The liability of developers under shared construction agreements is limited until 31 December 2024

Pepeliaev Group advises that a Resolution of the Russian GovernmentResolution No. 326 of the Russian Government "On establishing special conditions for applying a penalty (fine, default interest) and other financial sanctions, as well as other measures of liability for the non-performance or improper performance of obligations under shared construction agreements established by legislation on shared construction" dated 18 March 2024.
 has been adopted that establishes special conditions for applying a penalty and other financial sanctions and measures of liability for the non-fulfilment of obligations under shared construction agreements.

By virtue of Federal Law No. 46-FZ dated 8 March 2022, which has been developed to protect Russia's national interests with the view to implementing measures of a socio-economic nature, the Russian Government has been authorised to take decisions in 2022, 2023 and 2024 setting out special conditions for liability measures to be applied for the non-fulfilment or improper fulfilment of obligations under shared construction agreements.

The Government has adopted a Resolution providing that the period from 22 March to 31 December 2024 is not taken into account for the purpose of establishing the amount of a penalty and other financial sanctions under a shared construction agreement.

This rule applies to the following types of liability:

• a penalty for a breach of the contractual term for the shared construction facility to be handed over to the participant in the shared construction;

• the penalty for a breach by the participant in the shared construction of the contractual payment deadline;

• the losses caused by the non-fulfilment or improper fulfilment of obligations under the shared construction agreement (disregarding the losses caused during the above period);

• interest payable to a participant in shared construction in the event that the agreement is terminated owing to a breach by the developer of its obligations, as well as if the developer has not met the deadline for returning funds upon termination of the contract;

• penalties, fines and other financial sanctions payable to an individual participating in shared construction, taking account of consumer protection legislation.

With respect to claims raised against the developer before 22 March 2024, a deferral is granted until 31 December 2024.

In the period from 1 July 2023 to 31 December 2024, the amount of interest, penalties, and other financial sanctions under shared construction agreements that are not subject to the above rules is calculated based on the key rate of the Central Bank of Russia that is in force on the day when the obligations are fulfilled, but not higher than the key rate in force as at 1 July 2023 (7.5% per annum).

What to think about and what to do

Developers have the opportunity to make use of the restrictions on their liability, including in lawsuits filed by stakeholders.

Help from your adviser

The experts of Pepeliaev Group provide comprehensive legal support to developers, including on the issues of performing their obligations and the liability they bear under Federal Law No. 214-FZ dated 30 December 2004 on participation in shared construction of apartment buildings.

Translated by the Translation Department of Pepeliaev Group.