Plenums of the Supreme and Supreme Arbitration Courts of the Russian Federation: harmonising practices for disputes over ownership and other rights in rem.

11.06.2010

Legal update No. 150.

Goltsblat BLP advises that Resolutions of the Plenum of the Supreme Court of the Russian Federation No. 10 and of the Plenum of the Supreme Arbitration Court of the Russian Federation No. 22 “On certain issues arising in judicial practice when resolving disputes relating to protection of ownership and other rights in rem” were adopted on 29 April 2010. The key practical conclusions and recommendations in the real estate field   include:

Acquisitive prescription.

1. The title to state or municipally owned land plots may not be acquired by acquisitive prescription. Such land plots shall be acquired in compliance with the land legislation (clause 16).

The Unified Register of Real Estate Rights and Transactions  (Realty Register).

2. Registration of title to real estate in the Realty Register does not exclude the risk of the title being successfully challenged in court:
the title of the person disposing of property registered in the Realty Register does not constitute incontestable evidence of a good faith acquirer (clause 38);

  • if a real estate property the title to which has been registered bears any signs of an unauthorised structure, such registration does not exclude the possibility of a relevant demolition claim being filed (clause 23);
  • if an unauthorised structure is encumbered by third-party rights (e.g., rights of a pledgee or leaseholder), a successful challenge to the title will terminate the relevant encumbrances (clause 23).

 The above provisions prove that a comprehensive legal due diligence with respect to real estate rights is important not only before purchasing such property but also before signing a lease agreement for it.

Unauthorised structure.

3. The courts have once more emphasised that the title to an unauthorised structure may be recognised as belonging to the owner, lifetime inheritable possessor or permanent (termless) user of the land plot accommodating it (clause 25).

In other words, the leaseholder is not entitled to claim title to the structure in court,  irrespective of the lease term.

4. According to the courts, a missing construction permit may not per se constitute grounds for rejecting a claim for the title to an unauthorised structure to be recognised. At the same time, the court would need to establish whether the person that created the unauthorised structure had taken appropriate steps to legalise it, specifically, to obtain a construction permit and/or relevant commissioning certificate, as well as whether the relevant authority lawfully refused to issue such a permit or certificate (clause 26).

Thus, if the creator of the unauthorised structure did not apply to the relevant authority for the permits or failed to support its application with the requisite documents (e.g., state expert approval of design documentation), the claim for recognising title to the unauthorised structure is likely to be dismissed.

5. Having reviewed clause 1, article 222 of the Russian Civil Code, the courts concluded that construction in progress, being real estate, may also be recognised as an unauthorised structure (clause 30). Hence, claims for recognition of title to such facilities, as well as demolition claims, are permitted.

6. If an unauthorised structure is located on a land plot held by a developer by any of the rights in rem mentioned in clause 3 above but no necessary permits to build said unauthorised structure were obtained, the respondent in the developer’s action seeking to recognise ownership of the unauthorised structure will be the local government body on whose territory the structure was built, while in the cities of federal significance - Moscow and St. Petersburg - the relevant state authority of Moscow or St. Petersburg (clause 25).

Previously, selection of the respondent for such claims involved significant difficulties.

The status of good faith purchaser.

7. Certain criteria for a good faith purchaser of property have been defined. For instance, a purchaser is recognised as being in good faith if it proves that, when conducting the transaction, it was not aware and should not have been aware of the unlawful nature of disposal of the property by the seller and, specifically, that it took all reasonable steps to ascertain the seller’s rights to dispose of the property. A respondent may be recognised as a good faith property purchaser if acquisition of the disputed property meets the criteria of a valid transaction in all respects, except that it was performed by an unauthorised  seller (clause 38).

Actio negatoria (negatory action).

8. Given the important clarifications provided by the supreme judicial authorities, adoption of the Resolutions is likely to boost the number of claims for cessation of infringement of a right not involving deprivation of possession (negatory actions).

For example, such claims must be satisfied if the claimant proves that there is a real threat of its ownership or lawful possession being violated by the respondent. Such claims should be satisfied whether or not the acts (omissions) infringing on the claimant’s right are committed on the respondent’s land or land belonging to another person, or within a different real estate facility. Please note that even a slight departure from the town-planning and construction norms and regulations might constitute grounds for satisfying a claim, if ownership or lawful possession of the claimant is infringed (clauses 45, 46).

Let us recall that, according to article 208 of the Russian Civil Code, the statute of limitations does not apply to claims by an owner or other possessor for elimination of any kind of violation of its right, even if these violations were not associated with deprivation of possession. That means that, no matter how long the right has been violated, there is no obstacle to such claims being satisfied in court.

Other.

9. The Resolutions do not cover a number of practical aspects relating to ownership protection, e.g., whether or not a building may be considered an unauthorised structure if the lease agreement for the land plot accommodating it was recognised as a void transaction owing to violation of the procedures envisaged in the land legislation.

For additional information, please contact:

Vitaly Mozharowski, Partner,
Real Estate & Construction,
Goltsblat BLP,
Tel: +7 (495) 287 44 44,
Email: info@gblplaw.com

Elena Barinova, Partner, Real Estate Investment  & Finance,
Goltsblat BLP,
Tel: +7 (495) 287 44 44,
Email: info@gblplaw.com

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