services by Certain Types of Legal Entities (previously those requirements applied only to pharmacies). However, when public funds are used for procurement, Federal Law No. 44-FZ On the Contract System in the Procurement of Goods, Work and Services for State and Municipal Needs shall apply.

There is also a transitional period for applying the new provisions of Federal Law No. 223-FZ for electronic procurement and the operation of electronic platforms for the purposes of such procurement whose participants can only be small and medium-sized businesses. These rules must be applied after the electronic platforms start running, subject to additional requirements that became effective as of July 1, 2018.

Federal Law No. 160-FZ On Amendments to the Federal Law On Industrial Policy in the Russian Federation of June 27, 2018

A new type of territory covered by industrial incentives, industrial technology parks, has been added to the industrial policy law.

Industrial technology parks are industry and technology infrastructure facilities intended for industrial production, scientific and innovative activity to develop industrial production and to commercialize the results of research and development.

Technology parks are managed by a management company (for-profit or nonprofit organization).

In order for incentives to apply, the technology parks and their management companies must meet requirements set by RF Government Resolution No. 794 of August 4, 2015,12 which must be confirmed by the Ministry of Industry and Trade.

Federal Law No. 259-FZ On Amendments to Article 18.1 of the Federal Law On Protection of Competition of July 29, 2018

The Law supplemented a list of powers of the antimonopoly authority when complaints that procedures in the exhaustive list of construction procedures have been violated are considered.13

It has been established that the antimonopoly authority considers complaints against the acts and actions (or inaction) of the competent authorities when these construction procedures are applied to legal entities and individual entrepreneurs, including complaints against:

  • Illegal refusal to accept documents and applications;
  • Requirements not established by law being applied to the person who filed the complaint, or to documents and information.

Please note that previously these types of complaints were considered by the antimonopoly authority only for entities supplying utility services and entities operating related utility infrastructure.

Federal Law No. 261-FZ On Amendments to Article 4 of the Federal Law On Concession Agreements and Article 7 of the Federal Law On Public-Private Partnership, Municipal-Private Partnership in the Russian Federation and on Amendments to Certain Legislative Acts of the Russian Federation of July 29, 2018

The Law clarifies that facilities for production, primary and/or further (industrial) processing and storage of agricultural products defined according to approved criteria are among the facilities covered by concession agreements and also public-private and municipal-private partnership agreements.14

In the previous version of the regulations being amended, such facilities should have been included on a list approved by the RF Government in accordance with the agriculture development laws. This requirement no longer exists.

Federal Law No. 338-FZ On Amendments to Certain Legislative Acts of the Russian Federation of August 3, 2018; Letter No. 3846/03-16-3 from the Federal Notary Chamber of August 6, 2018

In addition to other amendments, the Law makes it possible to apply for state registration of title to real estate through the notary who notarizes the agreement.

The Law provides that after the notary notarizes the real estate transaction, the notary itself will send the application for state registration of title and the necessary documents to Rosreestr electronically. The notary needs to do this before the end of the business day or within the time the parties have specified in the agreement. The parties can still file the documents on their own if they are against such filing.

If for reasons beyond his or her control the notary is unable to file the documents electronically, the notary should submit them for registration in hard copy. Generally, the period is not more than two business days from when the agreement is notarized. However, the list of reasons beyond the notary's control when it is not possible to submit the application for state registration has yet to be approved.

These amendments will become effective as of February 1, 2019.

Federal Law No. 312-FZ On Amendments to Certain Legislative Acts of the Russian Federation with respect to Clarifying Aviation and Rail Transport Infrastructure Facilities and Seaport Facilities Classed as Particularly Hazardous and Technically Complex Facilities of August 3, 2018

This Law entered into force on August 14, 2018 and sets forth the types of particularly hazardous and technically complex aviation and rail transport infrastructure facilities.

We remind readers that according to the RF Town-Planning Code,15 the design documentation for particularly hazardous and technically complex facilities must undergo state expert review and must contain lists of measures for defense, countering terrorism and preventing emergencies.

Russian Federation Government Resolution No. 1130 On the Development, Public Discussion, Approval and Adjustment of Territorial Plans for Industrial and Consumer Waste Management, Including Municipal Solid Waste, and on Requirements to the Composition and Content of such Plans of September 22, 2018

There are now new rules establishing the procedure for how territorial plans for production and consumer waste management, including municipal solid waste, are developed and undergo public discussion, approval and adjustment. Such plans are approved to organize and carry out activities to accumulate (including separately), collect, transport, process, recycle, decontaminate and dispose of waste.16

Among other things, the rules set new requirements to the composition and content of such plans. A territorial plan must contain:

  • Data about planned construction, reconstruction and decommissioning of facilities for waste processing, recycling, decontamination and disposal of waste
  • An assessment of the capital investment needed to carry out such measures
  • Projected maximum rates for handling municipal solid waste
  • Information about areas where regional operators are active

Also, an electronic model is now a required section of the territorial plan.

