Changes at the federal level

  1. Changes in the RF Civil Code (“RF CC”)

Federal Law No. 100-FZ of 07.05.2013 “On amending subsections 4 and 5 of section 1, part one and article 1153, part three of the Civil Code of the Russian Federation”

This law adds a number of provisions and inter alia makes changes to the rules regarding transaction approval, legally significant notifications, transaction invalidity, resolutions of meetings, powers of attorney, statutes of limitation. On the whole, it is assumed that the changes are aimed at increasing the stability of relations between parties to civil transactions.

The law, with the exception of certain provisions, enters force on September 1, 2013.

The following are among the more significant changes/new rules connected with real estate:

  • the requirement for state registration of transactions that change the terms and conditions of a previously registered transaction has been formalized (previously this position was only visible from court practice). Changes to such transactions may include, for example, a change in the amount of rent. On the one hand, this should positively affect the real estate market, ensuring uniformity and transparency of the application of the law. On the other hand, the new rule could lead to registration being required for merely “technical” amendments, such as a change in the details of a party. This could significantly increase time and expense when performing a transaction;
  • a claim for the state registration of a transaction, or its invalidation if one of the parties thereto refuses registration or notarization of the transaction, may be submitted within a period of one year (previously the law did not set forth a specific deadline for such claims);
  • as a general rule, transactions that violate the requirements of the law are disputable (and not void, as currently established in the CC RF). A court decision is now required for such transactions to be invalidated. Recall that the statute of limitations for void and disputable transactions is 3 years for a void transaction and 1 year for a disputable transaction. Thus, the changes have also significantly restricted the time period within which a party may file a claim to defend its infringed rights;
  • provisions on invalidation of transactions made under a misapprehension have been elaborated, which includes a non-exhaustive list of misapprehensions that may be grounds for invalidation. These changes can be seen as a step towards legalizing the doctrine of representations and warranties in Russian law. Further details of the application of this article will apparently be refined through court practice;
  • a legal entity may now issue a notarized irrevocable power of attorney, which cannot be revoked before its expiration, or can be revoked only in cases directly set forth in the power of attorney;
  • there were also significant changes to calculation of statutes of limitations. Specifically, as a general rule a statute of limitations starts on the day the entity learned or should have learned of the violation of its right, and of who should be indicated as respondent in the claim for defense of such rights. The latter criterion is a new rule. In addition, such violated rights cannot be defended after 10 years from the date such rights were violated.

Federal Law No. 142-FZ of 02.07.2013 “On amending subsection 3, part one of the Civil Code of the Russian Federation”

This law enters force on October 1, 2013.

This law in part, further defines the term ‘indivisible item’, and sets forth that replacement of composite parts of an indivisible item with other composite parts does not incur the creation of a new item if the essential properties of the item remain the same. In addition, as a general rule, such an item may be foreclosed upon only as a whole. The law also establishes a new type of real property – a unified real estate complex – to which the rules on indivisible items will apply. This, in part, includes aggregates of linear facilities (railroads, electric power lines, pipelines, etc.). One of the conditions for an item to be deemed a unified real estate complex is registration of the title in the Unified State Registry of Rights (EGRP) to an aggregate of facilities as one real property.

  1. Federal Law No. 96-FZ of 07.05.2013 “On amending the Russian Federation Code of Administrative Offences”

This law enters force on August 7, 2013.

The law establishes liability for violation of laws on preservation of cultural heritage objects. It introduces additional grounds for liability, and also significantly increases the fines for violating preservation requirements and use and protection of cultural heritage objects. In part, these new grounds for liability include: violation of the regime for use of land within the territory of a cultural heritage objects (fine from 100,000 to 5,000,000 rubles); destruction of or damage to a cultural heritage objects (fine from 500,000 to 60,000,000 rubles); non-performance of obligations to cease works if an object that has the features of a cultural heritage objectsis discovered or works that, if performed, could worsen the condition of the cultural heritage objectsor destroy its integrity and security (fine from 200,000 to 5,000,000 rubles); failure to fulfill the orders of the state supervisory body for preservation, use, promotion, and state protection of cultural heritage objects (fine from 100,000 to 500,000 rubles).

