New notarization requirements in real estate transactions

04.07.2016

According to the last changes of Russian legislation on registration of real estate and transactions therewith (Federal Law No. 391-FZ dated 29 December 2015 and recent Federal Law No. 172-FZ dated 2 June 2016) the following transactions became subject to notarization: (1) alienation of the share in joint property on real estate; (2) sale of land share in the agricultural land plot (relevant only for particular types of agricultural land plots); (3) transactions with real estate related to the guardianship and (4) alienation of real estate of a minor or an incompetent person.

The changes initially provided by the Law No. 391-FZ were corrected or explained by the Law No. 172-FZ. Thus, the Law No. 391-FZ provided that only a sale of the share in joint property on real estate must be notarized. The Law No. 172-FZ has clarified that any alienation (including donation, contribution to the charter capital or property of a company etc.) must be notarized.

This law also explicitly stated, that a notarization is also required in case when all shares in the joint property on real estate are transferred to a third party simultaneously. This issue was under discussion after the Law No. 391-FZ was adopted and is now finally clarified by the Law No. 172-FZ.

Furthermore, it was not clear, whether a notarization is required when the premises in the building are sold, since under Russian law every owner of the premises in the building automatically owns a share in the commonly used parts of such building and in the land plot under such building (unless the land plot is owned by the state). In this regard the Law No. 391-FZ could be implemented in way, that any sale of the premises in the building requires a notarization since it is sold together with the relevant share in the commonly used parts of the building and the land plot.

In our view in such situation the notarization is not required since the premises are regarded as principal and the share in the commonly used parts of such building and in the land plot will be regarded as adjunct of such premises. This view is supported by the current practice of the registration authorities and the notaries.

Another open issue concerned disposal of the real estate on conditions of the fiduciary management. In particular, the Russian law provides for possibility of establishment of the real estate unit investment funds which represent a real estate operated by a management company on the basis of the fiduciary management. The Law No. 391-FZ provided that all transactions related to the disposal of the real estate on conditions the fiduciary management required notarization. This implied that all transactions with the real estate of the unit investment funds fall under such requirement. The Law No. 172-FZ has clarified that the transactions of the unit investment funds and the transactions on conditions of the fiduciary management do not require notarization. This has brought significant relief to the activities of the real estate investment funds.