Changes In Real Estate Legislation, Q2 2015

Overview of the most important changes for the second quarter of 2015 in Russian real estate legislation.
Russian Federation Real Estate and Construction

Changes at the federal level

RF Federal Law № 184-FZ "On Amendments to the RF Federal Law "On the State Real Estate Cadaster" and Article 6 of the RF Federal Law "On Special Economic Zones (SEZ) in the Russian Federation" dated June 29, 2015

On June 30, 2015 the State Real Estate Cadaster (SREC) is being supplemented with information about special economic zones (SEZ), namely information concerning zone type and a description of boundary location.

The new provision entered into force on June 30, 2015.

Furthermore, the law introduces certain changes to the provisions of the SREC Law concerning the substance of the technical plan. Thus, upon request of the cadastral-work customer, the location of the construction project can be established additionally in the technical plan in the form of a dimensional description of the structural elements of the construction project in view, among other things, of the height or depth of such structural elements.

The provision above will enter into force on December 31, 2015.

RF Federal Law № 158-FZ "On Amendments to the RF Federal Law "On the Particularities of the Acquisition of Real Estate Publicly Owned by the Constituent Entities or Municipalities of the Russian Federation and Leased to Small- and Medium-Sized Enterprises (SME) and the Amendments of Certain Legislative Acts of the Russian Federation" dated June 29, 2015

The law extends the deadlines governing the acquisition of real estate publicly owned by RF constituent entities or municipalities and leased to small- and medium-sized enterprises (SME): the buyout of such properties has been extended to July 1, 2018. That said, preferential rights to the acquisition of leased property can be exercised, provided that the leased property has been in uninterrupted temporary possession or use for two years as of July 1, 2015. In the exercise of preferential rights to the acquisition of leased property, the deferred-payment term must not be less than five years.

The law entered into force on June 30, 2015.

RF Government Resolution № 1521 "On Approving the List of National Standards and Codes (Parts of Such Standards and Codes) Whose Application Results in Mandatory Compliance with the Requirements of RF Federal Law "Technical Regulation on the Safety of Buildings and Structures of December 26, 2015;" Rosstandart Order № 365 "On Approving the List of Standardization Documents Whose Application Results in Voluntary Compliance with the Requirements of RF Federal Law "Technical Regulation on the Safety of Buildings and Structures" of March 30, 2015

For the purposes of ensuring implementation of the provisions of RF Federal Law № 384-FZ dated December 30, 2009 "Technical Regulation on the Safety of Buildings and Structures," the RF Government and Rosstandart have approved the lists of national standards and codes subject to mandatory and voluntary application. Please note that these documents have been updated and substantive changes to the SNiP (construction rules and regulations) and GOST previously in force have been made. Design documentation must comply with the updated mandatory requirements in cases where it is submitted for state expert review after July 1, 2015.

In particular, non-residential premises for temporary accommodation must now comply with the requirements of SP-54 "Residential Apartment Buildings." Thus, hotels must abide by the requirements imposed on residential buildings in terms of insulation, parking facilities, landscaping, etc.
The government resolution supplements the mandatory list with SNiP that had been applied previously on a voluntary basis, such as: SNiP 3.03.01-87 "Load-Bearing Structures and Enclosures." A number of SNiP and GOST have been stricken from mandatory application, such as: SNiP 3.01.03-84 "Geodesic Work in Construction."

Both acts entered into force on July 1, 2015.

Recent changes in the appraisal business

RF Federal Law № 145-FZ "On Amendments to the RF Federal Law "On Appraisal Work in the Russian Federation" and Article 3 of the RF Federal Law "On Amendments to the RF Federal Law "On Appraisal Work in the Russian Federation" dated June 8, 2015

The law establishes that the expert review of appraisal reports shall be regarded as just one type of state expert review for compliance with established requirements. Therefore, the expert review of reports determining market value shall also be used for the purposes of confirming the market value of the property subject to valuation.

On July 1, 2015 the period allotted for the state expert review of reports on the determination of cadastral value has been extended from 30 to 45 business days from the date the report is submitted to the respective appraisers' SRO. The law also specifies that the disclosure be placed on official SRO websites of information about the price and procedure governing the state expert review of reports, as well as information concerning report results.

