Probably every person dreams of having their own living space. Buying a private home or an apartment on the secondary housing market is not a cheap pleasure. A much more economical option is to take part in shared construction or build your own house on land leased from the municipality. But what if the developer delays the procedure for transferring the premises in the case of shared participation, or how to register ownership of the unfinished property on your site when constructing a house yourself? The following article will tell you how to obtain ownership of an unfinished construction project.
"Dacha amnesty"
This term is popularly used to describe the simplified procedure for the privatization of land allocated by municipalities for personal and subsidiary farming, as well as for individual housing construction - individual housing construction. It happens that a started, almost completed construction process has to be interrupted. But the “incomplete” also needs to be formalized properly. Of primary importance in this matter is the basis on which the site is exploited - whether the land is given for indefinite use or for temporary use, or the land under “unfinished” ownership belongs to the landowner. It is also important to take into account the purpose of the land. If we talk about individual housing construction, construction is assumed initially, but if we consider plots allocated for personal subsidiary plots (LPH), then the situation can be ambiguous. In cases where we are talking about private plots within populated areas, such a plot can be classified as a personal plot, which involves the construction of a residential building. But a plot located outside the boundaries of a populated area is characterized as a field plot, which means that it will not be possible to obtain recognition of ownership of an unfinished construction project on it, because in principle it is not intended for the construction of housing. In accordance with Art. 222 of the Civil Code of the Russian Federation, such a structure qualifies as an “unauthorized construction” and is subject to demolition.
Registration of unfinished construction
According to Article 130 of the Civil Code of the Russian Federation, real estate means things that are indivisibly connected with land, and it is not possible to move them without collateral damage. An unfinished object with a foundation is regarded as real estate, falling under the criteria of this article. From Art. 25, paragraph 2, of the Law on Registration of Rights to Real Estate, it follows that in order to register ownership of an unfinished property, title documentation for the land and a development permit are required. Before submitting documents to Rosreestr, you will need to take the following steps:
- obtain a construction permit obtained in relation to an unfinished building;
- obtain a technical passport of the object from the BTI;
- obtain a cadastral passport for unfinished construction in accordance with the form approved on January 1, 2015.
How to register an unfinished house construction
The law defines unfinished construction of a residential building as a building that has not been put into operation. In this case, it does not really matter whether the house is half completed or whether construction has just begun. And all because many are faced with an unpleasant situation when the construction of a residential building has to be stopped. The reasons may be very different, but the main thing is to know how to correctly register such an “unfinished project”. An important factor is the availability of rights to the land where the facility is being built. This may be a right of ownership, a right of inheritance or a right of lease.
This is important to know: Eviction for non-payment of utilities from a municipal apartment
Stumbling blocks when participating in shared construction
Purchasing housing on the basis of an agreement for participation in shared construction for a number of citizens is the best option compared to purchasing similar living space on the secondary market. Unfortunately, due to the instability of the economy or the unscrupulousness of the developer, an unfinished house often remains a symbol of a housewarming dream. Developers either delay delivery deadlines or completely abdicate responsibility by initiating bankruptcy proceedings. In such cases, the shareholder can either take the situation into his own hands, defending his own interests in accordance with current legislation, or resignedly wait for the other party to the contract to fulfill its obligations.
Important! It is possible to formalize your rights to a share of real estate only by applying to a judicial authority.
Appeal to the court
Before preparing a claim for recognition of ownership of an unfinished construction project, the shareholder must consider the following:
- Jurisdiction. Jurisdiction is determined in accordance with Art. 30 of the Code of Civil Procedure of the Russian Federation, based on the location of the object itself. For legal entities, the place of appeal will be the territorial body of the Arbitration Court; individuals send a statement of claim to the District or City Court.
- Readiness. Recognition of the right to an unfinished construction project is possible only in cases where the construction process is completed and all that remains is to put the building into operation, or the construction is “frozen” at the final stages. However, there is no basis for going to court in cases where the developer violated the terms of construction at the initial stages. There is a possibility that the court will satisfy the plaintiff’s claims if the facility is more than 75% ready, but it is not great. But the likelihood of receiving a positive decision from the judicial authorities for the plaintiff if the building is more than 90% complete is many times higher, but it must be taken into account that it is the applicant who will have to confirm the declared readiness by providing evidence.
- Subject of the claim. The most common mistake made by shareholders, due to which claims may be rejected, is the incorrect formulation of the claims themselves, for example, about recognition of rights to an apartment, garage, etc. According to the concluded share participation agreement, the shareholder has the right to claim a share; accordingly, the claim must include a requirement to recognize the ownership of the share of the unfinished property indicated in the existing agreement. An unfinished house does not qualify as full-fledged residential real estate, therefore, the use of terms related to residential real estate will be considered erroneous. Therefore, the claim should indicate only the demand for the share corresponding to the share participation agreement, and the reliability of accurate information about the size and area will be one of the key ones for the court.