  1. Federal Law No. 98-FZ of 07.05.2013 “On amending the federal law ‘On advertising’ and certain legal acts of the Russian Federation”

Main changes:

  • The definition of advertising structures has been expanded: for example, projector equipment is also now considered an advertising structure;
  • Mandatory plans for placing advertising structures, which must be approved by the local government bodies of municipal districts or urban units prior to January of 2014. After this date, permits for the erection and use of advertising structures shall not be permitted before the approval of such plans;
  • Term restrictions for agreements for the installation and use of advertising structures on public property are to be established by the RF region (from 5 to 10 years). The specific effective term of agreements are set by local government bodies within the established limits. It should be noted that, as per explanation No. AK/21792/13 of 04.06.2013 given by the Federal Antimonopoly Service (FAS) of Russia “On the procedure for entering into agreements for the installation and use of advertising structures”, prior to the RF regions approving term limits, local government bodies cannot hold tenders for agreements on installing and operating advertising structures or enter into such agreements. Thus, if a local government body has conducted a tender for an agreement to install and operate an advertising structure after May 14, 2013 without maximum terms for such agreements having been established, such tender may be invalidated; The option of extrajudicial dismantling of advertising structures is now provided for.
  1. Federal Law No. 108-FZ of 07.06.2013 “On preparing for and holding the FIFA 2018 Football World Championship and the FIFA 2017 Confederations Cup in the Russian Federation, and amending certain legal acts of the Russian Federation”

This law establishes, up to December 31, 2017, a special procedure within RF regions in which the FIFA World Football Championship and FIFA Confederation Cup matches are to take place for seizure of land plots and/or real and/or other property located thereon for the siting of infrastructure facilities (including hotels, airports, roads, parking areas, health care infrastructure, etc.), as well as a special regime for the siting of advertising and the approval of town planning documentation and construction (an “accelerated” regime).

  1. Federal Law No. 144-FZ of 02.07.2013 “On amending certain legal acts of the Russian Federation in connection with improving the procedure for disposing of state-owned real property of RF regions or municipally-owned real property leased by small or medium-size businesses”

The statute of limitations for privatization of premises by small and medium-size businesses has been extended by two years (until July 1, 2015). The list of premises that can be bought out has also been expanded. The list now includes premises that have been leased as at July 1, 2013 for at least two years, and a condition for exercising the pre-emptive right to privatization – the limit on the area of the leased premises – has also been eliminated.

  1. Changes to the procedure for managing multi-unit apartment buildings

Federal Law No. 38-FZ of 05.04.2013 “On amending the Housing Code of the Russian Federation and the Federal Law ‘On the Fund for Support of Restructuring Housing and Communal Services’”

This law has amended the RF Housing Code with respect to the management of multi-unit apartment buildings. The main change is that it is no longer possible for the developer to enter into management agreements for multi-unit apartment buildings, which is still common practice. In addition, the law contains a number of changes concerning, in part, the procedure for conducting tenders for entering into such an agreement.

RF Government Decree No. 416 of 15.05.2013 “On the procedure for activities for the management of multi-unit apartment buildings”

In implementing the changes to the RF Housing Code (see above), the Rules for the procedure of and standards for activities for the management of multi-unit apartment buildings (the “Rules”) have been approved, which regulate the procedure of and standards for managing multi-unit apartment buildings, the professional fundamentals of management, and the relations between participants in this type of activity.

The Rules apply, in part, to developers that manage multi-unit apartment buildings prior to entering into an agreement for the management of the multi-unit apartment building with a management company, management companies, housing owners’ partnerships (TSZh), or housing and housing/construction cooperatives (ZhK and ZkSK). Among the standards established by the law are: acceptance, storage, and issuance of technical documentation for the multi-unit apartment building, approval of the list of services and works for maintenance and repair of common property, and organizing the works and services set forth in the list. The Rules specifically regulate the procedure for compiling and approving the list of works and services to maintain the common property in a multi-unit apartment building, the procedure for organizing and performing emergency and dispatch services, and the procedures for transferring the technical documentation for a multi-unit apartment building in the event a decision is made by a general meeting to change the building management method.