The law also provides that state expert review of the cadastral valuation of real estate properties contracted prior to June 8, 2015 are exempt from provisions stipulating the performance of valuation no more than once every three years (in federal cities – every two years).

RF Ministry of Economic Development Orders № 297 "On Approving the RF Federal Appraisal Standard "General Appraisal Concepts, Approaches and Requirements Concerning Appraisal Work (FAS № 1)," № 298 "On Approving the RF Federal Appraisal Standard "Appraisal Purpose and Value Types (FAS № 2);" № 299 "On Appraisal of the RF Federal Appraisal Standard "Requirements Governing Appraisal Reports (FAS № 3)" dated May 20, 2015

The orders provide a new formulation of federal appraisal standards ("FAS"): The FAS provides an updated version of the current requirements governing appraisal work, clarifies the provisions of appraisal approaches and opens up the list of types of appraisal-item value.

The new FAS will become applicable following the entry into force of the RF Ministry of Economic Development order declaring current FAS versions null and void. As of the compilation of the present alert, the aforementioned order has yet to be drafted.

RF Ministry of Economic Development Order of June 22, 2015 № 388 "On the Amendments to RF Federal Appraisal Standard "Determination of Cadastral Value (FAS № 4)," as Approved by RF Ministry of Economic Development Order № 508 dated October 22, 2010

The order provides clarification of the RF Federal Appraisal Standard "Determination of Cadastral Value (FAS №4)," indicating that one of the purposes of determining cadastral value is taxation. The order establishes that cadastral value is to be determined without consideration of property restrictions and (or) encumbrances, with the exception of certain types of restrictions and encumbrances established in the public interest.

The rule stipulating that cadastral value be determined by mass-appraisal methods has been stricken, as has the requirement specifying that reports on the findings of cadastral-value appraisal be compiled within seven months of the date of conclusion of the agreement for the performance of cadastral appraisal.

As of the date of this alert, the order has not been officially published and has not entered into force.

RF Government Resolution № 350 "On Amendments to the Rules Governing the Technological Connection of Consumer Power Receivers, Power-Generation Installations and the Power-Grid Facilities Owned by Network Organizations and Other Parties to Electrical Networks" dated April 13, 2015

The resolution explicitly enshrines power-consumers' right to indirect connection to the proprietary power receivers of other consumers and the redistribution of incoming capacity to the latter. Such an arrangement can be implemented, provided that the consumer's connection took place prior to 2015 and that the indirect connection does not result in the need to change technical parameters.
Under the general procedure, the technical measures entailed in indirect connection must not take more than 30 days.

RF Federal Service for State Registration, Cadastral Records and Cartography Letter № 14-out/02357-GE/15 dated February 19, 2015

Rosreestr has issued certain clarifications with respect to the filing of objections against registered rights to real estate property, which were subsequently upheld by the RF Ministry of Economic Development in its Letter № D23i-323 dated 4 February 2015. According to the recently-issued position, the right to file the respective objection and secure recourse to court is enjoyed by any party whose title to the given real estate property was at any time registered with the Unified State Register of Real Estate Rights and Related Transactions (EGRP). Pursuant to the letter, any former owner is entitled to file an application citing the pertinent objections against registered rights to real estate property. In our view, it is impossible to exclude the possibility that this opportunity could be exploited by unscrupulous market participants.

RF Construction Ministry Letter № 10371-ACH/04 "On the Requirements Governing Concession Agreements" dated April 10, 2015

In its letter, the RF Ministry of Construction indicates the most widespread violation in the conclusion of concession agreements, namely the failure of such agreements to include the material terms established by RF Federal Law № 115-FZ dated July 21, 2005 "On Concession Agreements." The RF Ministry of Construction points to the general provisions of the RF Civil Code, which stipulate that, in the event of the failure of concession agreements to include the material terms provided by law, such agreements are deemed not concluded. In this connection, in the preparation and conclusion of concession agreements, we recommend conducting a thorough check to ensure that the agreements contain all of the material terms prescribed by applicable law.

RF Ministry of Economic Development Order № 789 "On Approving the Administrative Regulation of the RF Federal Service for State Registration, Cadastral Records and Cartography Governing the Provision of State Services Involving the State Registration of Real Estate Rights and Related Transactions" dated December 9, 2014

The Administrative Regulation approved by the order establishes the standard and procedure governing the provision of state services involving the state registration of real estate rights and transactions therewith. Among other things, the order prescribes service-provision timeframes, and the documents that must be enclosed with state-registration applications. The order also provides for the possibility of the simultaneous submission of state cadastral-record and state title-registration applications.

