Amendments in the shared construction

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Pepeliaev Group advises of a partial amendment in the regulation of shared construction for developers.

Federal Law No. 202-FZ dated 13 July 2020 relaxed a number of rules for developers operating under shared construction agreements. Let’s consider them.

1. The time has been changed when a pledge over the land plot (lease rights to the land) is terminated by virtue of the law

Article 13(8.1) of Federal Law No. 214-FZ “On shared construction of apartment buildings and other real estate, and on amending certain items of Russian legislation” dated 30 December 2004 (the “Shared Construction Law”) provides that the pledge of rights to the land plot arising by virtue of the law (including lease and sublease rights of the land plot) in favour of the participants in the shared construction or arising under an agreement with the bank terminates from the date when all the shared construction facilities have been transferred.

Federal Law No. 202-FZ dated 13 July 2020 has amended this. Now, the pledge is terminated “from the date when relevant information has been recorded in the state cadastre of the specified apartment building”

2. Financial exemptions for developers

The system of regulating developer's finances has been changed:
  • it is no longer required to provide information from the Unified Real Estate Register confirming state registration of the ownership title of the first construction stakeholder in order to receive funds from the escrow account as it was provided for by the Shared Construction Law: now it is enough to provide the bank with a commissioning permit;
  • developers will be allowed to grant special purpose loan from settlement account to developers that are subsidiaries. According to the previous version of the Shared Construction Law, provision of loans was not allowed via settlement accounts;
  • developers are entitled to independently register ownership title for construction stakeholders with an obligation to transfer an excerpt from the Unified Real Estate Register to the owner.

3. The new rules related to project declaration have been introduced

According to Federal Law No. 202-FZ dated 13 July 2020, the amendments related to information concerning the developer and the construction project should be entered by the developer to the project declaration on a monthly basis not later than 10th day of the month following the reporting month.
This extends the timeframes for adjusting the project declaration using the unified informational system (the “UIS”) of residential construction. Previously, adjustments to the declaration must have been made within three business days, following which the adjustments must have been entered into the UIS of residential construction within five business days. 

In addition, it has been clarified that if the facility has already been commissioned, there is no need to amend the project declaration. Simultaneously, it is permitted to deviate from the area according to the project documentation by 5% in any direction, provided that the number of floors, premises and parking lots does not change.

The contents of the project declaration has been specified: now it is necessary to specify in the list of beneficial owners those who can dispose of shares (votes), for individuals that are a part of the same group with the developer, it will be necessary to specify the personal pension account number (SNILS) and the Taxpayer’s Identification Number (INN). The list of information to be declared in the construction project has been slightly extended.

What to think about and what to do

Developers should take into account the amendments introduced by Federal Law No. 202-FZ which came into force on 13 July 2020 in the legal regulation of the shared construction and amendments concerning the time when the pledge is released and the funds are received from escrow accounts.
The shared construction stakeholders should carefully assess the risks of the shared construction facility being owned by the developer without the pledge from the date when the facility is commissioned and before the date when the facility is transferred to them.

Help from your adviser

Pepeliaev Group's lawyers are ready to assist in assessing circumstances and facts as they apply to each specific obligation, and in developing a position with regard to the most reasonable conduct depending on the situation. We will also provide any other legal support, including in resolving contentious situations, in negotiations with contracting parties, and in preparing agreements in the current legal and economic conditions.
We are also ready to provide complex legal assistance and support during court proceedings, both in commercial courts and courts of general jurisdiction.

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