In order to hold public discussion, the draft of the territorial plan is posted on the competent authority's website where the approved territorial plan is then also posted. The term of the public discussion is at least one month and not more than three months from when it is posted on that site.

CLARIFICATIONS OF FEDERAL LEGISLATION

Ministry of Construction of Russia Letter No. 23694-KhM/08 On Maintaining the Unified State Register of Design Documentation Expert Review Opinions of May 30, 2018

The Ministry of Construction reminds us that the Rules for Forming the Unified State Register of Design Documentation Expert Review Opinions for Capital Structures (the "Register") and the Rules for Maintaining the Register became effective on July 1, 2018.17 The Ministry of Construction designated Glavgosekspertiza of Russia Federal Autonomous Institution the Register's operator (hereinafter the "Operator").

The Ministry of Construction also clarified that expert review opinions (documents and information about them) should be included in the register only when the agreement for expert review of such documents was concluded after June 30, 2018.

We remind readers that in accordance with RF Government Resolution No. 878 of July 24, 2017, the following are among the publicly accessible18 free information of the Register:

  • The result of the expert review done (favorable or unfavorable expert review opinion);
  • The form of the expert review (state, non-state);
  • Information about the subject of the expert review (design documentation and results of engineering surveys).

Federal Antimonopoly Service of Russia Letter No. VK/48632/18 Recommendations on the Procedure for the Antimonopoly Authority to Approve Amendments to the Terms of a Concession Agreement for Heating Facilities, Centralized Hot Water Supply Systems, Cold Water Supply Systems and/or Wastewater Disposal Systems, Certain Facilities of Such Systems in Accordance with the Rules for the Antimonopoly Authority to Approve Amendments to the Terms of a Concession Agreement, approved by Russian Federation Government Resolution No. 368 dated April 24, 2014, of June 28, 2018

We remind readers that the consent of the antimonopoly authority is generally required to amend a concession agreement for, inter alia, heating supply facilities, centralized hot water supply systems, and certain facilities of such systems.19 FAS Russia has prepared a clarification of the Rules for how the antimonopoly authority grants approval to amend the terms of a concession agreement.20

For example, it is not enough that changes be made to the territorial heating plan and that new facilities be included in that plan for amendments to the concession agreement to be approved. It is also necessary to provide a justification of why the parties cannot fulfill the commitments they made when they entered into the concession agreement; this justification will be thoroughly examined by the antimonopoly authority.

The Letter also clarifies issues related to the grounds for refusing to approve amendments and the list of cases where amendments must be coordinated with FAS Russia, etc.

Federal Tax Service of Russia Letter No. BS-4-21/18577 On Sending a Copy of the Ruling of the Russian Federation Supreme Court No. 305-KG 18-9064 dated September 20, 2018, of September 24, 2018

The Federal Tax Service has noted that in light of this Russian Supreme Court Ruling, in order to have an obligation to accrue and pay corporate property tax a taxpayer must have actually existing immovable properties that are recognized as fixed assets.

To wit, the Russian Supreme Court has stated that the state cadastral inventory merely containing information on an immovable property and that a taxpayer owns it cannot serve as a basis to charge tax when the property being taxed does not actually exist.

If an immovable property is demolished, ownership of it ceases when the property is destroyed. Deletion of information about the inventoried immovable property from the state cadaster merely confirms that the property has ceased to exist.

Amendments to the laws of St. Petersburg and Leningrad Region

New cadastral value of immovable properties in St. Petersburg21

The Cadastral Valuation St. Petersburg state-financed institution has completed the cadastral valuation of immovable properties in St. Petersburg. The report generated with considered comments was forwarded to Rosreestr on September 25.22

The new valuation used real estate market pricing factors and particular attention was paid to the actual use of the immovable property, not the one registered with Rosreestr.

The final results of the new cadastral valuation will be approved by the end of 2018 and will become effective on January 1, 2019.