- Execution of obligations. Going to court itself is possible only subject to full fulfillment of contractual obligations to the defendant regarding financing issues. For example, such a clause in the contract as the need to pay the difference between the cost of the future apartment according to the design documentation and the actual footage after technical inventory may become a reason for rejecting the plaintiff’s claims.
Recognition of unfinished construction objects as real estate
According to the current legislation of the Republic of Kazakhstan, the division of things into movable and immovable is based on their distinctive features and properties of these things. Thus, the strength of the connection with the land and the immobility of real estate is contrasted with the mobility of movable property. Such a distinction, despite the fact that it is based on the natural qualities of things, has legal significance and legal consequences, since it allows one to distinguish movable property from immovable property.
Article 117 of the Civil Code of the Republic of Kazakhstan (general part) dated December 27, 1994 No. 269-XII (hereinafter referred to as the Civil Code of the Republic of Kazakhstan) includes real estate: land plots, buildings, structures, perennial plantings and other property firmly connected to the land, that is objects whose movement without disproportionate damage to their purpose is impossible.
Article 117 of the Civil Code of the Republic of Kazakhstan does not provide an exhaustive list of these objects. From a common sense point of view, we can assume that unfinished construction projects are real estate. But paragraph 4 of Article 236 of the Civil Code of the Republic of Kazakhstan states that until the completion of the creation of real estate, and in appropriate cases of its state registration, the rules on the ownership of materials and other property from which the real estate is created are applied to the property. From the above norm it is clearly clear that the legislator has established a regime for movable property for unfinished construction and considers it as a set of movable materials. In turn, unfinished construction is firmly connected with the land plot, which is subject to a different regime - the real estate regime. Differences in the right nature (mode) of these objects create many problems in practice. Often, a land plot is pledged, but unfinished construction is not the subject of the pledge. When foreclosure is applied to a land plot, the legal fate of unfinished construction is unclear.
So, for example, recognition of unfinished construction as movable property means that the pledge of a land plot does not apply to unfinished construction and the legal fate of unfinished construction does not depend on the legal fate of the land plot. However, the unfinished construction is firmly connected to the land. In this regard, when foreclosure on the subject of pledge, the problem arises of the implementation and transfer of rights to the land plot that is pledged.
We see the solution only in recognizing unfinished construction as real estate, which, in turn, will lead to completely different legal regulation. Objects of unfinished construction should be classified as a type of real estate such as a building (structure), subject to appropriate legal regulation. Otherwise, the possibility of applying to unfinished construction those rules that make it possible to effectively regulate these legal relations will be artificially excluded []. At the same time, in relation to unfinished construction, the norms provided for in paragraphs 1 and 3 of Article 52 of the Land Code of the Republic of Kazakhstan dated June 20, 2003 No. 442-II (hereinafter referred to as the Law of the Republic of Kazakhstan) will be applied, which state that the ownership of buildings (structures) entails, in accordance with the procedure established by law, the right of ownership of the land plot that is occupied by the specified buildings (structures). These rights are inseparable from each other. Alienation of the right of ownership or the right of permanent or temporary land use to a land plot that is occupied by buildings (structures, structures), and also intended for their operation, without the corresponding alienation of the specified real estate, as well as the alienation of real estate without the corresponding alienation of the land plot that is occupied by the specified real estate , not allowed. It is also necessary to note the relevance of the application of paragraph 1 of Art. 78 of the Land Code of the Republic of Kazakhstan, which provides that the pledge of a building (structure, structure) located on an indivisible land plot means that the entire land plot or land use right is simultaneously pledged. These articles are based on the principle of the unity of the legal fate of the land plot and the real estate located on it. If this principle is extended to an unfinished construction site, this will solve the problem of the implementation and transfer of rights to a mortgaged land plot, since unfinished construction will follow the rule of superficies solo cedit (what is done above the surface follows the surface). That is, the legal fate of these objects will be inextricably linked.
Recognizing unfinished construction as a real estate property will also require resolving a number of issues in shared participation in housing construction and contracting relations.
According to paragraph 8 of Article 1 of the Law of the Republic of Kazakhstan dated July 7, 2006 No. 180-III. “On shared participation in housing construction”, shared participation in housing construction is a relationship between the parties in which one party undertakes to build a residential building and, based on the results, transfer to the other party a share in the form of residential premises. The agreement is a multilateral transaction. Where the parties are the developer, the design company, the equity holder and the agent bank. According to the agreement, the developer organizes the construction of a residential building on land plots owned by him by right of ownership or land use right, by establishing a design company for the construction of a residential building by attracting money from shareholders. The project company builds a residential building within a certain period of time, which, after receiving permission to put it into operation, transfers its share to the shareholder under a transfer deed. Before the transfer of the share under the transfer deed, the shareholder has only rights of obligation towards the developer and the design company. Often, in practice, the developer, taking advantage of the fact that the land plot belongs to him by right of ownership, transfers it as collateral, receiving borrowed funds, but does not return the money by the specified date. The bank, on the basis of the Law on Real Estate Mortgages dated December 23, 1995 No. 2723 (hereinafter referred to as the Law on Real Estate Mortgages), begins foreclosure on the mortgaged property. At the same time, the bank faces the problem of selling and transferring rights to the land plot, since it contains an unfinished construction project.
