Complex Legalities of Buying a Property
Russians love paperwork, complete with seals, stamps and notarizations. When buying a property expect to accumulate a mountain of it, if you want to be sure of your rights and not have situations such as the former owner's father-in-law recently, released from jail, turning up on your doorstep and demanding the right to live in his old room.
Don’t laugh too fast. Stranger things have happened to unwary foreign buyers in the jungle of the Russian property market.
The object of this article is to make you wary. Naturally few buyers of property have the time or inclination to jump through the hoops collecting the paperwork to give them the assurance they crave and will turn to a real estate attorney to do the legwork. Since attorneys in Moscow reflect the society in which they operate you should at least have a checklist of the documents they should supply you with before going ahead with a deal, and parting with your money.
To help you get the definitive list, Passport turned to Daniel Klein, partner and Marina Rakova, junior partner of Hellevig Klein and Usov and Mikko Petrov, partner of Avenir Corporate. This intrepid trio advised Passport’s publisher, John Ortega on his purchase this summer of a detached cottage outside Moscow.
Their first point - before you make even the down payment you should get a payment agreement and they recommend this includes a provision for repayment of twice the value of the deposit if the seller fails to complete.
The crucial document you require is the seller’s proof of ownership, which could come in various forms depending how they obtained the property, from privatization, inheritance or purchase. Essentially, the older the property the more hassle and more bits of stamped paper they are going to have to get you.
Two state offices are important here – the residential construction cooperative (ZhSK) and the Bureau of Technical Inventory (BTI). Expect to get a BTI certificate, Form 11-A, which is valid for one month and the floor plan and legend, which is valid for one year. Your lawyers also have to obtain from the Repair and Use Office (REU), an extract from the building register, a copy of the tenancy register and a signed statement showing that there is no unpaid rent.
Another vital consideration is doing a search on all registered occupants of the property. You are going to need a notarized statement from each one agreeing to the sale of the property, with parents or legal guardians signing on behalf of minors.
If the property is in Moscow Oblast, or came into the seller’s possession as a gift or inheritance then you need a certificate from the local tax inspectorate to make sure that all the property’s antecedents are clear and above board. After all, you don’t want to deal with a decade old unpaid tax bill.
If the seller bought the property after the 1st March 1996, then you should also get a transfer deed.
Naturally you should also get the property surveyed to ensure the sizes of everything from rooms to walk in closets conform to the floor plan.
Proceeding to the sale agreement, which is the main document regulating the legal relations between buyer and seller, our experts caution against using standardized agreements preferred by lazy attorneys and recommend you insist that all the terms agreed be recorded in the agreement, including the price of the flat; the settlement procedure; the deadlines for vacating the property and the right of third parties to the premises being purchased. Unless it is a newly built property you should also stipulate the procedure for registering at their new address everyone currently registered at the property and set the liability for the seller’s failure to vacate the premises.
The most important thing in a sales agreement is the price of the flat, and should also include a detailed explanation of the settlement procedure.
To conclude the agreement it is sufficient to lay out all of its terms in simple written form, sign it and submit it along with all the necessary documents to the office of the federal registration service where the apartment is located. You are obliged to use a notary's services only if you conclude an annuity agreement.
An additional problem is if the property has been extensively renovated or reconstructed and the current floor plan differs from the original. (For more details see the article on Renovations in the next issue).
Following on from all of the above, the onus is on you, the purchaser to draft the text of the agreement to be presented to the Municipal registration office. Officials are fickle and change the rules. Use an attorney to maximize the chances of getting the agreement registered on the first attempt, and within the 30 days usually allocated for completion.
You might want to include in the sales agreement the contingency for extending completion if the sale registration is rejected and a re-filing required.
At the time of registration all the parties or their notarized powers of attorney must be present.
This article refers mainly to the purchase of apartments. Purchase of country homes and cottages will be covered in a future article, next year.