St. Petersburg Property Relations Committee Order No. 93-r of August 1, 2018 On Amendments to City Property Management Committee Order No. 76-r of June 1, 2010

The Order enables auctions to be held for the right to conclude lease agreements for nonresidential properties that are unused cultural heritage sites (historical and cultural monuments) of the Russian Federation that are in the Unified State Register and (1) are in unsatisfactory condition, (2) are owned by St. Petersburg, and (3) for which a preservation order has been approved (the "Unused Cultural Heritage Site").

The order specifies the conditions for holding such auctions and the list of documents, and also approves the form of the auction notice.

The lease agreement for an Unused Cultural Heritage Site is a 49-year agreement.

The Order also clarifies that immovable properties owned by St. Petersburg and granted at a fee determined on the basis of St. Petersburg Law No. 282-43 of May 26, 200423 cannot be put up for auction for the right to conclude a lease agreement for an Unused Cultural Heritage Site.

St. Petersburg Property Control Committee Decree No. 137-p On Amendments to the List of Immovable Properties for which the Cadastral Value is the Tax Base, for 2018, Approved by St. Petersburg Property Control Committee Decree No. 166-p dated December 25, 2017, of August 17, 2018

The list of properties for which the cadastral value is the tax base, for 2018, has been updated.

St. Petersburg Property Control Committee Order No. 19-r of August 10, 2018 On Amendments to Order No. 7-r of April 2, 2018

The Order updates the procedure for doing inspections to determine the actual use of buildings (structures, facilities) and premises for tax purposes. Such inspections may be done by employees of the Property Control Committee themselves or together with employees of the Center for Improving the Effective Use of State Property St. Petersburg state public institution.

LEGAL PRECEDENTS

Ruling of the RF Supreme Court No. 309-KG18-5076 in case А60-7484/2017, of August 3, 2018

In this case the taxpayer used an incentive providing a tax exemption for a newly constructed energy efficient retail and office building. The lower courts considered it legal; however, the Russian Supreme Court disagreed with them, stating that the Law on Energy Conservation has criteria for determining the energy efficiency only for apartment houses, so these incentives cannot be applied to other facilities (that are not apartment houses).

Ruling of the Volga Circuit Commercial (Arbitrazh) Court of August 6, 2018 in case No. А55-29909/2015

In this case, when a company sought to recover legal fees, the opponent attempted to dispute them, as, in its opinion, the amount was overstated and did not match the complexity of the case; it was not necessary to involve outside law firms.

The court disagreed with this and stated that increased workload on a legal department is reason to engage law firms. It helps to expedite enforcement of the judicial act in the case and to repay debts to creditors caused by the respondent's actions.

Footnotes

  1. Including Federal Law No. 321-FZ of August 3, 2018; Federal Law No. 340-FZ of August 3, 2018; Federal Law No. 341-FZ of August 3, 2018; Federal Law No. 342-FZ of August 3, 2018.
  2. Razreshenie na stroitelstvo.
  3. Territorial planning design and territorial site design.
  4. Land plot development plan.
  5. Razreshenie na vvod v ekspluatatsiu.
  6. Design documentation.
  7. State construction supervision.
  8. At the same time, this list does not contain, e.g., the Pulkovo Observatory protected park zone.
  9. The term depends on the purpose of the easement and is a maximum of 49 years.
  10. If the land plot is publicly owned and bringing the unauthorized structure into compliance with the established requirements isn't against the lease agreement.
  11. Shared construction agreement.
  12. On Industrial Parks and Management Companies of Industrial Parks.
  13. As of the date of this Alert, RF Government Resolution No. 403 of April 30, 2014 had approved the exhaustive list of housing construction procedures.
  14. RF Government Resolution No. 1686 On the Approval of Criteria... of December 29, 2017.
  15. Article 48(14) of the RF Town-Planning Code.
  16. Article 13.3(1) of Federal Law No. 89-FZ On Production and Consumer Waste of June 24, 1998.
  17. RF Government Resolution No. 878 On the Procedure for Forming... of July 24, 2017; Ministry of Construction of Russia Decree No. 115/pr On Approving the Procedure... of February 22, 2018.
  18. https://gge.ru/services/egrz/
  19. Article 43(1) of Federal Law No. 115-FZ On Concession Agreements of July 21, 2005.
  20. RF Government Resolution No. 368 On Approval of the Rules... of April 24, 2014.
  21. http://guko.commim.gov.spb.ru/
  22. http://guko.commim.gov.spb.ru/propromezhutoch-otchet/
  23. On the Procedure for Granting Immovable Properties Owned by St. Petersburg for Construction, Reconstruction and Adaptation for Modern Use.

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