Russia: Real Estate News

20.11.2018

1  Introduction

In the past three months amendments to the real estate laws of the Russian Federation have taken effect which improve legal certainty for investors in Russian real estate: The legislator has established a reliable basis for the construction and operation of linear infrastructure (e.g. power lines, telecommunication lines, roads, railway lines and pipelines) (“Linear Infrastructure”) on private and public land. Furthermore, it has substantially amended the legal basis for demolishing and legalizing buildings which were constructed in breach of the relevant laws of the Russian Federation.

2  Public Easements for Linear Infrastructure

2.1  General

With effect from 1 September 2018, the Russian legislator has enabled the competent federal or local government bodies (except for Rosavtodor regarding buildings for crossings of motor roads and railway lines, the competent bodies are not yet determined) to establish a public easement (“Easement”) on public and private land plots upon application and for the benefit of a state or private legal entity (e.g. a legal entity dealing with natural monopolies, communication or public transport) (“Beneficiary”) for the construction and operation of Linear Infrastructure.

2.2  Procedure for Establishment

After the decision on the construction of the Linear Infrastructure and charging the land plots needed for its construction (“Land Plots”) with an Easement is taken, the Easements will be registered with the Unified State Register of Immovable Property, and, within one month after registration, the Beneficiary and each of the owners of the Land Plots (“Land Owner”) have to enter into an Easement agreement (suggested by the Beneficiary) which defines the Easement term, the amount of the Easement fee and other obligations of the parties. However, even if a Land Owner does not agree with the terms of the Easement agreement, the Beneficiary is entitled to pay the Easement fee to a notarial escrow account and exercise the rights out of the Easement.

Easements cannot be established in regard to Land Plots granted to citizens for private housing and gardening except for connecting objects on such land to general utilities. There are special requirements for establishing Easements on agricultural Land Plots.

2.3  Rights of Land Owners

The rights of Land Owners against the establishment of the Easement are limited to the following:

  • challenging the decision on the establishment of an Easement, if it breaches the law and infringes the rights of the respective Land Owner, within thirty days since the date of receipt of the draft easement agreement;
  • requiring the Beneficiary to purchase the Land Plot for a price equivalent to the market value of the Land Plot and reimburse him for the losses suffered if the performance of the Easement significantly impedes the use of the Land Plot (for more than three months regarding Land Plots with residential buildings and for more than one year for other Land Plots);
  • requiring the Beneficiary to agree on certain conditions of the Easement agreement if the Land Owner has not agreed on the terms of the Easement agreement and the Beneficiary has exercised the Easement and paid the Easement fee into a notarial escrow account;
  • demanding in court proceedings the termination of the Easement on certain grounds defined by the law (e.g. breach of procedure on the establishment of the Easement, change of location of the linear infrastructure on new area planning schemes or the Beneficiary’s breach of the legal requirements on the exercise of the Easement.

3  News on Unauthorised Construction

3.1  Previous Laws and Practice

Under the previous laws an unauthorised building (“Unauthorised Building”) had to be demolished by the builder either voluntarily or upon a decision of the competent court (“Court”) or the competent local body (“Local Body”). It could be retained upon a decision of the Court only in the following events:

  • the builder was the owner or proprietor of the land under the Unauthorised Building and
  • the Unauthorised Building complied with all legal requirements and was not in breach with any rights of other persons.

The Local Body could take a decision on demolishing only if the land plot under the Unauthorised Building was not duly granted and this land plot was located (1) within the boundaries of a zone with special terms of use (e.g. sanitary protection zone, water conservation zone, etc.) or (2) in the territory of public use or (3) right of way of infrastructure facilities. In all other cases the decision on demolition had to be taken by the Court.

However, in practice the Local Bodies abused their powers and made the decisions to demolish the Unauthorised Buildings upon requests of owners of infrastructure facilities. In many cases the Unauthorised Buildings were properly built, but located within the boundaries of zones with special terms of use where construction was not permitted. Their owners did not know about the restriction because the official scheme of such zones was not published. Nevertheless, due to violation of the restriction, duly constructed buildings were considered to be Unauthorised Buildings and should be demolished.

3.2  Subject of New Laws

3.2.1  General

On 4 August 2018 amendments to the civil and urban laws have taken effect which introduce a new structure for demolishing or legalizing and retaining Unauthorised Buildings. The new structure is aimed at:

  • restricting the powers of the Local Bodies by limiting the cases in which the Local Body may take a decision on the demolition or on the reconstruction of an Unauthorised Building.
  • extending the options for legalizing and retaining Unauthorised Buildings by defining cases in which an Unauthorised Building may be legalized, i.e. reconstructed to bring it in line with the requirements of Russian urban planning laws.

3.2.2  Decision on Demolition or Reconstruction by Court

Under the new laws only a Court may take a decision on demolition or reconstruction with subsequent legalisation (“Reconstruction”) if:

  • the Unauthorised Building is located on private land (except when retaining such building poses a threat to life);
  • the ownership to the Unauthorised Building has already been registered with the Unified State Register of Immovable Property or has been acknowledged by Court;
  • the Unauthorised Building is a block of flats or residential premises or a religious facility etc.

3.2.3  Decision on Demolition or Reconstruction by Local Body

The new law sets forth that an Unauthorised Building may be demolished by the Local Body only if:

  • the land plot under the Unauthorised Building was not duly granted or
  • the land plot was located in a territory of public use and its permitted use did not include construction of such building.
  • the Local Body may take a decision on the Reconstruction of an Unauthorised Building, if:
  • there is no construction permit with regard to the Unauthorised Building or
  • the land plot under the Unauthorised Building is located within the boundaries of the zone with special terms of use and its mode does not allow construction of such building on it.

3.2.4  Performance of Demolition or Reconstruction

Demolition or Reconstruction must be performed within the term mentioned in the relevant decision. If ruled by the Local Body, the term for the demolition may be between three to twelve months and the term for the reconstruction between six months and three years.

Usually, demolition or Reconstruction must be performed by the builder of the Unauthorised Building. However, if the builder cannot be found demolition or Reconstruction may be carried out by the owner or user of the land thereunder. If these persons are also not available, the local government body or, in the event of governmental or municipal buildings, the respective land tenant may perform the Reconstruction. In the event of Reconstruction, the respective person is entitled to become the owner of the Unauthorised Building.