RF Government Resolution № 437 "On the Voiding of RF Government Resolution № 698 of November 24, 2005" dated May 6, 2015

As of the entry into force of the aforementioned resolution, i.e. as of 16 May 2015, the new forms of construction permits and commissioning permits provided by RF Ministry of Construction Order № 117/pr dated February 19, 2015 become effective.

Rosreestr reminds those concerned that as of January 1, 2015, certificates of state title registration are being issued on the new form approved by RF Ministry of Economic Development Order of December 21, 2013 № 765

The new form is a standard hard (paper) copy devoid of watermarks and other forms of printing security.

Information provided by the RF Ministry of Economic Development "Answers to FAQ on Implementation of the Provisions of RF Federal Law № 171-FZ dated 23 June 2014 "On Amendments to the RF Land Code and Certain Legislative Acts of the Russian Federation"

The RF Ministry of Economic Development has provided clarifications of the provisions entailed by the sweeping reform of land legislation in the form of answers to frequently-asked questions, touching on the following aspects: conclusion of a land-lease agreement for a new term; formation of land plots; preliminary agreement of the provision of a land plot; procedure governing the provision of land plots; acquisition of partially-constructed properties in connection with termination of the respective land-lease agreement; application of the criteria that must be met by social-cultural facilities and major investment projects, etc.

The recently-provided information should help resolve the potential practical problems associated with the application of new legislation.

Changes at the SPB and LR level

St. Petersburg Law № 421-82 "On Amendments to the St. Petersburg Law "On the General Plan of St. Petersburg" dated July 13, 2015

The law has introduced some long-discussed changes to the city's territorial planning. In particular, it establishes the priority of residential zones with buildings of no more than five stories under the change in the functional zoning of existing zones to residential. The total area of recreational and industrial zones has been increased. Much attention has been paid to the development of the transport system according to the State Program "Development of the St. Petersburg Transport System in 2015-2020."
Please note that the new version includes provisions governing the general plan containing territorial zoning maps.

The law entered into force as of 28 July 2015.

St. Petersburg Law № 477-93 "On Amendments of the St. Petersburg Law "On Town-Planning Activity in St. Petersburg" of 13 July, 2015

The law defines the authorities of the Legislative Assembly of St. Petersburg and the St. Petersburg city government with respect to approving the architectural-town-planning appearance of a residential construction project. Now, the Legislative Assembly has been empowered to establish the procedure governing the issuance of approval decisions, while the St. Petersburg city government is responsible for decision-making on approval of the architectural-town-planning appearance of residential construction projects. The law also determines the measures involved in general-plan implementation, namely – via execution of the measures provided under programs approved by the St. Petersburg city government.

The law entered into force as of 26 July 2015.

St. Petersburg Draft Law "On the Procedure Governing the Issuance of Decisions on Approval of the Architectural-Town-Planning Appearance of Properties in the Residential Construction Field"

For the purposes of elaboration of the provisions of the aforementioned St. Petersburg Law № 477-93 dated July 13, 2015, a draft law is currently being developed that proposes determining the procedure governing the issuance by the St. Petersburg city government of decisions on approval of the architectural-town-planning appearance of properties in the residential construction field. The draft provides that such decisions not be issued with respect to cultural heritage sites (identified cultural heritage sites), individual residential houses or linear facilities. The decision on approval of property appearance must be issued prior to the approval of the town-planning plan for the respective land plot. The general criterion for the issuance of an approval decision envisioned by the draft law: compatibility of the property's architectural-town-planning appearance with St. Petersburg's established architectural skyline.

The draft law is currently in its second reading.

St. Petersburg Law № 219-37 dated April 22, 2015 "On Grounds for the Adoption of Decisions to Refuse the Holding of an Auction for the Sale of a Land Plot or Conclusion of a Land-Lease Agreement, to Refuse Preliminary Agreement of the Provision of a Land Plot or the Provision of a Land Plot Without Benefit of Tender"

Pursuant to Art. 34 of RF Federal Law № 171-FZ dated June 23, 2014 "On Amendments to the RF Land Code and Certain Legislative Acts of the Russian Federation," the laws of a constituent entity may establish additional grounds for refusal to hold an auction for the sale of, or right to conclude a lease agreement for, a land plot, as well as for refusal to provide preliminary agreement to the provision of a land plot or its provision without benefit of tender.