  1. Federal Law No. 103-FZ of 07.05.2013 “On amending the Federal Law ‘On concession agreements’ and certain legal acts of the Russian Federation”

This law, with the exception of certain provisions, enters force on January 1, 2014.

This law contains provisions aimed at increasing the transparency of projects using a concession agreement, and also adds to regulations on concession relations, first and foremost when implementing utility infrastructure projects. It regulates, for example, the mechanism for transferring ownership and/or lease rights to utility infrastructure facilities. It also establishes that long-term criteria for tariff regulation be implemented, and establishes the requirement that approval be received from the antimonopoly authority when making changes to a concession agreement related to utility infrastructure facilities. It is assumed that the changes connected with regulation of a utility infrastructure may make such projects more attractive and less risky for investors.

  1. RF Government Decree No. 406 of 13.05.2013 “On state regulation of tariffs in the sphere of water supply and removal”

This decree establishes the fundamentals of price formation and rules for regulation of tariffs for water supply and removal, including long-term regulation. It envisages the adoption of other documents in its implementation, such as rules for establishing regulated tariffs, the list of criteria to be taken into account when adopting tariffs, etc.

  1. RF Government Decree No. 502 of 14.06.2013 “On approving requirements for programs for the integrated development of utility infrastructure systems for settlements and urban units”

Pursuant to the Decree, programs for the integrated development of utility infrastructure systems for settlements and urban units are to be developed by local government bodies based on the general plans of the settlement or urban unit, for a term of no less than 10 years and no greater than the effective term of the general plan.

This decree could create a foundation for more effective provision of utilities to the population, and may also be yet another step towards attracting private investment in the utilities sector.

If the decree is interpreted literally, it does not apply to Moscow or St. Petersburg, and its applicability to territories between settlements is also not unambiguous.

  1. Letter from FGBU FKP Rosreestr No. 08-0421-VB of 07.05.2013 “On sending explanations”

This Letter declares that state registration of the lease of part of a real property is possible only if such non-isolated part could be identified as an individually defined real property, i.e., if it has a separate purpose and is delimited by a construction structures. In other cases (for instance, if there is no delimiting construction structures), the lease is not registered.

It is not clear, however, whether registration is necessary for long-term lease of parking spaces that are located, for example, in underground parking areas. These are not delimited by construction structures, but still registered as separate real properties. It is also unclear to what extent this Letter calls into question the possibility of entering into short-term lease agreements (that do not require state registration) with respect to parts of premises that are not delimited by construction structures.

  1. Changes to regulatory acts regulating the use of hazardous industrial facilities

RF Government Decree No. 492 of 10.06.2013 “On licensing the operation of fire and explosion hazardous and chemically hazardous industrial facilities of hazard classes I, II, and III”

The Decree establishes a new procedure for licensing the operation of fire/explosion hazardous and chemically hazardous industrial facilities. A license is required to operate hazard class I, II, and III facilities. Some of the changes to the license requirements concern the applicant, while others affect the licensee. The Decree contains a specific list of works that require an authorizing document. As before, this is issued by Rostekhnadzor.

Letter from Gosstroy No. 5061-DB/12/GS of 06.06.2013 “On explanations to the regulatory legal and regulatory technical documents in the sphere of designing especially hazardous industrial facilities”

This letter explains the relationship between the concept of “especially hazardous, technically complex, or unique facilities” and “hazardous industrial facilities”, as well as applying to them the reliability ratings for buildings and structures set forth in applicable law.

