The system of the Russian real estate law is still under development. The Civil Code which was adopted in 1994, recently after transformation of Russia into the market economy, is now being reconsidered by the legislators. The system of real rights is to be further developed in order to meet the new requirements of the turnover. All the changes are expected to be adopted within one or two coming years or even less.
At the moment foreign nationals and legal entities may own Russian real estate without any substantial limitations. The foreign ownership is restricted in respect of the agricultural land plots, land plots within sea ports and state border areas only. However, recently the government has introduced draft law to oblige the foreign nationals and legal entities to obtain preliminary permissions from the state authorities to purchase real estate in Russia, which is now being widely discussed.
The private ownership and turnover of the real estate (both residential and business) is very well established and developed in Russia. However, land market requires further development as public ownership (state or municipal) of the land plots still predominates, especially of the land plots for those designated for new development (green field).
Up to this moment the taxation of the residential and business real estate was comparatively minor. However, it is planned that the real estate tax will be introduced within one or two years. The tax rates are being discussed at the level of 0.1 per cent for the residential and 0.5 per cent for non-residential real estate. From 1 January 2014 the business centers, which include offices, premises for retail, HORECA, real estate, which belong to foreign legal entities, which do not have representative offices in Russian, may be subject to increased regional tax up to 2.2 per cent. The increase of tax payments will be resulted due to the fact that market (cadastral) value of the real estate will be used as a tax base as opposed to the book value which was used earlier. For instance, in Moscow the tax rate of the property taxed at market (cadastral) value will gradually increase from 0.9 per cent in 2014 till 2.0 per cent in 2018. It should be noted that payment of tax is a personal obligation of the taxpayer which does not encumber real estate.
All rights to the real estate and their transfer as a result of transaction are subject to the state registration in the Unified State Real Estate Register. All encumbrances are also subject to such state registration. All the data from the Register is publicly available.
The transfer of title to the real estate normally causes the automatic transfer of the respective right to the land plot under the real estate (very often publicly owned and leased).
Long-term lease agreements of the business premises for the term of more than 1 year are subject to the state registration. Lease agreements may be concluded also in respect of the ‘future’ property and stay in full force in case of change of ownership.
The transactions with the real estate are governed by the Russian Law. Construction contracts may be subjected to foreign law governance under parties agreement.
The main legislative acts are:
- The Civil Code of the Russian Federation
- The Land Code of the Russian Federatton
- The Town Planning Code of the Russian Federation
- Federal Law On The State Registration of The Rights on the Real Estate Object and Transactions Thereof