Insurance against unfinished construction in St. Petersburg.

Equity insurance

Construction equity insurance was previously a right, not an obligation, of developers. But since 2014, everything has changed, and now they are required to carry out this procedure. Otherwise, it is a violation of the law. The norm is contained in Federal Law No. 214.

Full liability insurance for the developer during shared construction is carried out as follows:

• with the help of a mutual insurance company,
• with the participation of a credit institution,
• with the help of an insurance company.

If the developer provides insurance with the help of the society, he is forced to pay membership fees. Participants bear collective responsibility. Insurance from a bank is rarely used, as it requires compliance with more serious conditions from both parties. For example, the applicant will need a lot of documents and payment of a security deposit.

Insurance by a developer of shared construction with the help of a financial institution implies the presence of additional restrictions. First of all, they concern the bank.

1. The institution must operate for at least 5 years.
2. The bank's capital is no less than a fixed amount (200 million rubles).
3. The value of the institution’s total property is at least 1 billion rubles.

Finding a bank that meets the legal requirements is not easy. Many construction companies prefer to issue loans that automatically come with insurance. But then it is difficult for shareholders to receive compensation when an insured event occurs.

Construction insurance by a company is most often carried out with the help of licensed firms. There is no need to pay a deposit, the interest rate does not change throughout the entire period. If an insured event occurs, shareholders have the right to receive funds.

Information: the developer bears all costs for registration and payment of insurance. But shareholders have the right to demand information about the terms of the insurance agreement.

Ensuring payments is also carried out with the help of Rosreestr, because the relationship between the developer and the insurer must be registered. The agreement is registered as an official document containing the conditions necessary for cooperation. The rule also applies to preschool education. Without this, further relationships are impossible, as stated in Federal Law No. 214.

Shareholders themselves can take out insurance. This is permitted by law, but such a procedure is voluntary and not mandatory. In this case, the participant acts as a beneficiary and policyholder at the same time. And the construction company, that is, the developer, acts as the insurer.

There are differences between the insurance of the shareholder and the developer. In case of voluntary insurance by the participant, compensation (in the event of an insured event) depends on the funds invested by shareholders. With OS, compensation does not depend on the money of shareholders. With voluntary insurance, it is difficult to change the terms of the agreement.

How to optimize apartment insurance in a new building?

The objects of real estate insurance are usually the structure of the building itself and the finishing of the apartment located in it . The basis for calculating the amount of the insurance premium is the actual value of the real estate named by the appraiser. The amount is fixed in the insurance contract and multiplied by the current insurance rate in the insurance company. The final value will become the annual cost of insurance for the mortgage recipient.

It can be paid in one payment every year until the mortgage is repaid.

The insurer may break the annual amount into quarterly or monthly premiums, but the final annual amount in this case will be slightly larger.

If the owner of a mortgaged apartment himself is not interested in property insurance and carries out insurance when purchasing an apartment in a new building only for the bank, he can reduce the amount of the insurance premium . For this it is enough:

• insure only the structure of the building, refusing in advance the financial protection of the finishing;
• increase the deductible - the amount that the insurer, in accordance with the contract, will deduct from the amount of insurance compensation (the higher the deductible, the lower the insurance premium will be);
• insure the home not for its entire value, but only for the remaining amount of the mortgage debt, thereby reducing the value of the property (not every bank will agree to this option!); it is necessary to understand that in this case the amount of insurance compensation calculated by the insurer will decrease in the corresponding proportion;
• pay the insurance premium once a year in one payment, without breaking it into several smaller ones.

Insurance against "unfinished construction"

Information about the terms of the insurance agreement must be publicly available to shareholders. Insurance of a completed share participation agreement implies insurance against unfinished construction. According to the above-mentioned regulation, the construction company undertakes to take responsibility if the house is not delivered on time or is built with violations.

Damage insurance means that the developer is financially responsible for the cessation of its activities in the event of bankruptcy or liquidation. This is important for shareholders, since in this case they can return the invested funds.

Regulatory framework for shared construction

The relationship between the developer and the shareholder is a property relationship. Therefore, they are regulated by civil law. But a number of points are regulated by other acts. For example, the Tax Code. The liability of developers for fraud with apartments is provided for in the Criminal Code of the Russian Federation. There is also a special law - Federal Law of December 30, 2004 N 214-FZ “On participation in shared-equity construction of apartment buildings and other real estate and on amendments to certain legislative acts of the Russian Federation.” Its adoption made it possible to reduce the severity of relations between developers, shareholders and the state.

Civil legislation

Despite the fact that shared construction belongs to civil legal relations, there are no norms directly devoted to it in the Civil Code of the Russian Federation. But in Art. 130 of the Civil Code of the Russian Federation defines this type of real estate as an unfinished construction project. The introduction of precisely this wording into the text in 2004 made it possible both for shared construction itself and for mortgages (loans secured by real estate) for apartments in houses under construction.

This method of the bank to ensure that the borrower fulfills the obligation to repay the debt is discussed in Art. 334 Civil Code of the Russian Federation . This act also states that state registration is required for rights to real estate and contracts related to it ( Article 131 of the Civil Code of the Russian Federation ). Without it, that is, without entering information into a special state register, all transactions will be invalid.

