Changes to the Russian Federation Town-Planning Code

A number of federal laws adopted in 2016 and entering into force at various times will make major changes to the RF Town-Planning Code.1 The changes are generally aimed at clarifying town-planning regulation, setting up new mechanisms for government-developer interaction, and at optimizing the design process.

In particular, the following main innovations were adopted2:

  1. establishment of an exhaustive list of cases requiring the development of territorial planning designs and territorial site designs (hereinafter – "TPD/TSD"), such as, inter alia, cases necessitating the establishment/modification/lifting of red lines, and cases involving the formation of a land plot within the boundaries of a previously-built-up area, micro-neighborhood, etc.
  2. the period in which information stated in a land plot's urban-development plan (the "LPUDP") was specified as three years from the date of issuance. LPUDPs issued prior to January 1, 2017 remain effective throughout the period established by the corresponding RF constituent entity; after January 1, 2017, the period cannot be less than three years or more than eight years3
  3. it was established that a building permit ("BP") confirms the conformance of design documentation to town-planning regulations and the TPD/TSD (where their development is required) as of the date of LPUDP issuance, just as it affirms the permissibility of locating the anticipated structure on the land plot in accordance with the permitted use of that land plot and any restrictions established in connection therewith pursuant to land and other legislation
  4. a new mechanism for interaction between the local government authorities and developers is being introduced: agreements on integrated territorial development ("ITD"). It is intended that ITDs will be entered into for large areas that encompass both public and privately owned land plots and/or real properties. The ITD is possible on the basis of public and private initiative alike.

The above-mentioned provisions entered into force as of January 1, 2017, with the exception of the individual provisions mentioned in paragraph (i) which will enter into force on July 1, 2017.

Issuing time for building and commissioning permits reduced

Federal Law No. 445-FZ on Amendments to Articles 51 and 55 of the Russian Federation Town-Planning Code of December 19, 2016

The issuing time for building and commissioning permits has changed from 10 calendar days to seven business days, which generally results in a reduction. This new development applies to permits for which applications are filed after the law enters into force.

The law entered into force on December 31, 2016.

Establishment of new protection zones for cultural heritage sites

Federal Law No. 95-FZ on Amendments to the Federal Law on Cultural Heritage Sites (Monuments of History and Culture) of the Peoples of the Russian Federation and Article 15 of the Federal Law on the State Real Estate Cadastre of April 5, 2016

The law introduced new protection zones for cultural heritage sites ("CHS")4. These zones are intended to temporarily protect CHS (monuments and ensembles, with a few exceptions), that are in the register of cultural heritage sites until the date of approval of the protection-zone plan for the concerned CHS.

Protection zones for CHS are not set if the cultural heritage site is located within protection zones of another CHS or within a combined CHS protection zone.

Within the boundaries of the CHS protection zones the construction and reconstruction of capital structures is prohibited, with the exception of the reconstruction of utility lines. These prohibitions do not apply if the BP will be issued before the Federal Law enters into force, as well as in cases of extension of the BP and/or change of developer.

The CHS protection zone may be from 100 to 300 meters, depending on where the CHS is located, and the regional CHS protection authority my decide to set other protection zones following historical and cultural expert review.

The law entered into force on October 3, 2016.

Changes in shared construction

Federal Law No. 304-FZ on Amendments to the Federal Law on the Participation in Shared Construction of Apartment Houses and Other Immovable Property Units and on Amendments to Certain Legislative Acts of the Russian Federation and Certain Legislative Acts of the Russian Federation of July 3, 2016

The law provides for a stiffening of the requirements to developers under shared construction agreements. Specifically, developers raising funds from individuals will be required to comply with a minimum charter capital requirement (depending on the area of the facilities being erected), there should be no information about them in the registry of bad-faith suppliers, and such developers' arrears for taxes, levies and other mandatory payments for the preceding year should not be more than 25% of the book value of their assets.

Detailed rules for information disclosure by developers are being introduced (whether they raise funds from individuals or legal entities). Among other things, the developer's website must publish the project statement of the facility (the form of which was approved by RF Ministry of Construction Decree No. 996/pr of December 20, 2016), a conclusion from a competent authority that it meets the requirements of law, draft shared construction agreements and information about security for performance of the developer's obligations.

