Moscow’s enlargement. Legal aspects. Supreme Arbitration Court’s resolution on future real estate
On 20 September 2011, the Moscow Business Club and Pepeliaev Group law firm held a legal business breakfast on Moscow’s enlargement. Legal aspects. Resolution of the Plenum of the Supreme Arbitration Court No. 54 dated 11 July 2011 On some aspects of resolving disputes arising fr om contracts involving property to be built or acquired in the future. The event was hosted by The Savoy Hotel.
The business breakfast brought together a record 120 participants, including top executives and in-house lawyers from real estate, insurance and financial services companies. Attendees included real estate companies Best-Nedvizhimost, OPIN, INKOM, Miel, Nazvanie.net, Centralniy Departament Nedvizhimosti, RosEuroCity, Blackwood, GK Promingroup, IK Expert, NP Soyuz Zastroyschikov, GK Global Engineering, Peresvet-Invest, Mozaik Development, Kalinka Realty, and Perviy Stroitelniy Trest; insurance companies ROSNO, MSK, Pervaya Strakhovaya Kompaniya, and VSK; and banks VTB, TransCreditBank, BinBank, and others.
The business breakfast was opened by Anna Markina, CEO of the Moscow Business Club. The event comprised a theoretical discussion and a practical workshop. The first one featured presentations delivered by speakers from Pepeliaev Group. They looked at recent developments in statutory and case law on real estate and construction, at the Supreme Arbitration Court’s resolution on future property, at the possibility of buying and selling future property, at investment agreements, at the specifics of structuring investment agreements based on case law, and at the tax treatment of transfers of real estate. The second session focused on issues facing particular companies and on case studies that had been proposed by attendees beforehand.
The first to speak was Alexey Konevsky, head of the land law, real estate and construction team of Pepeliaev Group. He told the audience about the legal aspects of Moscow’s enlargement. Alexey described in detail the procedure for modifying Moscow’s boundaries, wh ereby the heads of the two Russian regions, the City of Moscow and the Moscow Oblast, will first sign an agreement; it will then be approved by the regions’ legislatures (Moscow City Duma and Moscow Oblast Duma); and it will finally be approved by the Council of the Federation. Mr Konevsky pointed out that modifying the boundaries of a settlement will not automatically lead to permitted uses of land being changed.
Permitted uses may be modified by 1 January 2012, before the Land Use and Development Rules are enacted: by taking a decision, following public hearings or based on a land planning project, by making changes to territorial planning documentation, the master plan, and land use and development rules (after they are enacted). New land may also be zoned as suburban, which includes farming land, recreational zones, and land reserves for urban development. The boundaries and legal status of suburban zones of cities of federal importance (Moscow and St Petersburg) are to be approved and changed by federal laws.
The next speaker was Maria Akutina, a senior associate in Pepeliaev Group’s land law, real estate and construction team. She looked at the options available for buying and selling property. She focused in particular on the rights of the buyer, ways to enforce them in controversies over acquisitions of future property and the wording of contracts governing such transactions. Ms Akutina also told the audience about the specifics of structuring investment agreements and new methods of entering into investment agreements that may be used given the recent trends in case law. She highlighted the key advantages and risks for investors: investors will only obtain ownership title to a newly built property if they have title to the underlying land.
Mikhail Zausalin, a senior tax associate at Pepeliaev Group, told the audience about the Supreme Arbitration Court’s resolution on future property and its tax implications. He summarised the main points of the resolution: ownership title to land is vested in the land owner; the contractual relations between the parties must be structured as a sale and purchase, contractor or joint venture agreement. Mr Zausalin spoke at length on the VAT treatment of specific stages of properties being built and sold. The taxpayer is to charge VAT to the buyer on the price of properties sold. Under investment agreements, no VAT is charged.
The coffee break afforded a chance for the attendees to treat themselves to dairy products made of high-quality organic cows’ milk by Madam Mu and enjoy some freshly roasted coffee by Madeo. During the workshop session that followed, the companies raised a number of issues, including: the impact that Moscow’s enlargement will have on the legal aspects of property development; obtaining title to land in the New Moscow; government approvals to be obtained by land owners for construction purposes; the impact of Resolution No. 54 dated 11 July 2011 on the regulation of investment relations; and the tax treatment of payments made under agreements on sale and purchase of future real estate. The session also looked at various case studies that highlighted some of the legal issues faced by attendees.
Legal business breakfasts on real estate have become a tradition, and the Moscow Business Club and Pepeliaev Group have been holding them for several years. It is evident to almost all participants that the event has outgrown the traditional plenary session format. The next legal business breakfast will take place in 2012. It will cover new topics and provide a new chance for sharing views. Stay tuned. We will be pleased if you join us for a cup of coffee and discuss legal issues over a business breakfast.
