Personal data of individuals will be removed from extracts regarding real estate
Pepeliaev Group advises that, on 14 July 2022 a federal law[1] was signed according to which information regarding individuals who own real estate will be provided to third parties only with the consent of the owner.
The legislature has reconsidered the principle of disclosure of the Unified State Register of Real Estate (in Russian, abbreviated as ‘EGRN’) for the purpose of protecting personal data of individuals from being accessed by the public at large.
The amendments will take effect on 1 March 2023.
What amendments are introduced
In Russia, the real estate register has been long based on the principles of disclosure: any interested party could have received necessary information regarding an owner of real estate, including the first name, last name and patronymic of an owner who is an individual. Such an approach was aimed at, among other things, protecting the interests of parties to real estate transactions and at reducing transaction costs.
Now, the legislature is shifting away from the traditional and publicly available EGRN. To sum up, the legislative developments are as follows:
1. according to the general rule, no first name, last name and patronymic and date of birth of an owner of real estate who is an individual will be indicated in an extract from the EGRN;
2. at his or her discretion, the owner may consent to his or her personal data being disclosed to third parties;
3. the new developments do not apply to the following categories of persons that obtain information from the EGRN:
- those who had to access to restricted data previously (specifically, to an owner him/herself, state authorities, a court, a pledge holder, a court-appointed manager and others[2]),
- notaries, cadastral engineers and persons who have to take into account each other’s interests when property is used (specifically, such persons include co-owners, a spouse, owners of adjacent land plots or a piece of real estate on a land plot and others[3]).
What will change?
Having proved a substantiated interest, an interested party may obtain an extract from the EGRN from a notary indicating the first name, last name and patronymic and date of birth of an owner who is an individual. Specifically, the following attests that an interest is substantiated: existence of an agreement relating to real estate and of grounds for applying to court[4].
To obtain a relevant extract, sufficient evidence of a substantiated interest should be presented in writing to a notary. It should be noted that the law does not contain any lists of above evidence for different situations.
A notary may turn an applicant away if the notary believes that the evidence submitted is not sufficient to prove a substantiated interest in obtaining an extract from the EGRN which contains personal data.
Verifying an extract from the EGRN
The amendments adopted stipulate that an extract from the EGRN that contains personal data can be verified by any person via the official website in terms of whether it contains accurate information.
It is apparent that the possibility of verifying an extract from the EGRN will be in demand under new conditions. With it being impossible for a potential buyer or a lessor of a piece of real estate to independently obtain data regarding the owner of such real estate in the EGRN, they will have to rely on the information from the EGRN obtained by the person who claims to be an owner of the real estate. In any case, a person needs to be able to verify such information.
It still remains unclear which standards of good faith courts will apply when it is resolved on the matter of whether a buyer of real estate is a good-faith buyer.
According to the general rule, a buyer of real estate who relied on the data in the EGRN is recognised as a good-faith buyer[7]. It is unclear whether courts will recognise a person as a good-faith person if he/she only limited him/herself to the above verification of an extract from the EGRN which the seller provided to him/her.
What to think about and what to do
Those who intend to close transactions involving real estate should consider the risks associated with interactions with counterparties who are individuals as well as checking the history of a piece of real estate.
It may become common practice when notarised powers of attorney are received from the owner to obtain extracts from the EGRN and when preliminary and other contracts are concluded with respect to the piece of real estate, which will regulate the receipt of information from the EGRN.
Help from your adviser
Pepeliaev Group’s experts continue to provide comprehensive legal support to parties to transactions with real estate. With rapidly changing legislation which is becoming ever more complicated a purchase of real estate is far from being a trivial task. In such cases we are ready to provide comprehensive legal assistance, involving support with respect to transactions with real estate.
Pepeliaev Group’s range of services includes advising on sale and purchase issues and closing other transactions with real estate, analysing risks associated with a particular piece of real estate, representing the interests of companies in their interactions with state authorities and conducting legal due diligence of real estate.
[1] Federal Law No. 266-FZ "On amending the Federal Law "On personal data" and individual items of the legislation of the Russian Federation, and repealing article 30(14) of the Federal Law "On banks and banking activity" dated 14 July 2022.
[2] An exhaustive list has been given in article 62(13) of Federal Law No. 218-FZ "On the state registration of real estate" dated 13 July 2015 (‘Law No. 218-FZ’).
[3] An exhaustive list has been given in article 63.3(6) of Law No. 218-FZ (as amended).
[4] A preliminary list of persons has been given in article 85.1(2) of the Fundamental principles of Russian legislation on notaries (as approved by the Russian Supreme Court’s Resolution No. 4462-1 dated 11 February 1993) (as amended).
[5] Rosreestr means the Federal Service for State Registration, the Cadastre and Cartography.
[6] https://tass.ru/nedvizhimost/13331327.
[7] This rule is set out in article 8.1(6) of the Russian Civil Code. An exception to this rule is a situation when it has been proven under a court procedure that a buyer was or should have been aware that the person from whom he/she acquired the ownership title did not have such title.
Such wide discretion of a notary creates risks of abuse: a notary may unlawfully interpret the law to the detriment of interests of an interested party and refuse to issue an extract which, in fact, can create obstacles for the judicial protection by a person of his or her rights and legitimate interests. A notary’s refusal to issue an extract from the EGRN can be challenged in court.
It is worth mentioning that the Federal Service for State Registration, the Cadastre and Cartography (in Russian, abbreviated to ‘Rosreestr’)[5] issued over 132 million extracts over the first 11 months of 2021[6]. Now, the relevant portion of the work of an intermediary that involves issuance of extracts from the EGRN will be allocated among notaries. This will result in growing transaction costs, including greater time being spent.
Finally, the law significantly complicates the ability of an individual to independently check real estate before purchasing it.