Requirements are being introduced to the content of the transfer certificate, to which operating instructions for the facility being transferred must be attached. The law also expressly states that a more than 5% change in the premises' area qualifies as a substantial change of the design documentation serving as grounds to terminate the shared participation agreement.

Other changes that should be noted include the creation of a special fund to protect the rights of shared construction participants if developers go bankrupt; the fund will be formed from developers' contributions. The RF Government has established the procedure for forming and managing the money in the fund.5

The law entered into force on January 1, 2017, with the exception of individual provisions.

New law on state cadastral valuation

Federal Law No. 237-FZ on State Cadastral Valuation of July 3, 2016

The law established a new procedure for state cadastral valuation (hereinafter "SCV") for the purposes of calculating the tax base. The Federal Law sets a transitional period and provides that between January 1, 2017 and January 1, 2020 state cadastral valuation may be done under both the "new"6 and the "old"7 rules.

Special budgetary institutions created by RF constituent entities will handle determining cadastral value. According to the new rules, these institutions will make restitution for any damages caused as a result of the determination of cadastral value.

The law envisions the overall frequency of SCV: not more than once every three years (in cities of federal importance—not more than once every two years) and not less than once every five years. The Federal Law stipulates cases where an unscheduled SCV can be performed (these provisions enter into force as of January 1, 2020). The performance of an unscheduled SCV is possible, inter alia, in the event of a price-index decline on the real estate market in the respective RF constituent entity by thirty percent or more since the date of the last SCV.

Technical errors in determining cadastral value may be corrected on the basis of a request filed with the respective RF constituent entity budgetary institution that determined the cadastral value. However, it is expressly stated that correcting technical errors can only reduce the cadastral value.

The results of cadastral-value determination can be challenged at the commission on the consideration of disputes involving the results of cadastral-value determination—in the event that such a commission has been created in the respective RF constituent entity, or in court. Seeking recourse to a court no longer requires preliminary filing with the commission (with the exception of challenges to the results of SCV conducted prior to January 1, 2017).

The law entered into force on January 1, 2017, with the exception of individual provisions.

Changes in determining the cadastral value of real estate

The "moratorium on cadastral value review" and its lifting

Federal Law No. 360-FZ on Amendments to Certain Legislative Acts of the Russian Federation of July 3, 2016 established a so-called "moratorium on cadastral valuation review" until January 1, 2020. It provided that during that period new cadastral valuation is not carried out and, for tax purposes until January 1, 2020, generally the cadastral value in effect on January 1, 2014 or on January 1 of the year in which the cadastral value first became effective for tax purposes is used if there was no cadastral value on January 1, 2014 or it was not used for tax purposes. However, if the cadastral value was later reduced, then the reduced cadastral value shall be used.

However, Federal Law No. 401-FZ on Amendments to Parts I and II of the Russian Federation Tax Code and Certain Legislative Acts of the Russian Federation of November 30, 2016 lifted that "moratorium" and granted regional authorities the right to use the above-mentioned provision.

In order to exercise the right, the RF constituent entity's decision on the "moratorium" must be adopted by the regional authorities by December 20, 2016 and sent to Rosreestr. On the date of this overview there was no information in open sources that the decisions had been adopted in St. Petersburg or Moscow.8

The amendments entered into force on November 30, 2016, with the exception of individual provisions.

Legal status of parking spots and interest under Articles 317.1 and 395 of the RF Civil Code

Federal Law No. 315-FZ on Amendments to Part I of the Russian Federation Civil Code and Certain Legislative Acts of the Russian Federation of July 3, 2016

The law introduces amendments to the RF Civil Code and to other laws (on mortgage, on the state registration of real estate) with respect to deeming a parking spot a real estate property, if its boundaries are described according to the procedure set forth in the laws on cadastral inventory. The law, in particular, introduces a definition of parking spot to the RF Town-Planning Code: a parking spot is an individually defined part of a building or structure intended solely for the parking of a motor vehicle and that is not bounded or is partially bounded by the structural or other enclosing structure and the boundaries of which are described according to the procedure set forth in the laws on state cadastral inventory. The boundaries of the parking spot may be designated, inter alia, by marking the surface of the floor or roof.