Gosstroy explained that the concept of “reliability ratings”, according to applicable law, is applied to especially hazardous, technically complex, and unique facilities, i.e., to buildings and structures. At the same time, a “hazardous industrial facility”, according to the law, is understood to mean a business, establishment, workshop, organization, etc., in an administrative sense, and not in a technical sense (a building or structure, etc.). Thus, not all buildings or structures located on the territory of a hazardous industrial facility (such as a factory) must be assigned a high reliability rating. Instead, this is only required if they are especially hazardous, technically complex, or unique.

Local-level changes (St. Petersburg)

  1. St. Petersburg Law No. 289-49 of 22.05.2013 “On amending St. Petersburg Law ‘On establishing prices for land plots in St. Petersburg’”

It may be recalled that, as of July 1, 2012, the “discounted” procedure for buy-out of land plots by owners of buildings, structures, and constructions thereon ceased to be in effect. A consequence of this was an increase in the buy-out price to 100% of the cadastral value of the land plots, which in turn was reexamined in 2012 and in most cases increased significantly. This led to a drop in the number of companies wishing to buy out the land at such price. The new rules introduced by the law regarding setting the buy-out price may help to increase the demand, since it establishes a corrective (discount) coefficient for certain categories of land (in particular, the corrective coefficient for land plots that were granted for investment activities and on which prior to July 1, 2012 capital (permanent) structures were erected and operating, is 0.1 (previously 1, i.e., the price will decrease tenfold), and for sale to owners of other types of buildings, structures, or constructions is 0.25 (also previously 1, meaning a fourfold decrease).

  1. St. Petersburg Draft Law “On amending St. Petersburg Law ‘On town-planning activities in St. Petersburg’ with respect to legal relations regarding unauthorized construction, unauthorized reconstruction, and issuance of construction permits”

This draft law defines the concepts of “unauthorized construction” and “unauthorized reconstruction”. This differs from the current law, which only contains a definition of an “unauthorized structure”. Thus, these definitions are new, but in essence are derived from the definition of “unauthorized structure”.

The powers of the St. Petersburg Government include organizing the demolition of unauthorized structures and parts of constructed facilities that are the result of unauthorized reconstruction on land plots owned by St. Petersburg. It establishes that a construction permit is not required for: dismantling/demolishing unauthorized structures that are capital structures of less than three floors, without subsequent construction; dismantling the part of capital structures that came about through unauthorized reconstruction; dismantling/demolishing multi-unit apartment buildings that have been deemed dangerous and are slated for demolition, if no more than three floors, with the exception of buildings that are historic and cultural heritage objects or potential cultural heritage objects, without subsequent construction. Legalizing the dismantling of parts of capital structures avoids the entire capital structure having to be deemed an unauthorized structure after unauthorized reconstruction.

The Draft Law also sets forth a procedure and timeframe for publishing construction permits.

Court practice

  1. Decree of the Presidium of the RF Supreme State Arbitration Court No. 8989/12 of 04.12.2012 in case No. А28-5775/2011-223/12

This decree contains two important conclusions:

  • Since a parent company and its subsidiaries are considered, from an economic point of view, to be a single economic entity, transactions between them that do not envisage direct mutual consideration (for example, a transaction to transfer to the parent company real property that belongs to the subsidiary, or vice versa) are not considered gifts, and are thus legal.
  • A transaction to dispose of real property must be documented in an agreement. Any other document (such as a transfer-acceptance act between the parent company and the subsidiary) is not in compliance with the law, and will incur a legal refusal of state registration of the title transfer.
  1. Decree of Federal State Arbitration Court for the Northwest District of 15.05.2013 in case No. А56-71381/2012

The Federal State Arbitration Court for the Northwest District confirmed the conclusions drawn by the State Arbitration Court of St. Petersburg and Leningrad Oblast in their consideration of an application from the Office of the Federal Antimonopoly Service for St. Petersburg (UFAS).

The provisions of St. Petersburg law No. 282-43 of 17.06.2004 "On the procedure for granting real properties owned by St. Petersburg for constructionn and reconstruction" that establish the provision of real properties to strategic investors for a target purpose (without a tender) contradict antimonopoly law.