Special law

By 2004, it became clear that the accumulated problems of shared-equity construction could not be solved using existing legal provisions. Then a special law was adopted - N 214-FZ (Law). It regulates exclusively relations in the field of shared construction. Namely:

• introduces the concept of shared construction object;
• allows developers to raise funds from citizens;
• regulates the conclusion of an equity participation agreement (hereinafter referred to as the DPA);
• prescribes the rights of the parties and their responsibilities (only property);
• establishes measures to ensure that the developer fulfills his obligations (pledge, surety, insurance);
• introduces compulsory state registration of preschool educational institutions and assignment of claims;
• includes a list of documents required for the developer;
• establishes state supervision in this area.

Responsibility

The developer is responsible to his shareholders. Depending on what kind of violations they commit, their liability may be:

• Property. An unfulfilled contract threatens the developer not only with the return of the shareholder’s funds, but also with a substantial penalty ( Article 10 of Federal Law No. 214 ).
• Administrative. You will have to pay a fine for violating the laws on shared construction ( Article 14.28 of the Code of Administrative Offences ) and for failure to comply with the instructions of supervisory authorities ( Article 19.5 of the Code of Administrative Offenses ).
• Criminal. Deception of shareholders is classified as fraud ( Article 159 of the Criminal Code of the Russian Federation ). He faces either a substantial fine of 1 million or 10 years in prison.

Risks and insurance of the object

After the law on participation in shared construction came into force, many shareholders began to fear the impact of insurance on the value of real estate. It had to grow, which increases the size of participants' contributions.

But the insurance of the executed share participation agreement was drawn up in such a way that there was no increase in the price for shareholders. The company spends no more than 1% of its available funds on insurance, and this does not affect the cost of square meters.

The developer is obliged to answer to the shareholders with all his property. There are two ways to insure a property under construction: the entire house at once or each apartment separately. When an insured event occurs, this choice plays an important role. In practice, developers prefer to insure apartments - this makes it more convenient to find compromises with each shareholder.

Shareholders will be required to insure the risks of unfinished construction at their own expense

Vitaly Us (Head of the Department of Underwriting of Business and Financial Risks, Soglasie Insurance Company) Insurance of financial risks of shareholders has been insuring in Russia for more than 10 years. Before amendments were made to Federal Law 214 regarding the provision of financial guarantees by developers themselves, the possibility of such insurance existed on the market and it was carried out. However, both insurance of financial risks of shareholders and insurance of civil liability of developers are the same risks. At the same time, it has become more convenient for insurers to work with the developer as an insured, primarily in terms of obtaining more complete information about its activities and a complete package of documentation necessary for conducting a pre-insurance examination. On the other hand, when insuring the financial risks of shareholders, such a service was used by a fairly limited number of shareholders - as a rule, the number of shareholders who purchased a financial risk insurance policy did not exceed 15 - 20% of the total number of shareholders at this facility. But, as in the situation with insurance of civil liability of developers, insurance of financial risks of shareholders was offered by a very limited range of insurance companies - such insurance required, in addition to the availability of specialized insurance rules, the presence of specialists who could conduct a pre-insurance examination of the developer, the construction project, as well as assess market conditions during the construction period. There were both positive insurance experiences and negative ones, when such insurers suffered large losses and were forced to cease their activities. Experience in insuring the financial risks of shareholders formed the basis for civil liability insurance for developers. But it should be emphasized that insurance of the financial risks of shareholders was carried out on a voluntary basis (by the way, it is still possible now, in addition to liability insurance for developers). Shareholders, at their own peril and risk, have made and are currently making decisions to participate as investors in housing construction projects. The initiative of the Ministry of Construction to make insurance of financial risks of shareholders mandatory seems dubious - according to this logic, it is necessary to oblige all persons investing money in certain investment objects, not only in construction, to insure their financial risks. Which does not correspond to the principles of freedom of investment, freedom of contract and market relations. On the other hand, having become mandatory, insurance of financial risks of shareholders will face the same problems that liability insurance of developers faced - lack of capacity, “Bank of Russia List”, largely poorly calculated risks, etc. At the same time, there are no noticeable initiatives directed by the Ministry of Construction and other structures to increase requirements for developers, to restore order in urban planning policy, to provide preferential financing for housing construction from commercial and budgetary sources. In order to accept the financial risks of shareholders for insurance, insurers will need to conduct a pre-insurance examination of the developer and the shared construction project. This will require information and documents that the shareholder himself will often not be able to provide, i.e. such insurance, as a rule, is possible only in close cooperation with the developer himself and with his willingness to disclose information about himself and about the shared construction project, often of a confidential nature. Otherwise, such insurance will be extremely difficult. This was the case before, and this will be the case if the initiative of the Ministry of Construction is implemented in the form of a legislative act. Separately, the question of what can be included in the insurance coverage is only such an event as the bankruptcy of the developer (as is currently provided for in the civil liability insurance of the developer) or the long-term failure of the developer to fulfill its obligations (during the long waiting period established by the insurance contract, established for for the purpose of qualifying the developer for signs of insolvency, carrying out rehabilitation and completing the construction of a shared construction project), by analogy with other types of credit insurance. With insurance coverage in the form of a long-term failure by the developer to fulfill its obligations, the number of insurance events will be greater than when covering only the risk of bankruptcy of the developer, but there will be an opportunity to rehabilitate the construction project, attract another developer, etc., i.e. try to revive the construction project by completing the shared construction project and avoiding bankruptcy proceedings for the developer. Such coverage may open up prospects for attracting Western reinsurers, who have experience in rehabilitating developers and bringing construction projects to completion, earning money from this after the implementation of a shared construction project.