The St. Petersburg Law establishes the following additional grounds for refusal: presence of the provisions provided by current legislation prohibiting the use of a land plot for the purposes indicated in the respective application for the provision of a land plot, as well as the submission of an application for the provision of a land plot covered by the targeted program providing the cost-free transfer of land plots into the ownership of RF citizens with three or more children for the purposes of individual residential or cottage construction.

The aforementioned additional grounds shall remain in force until January 1, 2020.

St. Petersburg Law № 233-39 "On the Voiding of the St. Petersburg Law "On the Procedure Governing the Provision of Land Plots for Purposes Other Than Construction" dated May 14, 2015

As of March 1, 2015, the St. Petersburg Law "On the Procedure Governing the Provision of Land Plots for Purposes Other Than Construction" was declared not effective due to the fact that it is not complying with the RF Land Code. Applications for the provision of land plots into lease for purposes other than construction submitted prior to 1 March 2015 shall be considered according to the previous procedure.

However, the provisions of the now-voided law shall remain in effect until January 1, 2018 in the event that, prior to March 1, 2015, the responsible state or municipal authority approves an arrangement for the positioning of the land plot on the cadastral plan or territorial cadastral map with the aim of its provision for purposes other than the construction and (or) operation of buildings and structures.

St. Petersburg Law № 288-48 "On the Criteria Binding Socio-Cultural and Household Facilities Not Classified As Real Estate Properties Whose Situation Entails the Lease of Land Plots Without Benefit of Tender" dated June 3, 2015

The law was adopted for the purposes of implementing Subclause 3, Clause 22, Art. 39.6 of the RF Land Code, providing the provision of land plots into lease without benefit of tender. The criteria established by the law are unrelated to the commercial use of land plots. For instance, the facility slated for erection on the plot must be deemed an amenity and be used for purposes other than the pursuit of entrepreneurial activity.

St. Petersburg Government Resolution № 351 "On approval of the Provision on the procedure governing decision-making on the construction of buildings and structures of particular significance to the social, economic, cultural and other development of St. Petersburg in deviation from the established usage modes of land within the boundaries of the protection zones established for cultural heritage sites within St. Petersburg city limits, and the procedure for holding public hearings on recognizing buildings and structures as having particular significance to the social, economic, cultural and other development of St. Petersburg" dated April 17, 2015

The resolution determines the procedure for decision-making on the construction of buildings and structures of particular significance to the social, economic, cultural and other development of St. Petersburg in deviation from the established usage modes of land within the boundaries of the protection zones established for cultural heritage sites (such decisions must be made prior to or in the process of design-documentation preparation, but in any case prior to the state expert review of design documentation and obtainment of the respective construction permit). In particular, the procedure can be used with respect to real estate properties transferred into state ownership following their construction (for example, construction within the scope of a state contract or concession agreement). It should be noted that the resolution does not specify a threshold volume of deviations.

Please note that, pursuant to applicable federal law, any deviation from the established modes of protected zones for federally-designated cultural heritage sites occurring at the construction stage entail compulsory agreement with the RF Ministry of Culture, although this requirement is not reflected in the resolution. Thus, when obtaining permits, it is important to ensure the agreement of the RF Ministry of Culture to any deviations occurring in construction taking place in the protected zones of federally-designated cultural heritage sites to avoid the risks associated with possible objections against permits for a deviation from threshold parameters and (or) the filing of claims seeking classification of the respective real estate properties as unauthorized construction projects.

St. Petersburg Property Relations Committee Instruction № 12-r "On the Procedure Governing Decision-Making on the Issuance of Permits for the Use of State-Owned Land or Land Plots" dated June 24, 2015

The instruction determines the procedure governing interaction among the various structural divisions of the St. Petersburg Property Relations Committee in decision-making on the issuance of permits for the use of land and land plots located within the city limits of St. Petersburg and state-owned by St. Petersburg, where said state ownership is not delineated. At issue here is the authorization-based procedure for land-plot utilization pursuant to Article 39.34 of the RF Land Code, that is, without the provision of plots under whatever rights (in particular, for the performance of engineering surveys).