The law also establishes that on the engineering layout the location of the parking spot is determined by marking off on the floor plan or plan of part of the floor of the building or structure (if the building or structure does not have floors, then on the layout of the building or structure) a geometric figure corresponding to the boundaries of the parking spot.

Now parking spots can also be the subject matter of civil-law transactions (sale-purchase, lease, mortgage, etc.). Parking spots are subject to cadastral registration, and ownership rights to parking spots (title) are registered to the proper titleholder according to the usual procedure.

In order to implement the above-mentioned provisions of the law the Ministry of Economic Development has approved maximum parking spot dimensions at which the parking spot can undergo cadastral inventory and be deemed a separate real property. The minimum size is 5.3 by 2.5 meters and the maximum size is 6.2 by 3.6 meters.9

The law also changed the procedure for selling a share in shared property (a "Property Share"): other participants of the Property Share have a right of first refusal to acquire the share in real property within one month from the date of notification, and in movable property within 10 days from the date of notification. If the seller receives a waiver within that time period, then it may sell the share before the period expires.

A logical and expected amendment was made to Article 317.1 of the RF Civil Code concerning statutory interest. Now statutory interest should be used only if provided for by the contract or a law. Amendments were also made to Article 395 of the RF Civil Code according to which late payment interest on a monetary obligation is determined by the Central Bank's key rate during the periods in question (currently the average rates on personal deposits), but a law or the contract may provide otherwise.

The law entered into force on January 1, 2017, except for the amendments made to Articles 317.1 and 395 of the RF Civil Code that already entered into force on August 1, 2016.

Change in regulation of the procedure for revoking powers of attorney

Federal Law No. 332-FZ on Amendments to Articles 188 and 189 of Part I of the Russian Federation Civil Code and Russian Federation Framework Legislation on the Notary Public of July 3, 2016

The law sets new rules for revoking a power of attorney and clarifies that the power of attorney is revoked in the same form in which it was issued, or in notarial form.

Information on the revoked power of attorney executed in notarial form must be entered in the register of notarial actions, which is administered electronically by the Federal Notary Chamber and information from which is available via the Internet. That said, third parties are considered to have been notified of the revocation of a power of attorney as of the day following the entry of information to that effect in the register of notarial actions.

Information on a revoked power of attorney executed in simple written form can be published in the official publication in which bankruptcy information is released.10 Third parties are considered to have been notified of the revocation of a power of attorney upon the expiration of one month from the date of publication of the respective information.

In addition, it will be possible—around the clock and free of charge—to ascertain online, among other things, who witnessed a power of attorney and when, and to find out its registration number (until this law, access was only available to information on powers of attorney that had been revoked).

The law entered into force on July 4, 2016, and the above-mentioned provisions on revocation of powers of attorney entered into force on January 1, 2017.

Special investment contracts/regional investment projects

Federal Law No. 144-FZ on Amendments to Parts I and II of the RF Civil Code of May 23, 2016

The law introduces the concept of "participant in a special investment contract" and provides that the preferences envisioned by the RF Tax Code with respect to regional investment projects may be applied to projects being implemented under federal special-investment contracts.

The law clarifies the procedure for applying the provisions of legislation on taxes and levies that worsen the position of investors under special investment contracts and establishes that the respective legislative amendments may not be applied to the legal relations arising under the contract prior to the earlier of the following dates: (1) expiration of the contract; (2) expiration of the tax rates, tax breaks, tax-assessment procedure and the procedure and timeframe for the payment of taxes of a temporary nature in effect as of the date of the contract's conclusion.

Aside from provisions concerning special investment contracts, the Law introduces a number of amendments to the provisions on regional investment projects. Thus, pursuant to the Law, regional investment projects may now be implemented in all RF constituent entities.