The question also arises: what to do with the obligatory rights of shareholders? Of course, their rights are violated. Moreover, if the developer has the right to mortgage the land plot and unfinished construction as a real estate property. The solution to this problem is seen in strengthening and ensuring the rights of shareholders. To do this, we believe that it is necessary to legislatively establish a provision on the right of pledge of shareholders for unfinished construction along with the land plot. In this case, the developer will have the right to mortgage the unfinished construction along with the land plot only with the consent of the shareholders.
The next problem arises in contracting relationships. Under a construction contract, the contractor undertakes to build a certain object according to the customer’s instructions within the period established by the contract, and the customer undertakes to create the necessary conditions for the contractor to carry out the work, accept its results and pay a certain price for it.
In paragraph 4 of Art. 654 of the Civil Code of the Republic of Kazakhstan establishes that the owner of unfinished construction before its delivery to the customer and payment for the work is the contractor. In accordance with our proposed amendments, the meaning of this norm is lost, since the owner of the unfinished construction will be the owner of the land plot. In practice, there are often cases when the owner of a land plot is the customer. Consequently, he will also be the owner of the unfinished construction project. Of course, this increases the contractor's risks. After all, he loses the rights to the object he is constructing.
The solution to this problem is seen in the need to strengthen the institution of retention to ensure the interests of the contractor. To do this, it is necessary to include an additional article in paragraph 3 “Features of a construction contract” of the Civil Code of the Republic of Kazakhstan, which will describe the rights and obligations of the contractor, the retention procedure, and also, in the event of a long-term failure to fulfill the obligation by the customer, the contractor’s right to sell unfinished construction along with the land plot .
I would also like to note that the procedure for payment for work is determined by the contract, which may provide for payment: a) preliminary b) stage-by-stage c) after acceptance of all the work [ ]. Of the three types above, the greatest risk for the contractor is payment after acceptance of the work. Therefore, for this type of payment, we propose the introduction of a more radical rule, which will indicate that in the event of non-payment by the customer for work performed under the contract, the customer is obliged to assign to the contractor the right to dispose of the objects for subsequent exhibition and sale at auction.
In continuation of the topic under consideration, it should also be mentioned that in accordance with the proposed innovations in relation to unfinished construction, the provisions of the law on mortgage of real estate are subject to application, which has slightly different economic goals and objectives than the Civil Code of the Republic of Kazakhstan. This, in our opinion, will improve the economic component and attractiveness of the unfinished construction project as a collateral. Thus, in the literature it is noted that the Decree on the mortgage of real estate is aimed at intensifying the provision of loans by banks (mortgage lending), including to attract funds for housing construction, investment in the business sector of the economy of Kazakhstan. The incentive for this should be the lender’s confidence in minimizing business risk, which is based on the availability and high liquidity of real estate issued in the form of a mortgage. The adoption of the Decree on the mortgage of real estate in combination with other regulatory legal acts in the field of entrepreneurship is a factor contributing to the stabilization of the spheres of production and distribution, as well as the creation of sustainable market incentives and regulators [].
Thus, if we recognize objects of unfinished construction as real estate, then in accordance with paragraph 2 of Article 299 of the Civil Code of the Republic of Kazakhstan, the pledge of unfinished construction will be qualified as a pledge of real estate. This in turn: 1) will connect the legal fate of the land plot and unfinished construction projects; 2) will solve the problem of the implementation and transfer of rights to a land plot that is pledged with unfinished construction; 3) will abolish fiction (the nature of things will not be violated); 4) will increase the efficiency of legal regulation of obligation (collateral) legal relations; 5) will allow you to get a loan with the least problems; 6) minimizes the creditor’s entrepreneurial risk, and 7) increases the liquidity of unfinished construction projects.
List of sources used:
1. Romanets Yu.V. System of contracts in Russian civil law. M.: Yurist, 2001. P. 218.
2. Civil Code of the Republic of Kazakhstan (Special part). Commentary (item by article): In two books. Book 1/ Responsible editors: M.K. Suleimenov, Yu.G. Basin. - Almaty, 2006. - with 391 comments to article 623. Procedure for payment for work.
3. Suleimenov M.K., Osipov E.B. Lien right. Almaty: AdiletPress Publishing House, 1997. - p. 76.
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