St. Petersburg KGIOP Instruction № 10-243 "On Approval of an Administrative Regulation" dated June 15, 2015

The approved Administrative Regulation regulates the relations involved in the provision by KGIOP of state services with respect to the installation (placement) at cultural heritage sites and adjacent grounds of devices for the transmission (receipt) of telecommunications signals, electrical-lighting equipment, air conditioners, balconies, as well as other activities involving the reequipping and reconfiguration of (identified) cultural heritage sites. The regulation also establishes the eligible group of applicants, the list of required documents, service standards and provision timeframes and determines the procedure governing the appeal of KGIOP decisions by claimants without recourse to court.

Judicial Practice

Plenum of the RF Supreme Court Resolution № 25 "On the Application by the Courts of Certain Provisions of Section I, Part One of the Civil Code of the Russian Federation" dated June 23, 2015

The Plenum of the RF Supreme Court has provided some clarifications, unprecedented in terms of both scope and substance, concerning the application of Part One of the RF Civil Code. The elucidated positions cover a number of important aspects that could have a significant impact on court practice. The Plenum also touched, inter alia, on certain issues concerning real estate and the state registration of related rights. A detailed analysis of the provisions of the resolution will be provided in our next alert.

Plenum of the RF Supreme Court Resolution № 28 "On Certain Issues Arising in the Consideration by the Courts of Cases Involving Objections Against the Ultimate Determination of the Cadastral Value of Real Estate Properties" dated June 30, 2015

The Plenum of the RF Supreme Court has provided a clarification of the issues associated with objections against determination of the cadastral value of real estate properties, indicating that said determination involves both taxation and the setting of lease fees. The procedural forms governing such disputes have been refined. Thus, a tenant can file such a claim if the owner has expressed in writing its consent to such a review.

RF Supreme Court Ruling dated April 7, 2015 in Case № 306-KG15-578, А65-4542/2014

The Chamber of the RF Supreme Court has found that the absence in the RF Town-Planning Code of norms regulating the procedure governing introduction of the respective changes in the event of the modification of design documentation for a property under construction cannot constitute grounds for refusing the applicant's exercise of its right to bring construction documentation into alignment with duly-introduced design modifications, including by virtue of a change in territorial development parameters.

Chamber for Commercial Disputes of the RF Supreme Court Ruling № 305-ES14-2306 dated April 13, 2015

The RF Supreme Court has formulated a position whereby the actions of Rosreestr – involving the entry of inaccurate cadastral value with respect to the land into the SREC – can be disputed according to the rules governing the disputing of non-regulatory acts. The disputing of cadastral value by contesting the actions of Rosreestr in terms of entering inaccurate information concerning a real estate property does not require the establishment of the market value of the underlying land plot.

Chamber for Commercial Disputes of the RF Supreme Court Ruling № 304-ES14-3964 dated March 31, 2015

According to the position taken by the RF Supreme Court, a party acquiring a real estate property without establishing its right to the underlying land plot cannot be refused the recognition of its right to a commensurate share of title to the land plot on the grounds that the size of said share cannot be firmly established. In such situations, the courts should independently order the required cadastral work in order to establish the size of the share according to the rules governing court inquiries. In this connection, when acquiring land plots, we recommend carefully checking for the presence thereon of real estate properties owned by other parties.

RF Constitutional Court Resolution № 6-P dated March 31, 2015

The RF Constitutional Court has formulated a critical legal position on the issue of disputing against acts issued by the RF Federal Tax Service containing clarifications as to the application of tax legislation. The resolution indicates that, prior to the amendment of procedural legislation such acts must be disputed according to the procedure provided by procedural law governing the disputing of regulatory acts. Such disputing was previously impossible.

Chamber for Commercial Disputes of the RF Supreme Court Ruling dated April 21, 2015 in Case № 307-ES14-8324

The RF Supreme Court has clarified the conditions under which major transactions must be approved. According to this position, any transaction changing the terms of a previously-approved major transaction is also subject to approval in the event that it changes the basic terms of said previously-approved transaction. Earlier case law had proceeded from the legally-enshrined concept of "material terms," whereas the "basic terms" category remains undefined. In this connection, in the avoidance of possible disputes and inconsistencies, we recommend arranging for the approval of any changes to previously-concluded contracts.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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