The law also explains that the relevant preferences under regional investment projects are applicable in certain RF constituent entities (Buryatia, Yakutia, Tyva and Khakassia, the Trans-Baikal, Kamchatka, Krasnoyarsk, Primorsky and Khabarovsk Krais, the Amur, Irkutsk, Magadan and Sakhalinsk Regions, the Jewish Autonomous Region and the Chukotka Autonomous District), inter alia, under the commitment of investments in the amount of at least RUB 50 million for three years in a row or at least RUB 500 million for five years in a row (these amounts may be adjusted upwards by the law of the respective RF constituent entity).

The profit-tax break is only applicable in the event that the revenue generated from the sale of goods under implementation of the regional investment project accounts for at least 90% of the total revenues counted for the purposes of determining the tax base for profit tax.

The law entered into force on June 23, 2016 (aside from the provisions on preferential tax rates, which entered into force as of January 1, 2017), but the periods for determining investment amounts started running on January 1, 2016, meaning that companies cannot secure the right to receive preferences before January 1, 2019.

Changes in utility connection legislation

RF Government Resolution No. 999 on Amendments to Acts of the RF Government on Issues of Developing Sanctions for Failing to Comply with the Time Limits for Taking Utility Connection Actions of October 5, 2016

The Resolution clarified the procedure for imposing sanctions for failing to comply with the time limits for taking actions for utility connection to power grids, and regulates sanctions for both applicants and grid companies.

Grounds are provided for early termination of a contract of utility connection in the event of a more than 12-month delay in taking utility connection actions (i.e., the applicant's failure to properly perform the obligation to pay the fee for utility connection, the applicant's avoiding inspection of compliance with technical specifications, the applicant's failure to send the grid company a notice that the actions stipulated in the technical specifications have been taken).

The penalty amounts for delay in taking utility connection actions are as follows:

  1. 5% of the total utility connection fee per day of delay if the fee under the contract is RUB 550,
  2. 0.25% of the total utility connection fee per day of delay if the fee under the contract is more than RUB 550,

but not more than the penalty calculated for a year's delay.

The Resolution entered into force on October 15, 2016.

Footnotes

1. The most significant changes were introduced by Federal Law No. 368-FZ of July 3, 2016; by Federal Law No. 370-FZ of July 3, 2016; by Federal Law No. 372-FZ of July 3, 2016; and by Federal Law No. 373-FZ of July 3, 2016.

2. For more detail see the analysis of these amendments in Dentons' overview "Amendments to real estate legislation" for the third quarter of 2016. We would be happy to provide you with that overview at your request.

3. In Moscow it was established that LPUDPs issued before January 1, 2017 may be used until January 1, 2020 (RF Government Resolution No. 921-PP of December 21, 2016). On the date of this review there was no information in open sources on a similar legal act being adopted in St. Petersburg.

4. For more detail see the analysis of this federal law in Dentons' overview "Freezing" of construction/reconstruction around "unprotected" "free-standing" monuments. We would be happy to provide you with that overview at your request.

5. RF Government Resolution No. 1310 on Protecting the Rights of Individual Participants in Shared Construction of December 7, 2016, which created the non-profit organization Fund for the Protection of the Rights of Individual Participants in Shared Construction.

6. If an entity drafts all of the legal acts needed to apply the new procedure and creates a special budgetary institution to conduct cadastral valuation.

7. Federal Law No. 135-FZ on Valuation Activity in the Russian Federation of July 29, 1998.

8. Please note that Moscow Government Resolution No. 791-PP of November 29, 2016 approved the cadastral value of real estate in Moscow as at January 1, 2016, and the St. Petersburg Government decided to transition to conducting state cadastral valuation in accordance with the "new" Federal Law No. 237-FZ on State Cadastral Valuation of July 3, 2016 starting February 1, 2017, and also to create St. Petersburg State Budgetary Institution "Municipal Administration for Cadastral Valuation" for those purposes (St. Petersburg Government Resolution No. 1259 of December 28, 2016).

9. Ministry of Economic Development Order No. 792 on Setting the Minimum and Maximum Permitted Dimensions of a Parking Spot of December 7, 2016 (entered into force on January 1, 2017).

10. On the date of this Overview Kommersant newspaper is that publication.

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