Real Estate and Urban Development
«It's tangible, it's solid, it's beautiful. It's artistic, from my standpoint, and I just love real estate.» -Donald Trump
Relations in the area of real estate and urban development often require solving a whole set of legal issues. Uniqueness and complexity of each supported project allowed lawyers of Rightmark Group to acquire many-sided experience and expertise in various branches of law, required to support major investment projects associated with design, refurbishment and construction of real estate, integrated land development, development of built-up areas and purchase of real estate from the state.
Practicing lawyers often take part in preparation and resolution of particularly complex disputes related to real estate and urban development in St. Petersburg and Leningrad Oblast, Moscow and Moscow Oblast and other regions of Russia, including those regarding challenge of unlawful acts of public authorities undermining rights of developers. Much attention is given to support land and other real estate transactions (buildings, residential and non-residential premises), ranging from a comprehensive legal due diligence of facilities to conclusion of transaction and support at all stages of state registration of the client’s title.
Services within the practice
Support of real estate transactions, including but not limited to:
- conduct of a comprehensive legal due diligence of real estate as per the client’s order (assessment of permitted use in accordance with the land and urban planning legislation, identification of encumbrances, protection zones, and other restrictions);
- preparation of a package of documents necessary and sufficient for contract conclusion and subsequent state registration of titles to property;
- preparation of a draft contract, negotiations for agreement of transaction terms and conditions, payment and guarantee system that are acceptable to the customer;
- assistance in state registration of titles to real property, including property portfolios and newly constructed real estate. After consultation with a customer, registration documents are submitted and received after registration;
- tax optimization for real estate transactions;
- assistance in obtaining certificates and approvals of public authorities (Committee for City Planning and Architecture, Committee on State Control, Use and Protection of Historical and Cultural Landmarks, City Property Management Committee, etc.).
Comprehensive support of investment activities in the following areas:
- development projects;
- real estate refurbishment and construction, including assistance in harmonization of design documentation, procurement of urban development plans of land plots and construction permits;
- purchase of land plots, including for development;
- purchase (privatization) of leased premises and built-up areas from the state;
- general due diligence of activities of a legal entity (legal audit).
Comprehensive support of activities in the area of land relationships, including but not limited to:
- registration of titles to land plot, including those from forest and water reserve lands, alluvial territories;
- enforcement of rights of owners of land parcels (shares), including allocation of land plots against land parcels (shares), preparation for general meetings of co-owners of land plots from agricultural lands;
- assistance in alteration of permitted use of a land plot.
Assistance in resolution of real estate and urban development disputes:
- conduct of cases in the area of land relationships, associated with termination or invalidation of contracts for lease of land plots, challenging of bidding (tenders, auctions);
- challenge of unlawful acts of state and municipal authorities on revocation of area planning documentation (site designs, land plot development plans), cancellation of construction permits;
- protection of client interests in cases on eviction from real estate property, challenge of privatization by public authorities.
The municipality included in the Moscow Oblast held an auction for the right to conclude a contract for development of built-up area. However, the municipality signed the contract after it was included into the jurisdiction of Moscow. Later on a public authority withheld the contract performance for several years.
Legal certainty violated due to changes in composition of constituent entities of the Russian Federation could be restored only in the process aimed not at a particular court resolution, but a well-defined statement of reasons finding the facts related to contract execution and performance.
This required bringing opposite legal views in the process. The winning bidder raised an action to compel the Moscow Government to enter into a contract based on the auction results, claiming that although the bidding was lawful, the municipality had no authority to conclude such contracts since it became a part of Moscow City. The third party, the company client, in its turn, asserted that the contract is valid, moreover, that rights and obligations thereunder were transferred to the third party. The claim was not satisfied. However, not only the third party and a defendant won the case, but the plaintiff as well. Insofar as the stated reasoning is concerned, the court specified the facts associated with execution and performance of the contract, and came to conclusions on the right, which resolved the legal uncertainty in a matter in controversy.
Rightmark Group was approached by a customer interested in purchase of investment-attractive land for the subsequent integrated housing development thereof. The necessary area planning documentation for these land plots was not, however, approved at that moment, thus considerably raising the buyer’s risks.
Rightmark Group lawyers developed and proposed to the parties an agreement of purchase and sale of future land plots according to which the seller undertook to re-form the existing land plots after approval of the development and boundary-setting plans. The parties agreed on the minimum acceptable construction parameters for the formed parcels (total useful floor area and non-residential gross floor area in apartment buildings) as essential conditions. The parties also entered into an agreement of mortgage of existing land plots in order to ensure repayment of money to the buyer, if the agreement of purchase and sale is terminated.
Further assistance will be provided to the customer in performance of agreements and registration of title to the newly-formed land plots after full payment thereof.
Head of Khimki City District Administration (Moscow Oblast) issued permits for construction of the Mendeleev Residential Complex. However, afterwards the Administration arbitrarily cancelled the development plan and housing project construction permit. This resulted in violation of interests of both developer, Etalon LLC, and shared construction participants.
Rightmark Group representing the developer interests applied to the Moscow Oblast Arbitration Court for cancellation of the orders of the Khimki City District Administration. After months of legal controversy, Rightmark Group lawyers convinced the first instance and appeals courts to rule that the aforesaid orders were illegal and void (Khimki City District Administration did not appeal in cassation against court of appeal rulings). Thus, failure to meet deadlines for the house construction and transfer of apartments to citizens was prevented.
Original photo: http://www.lidgroup.ru/realestate/residential/v_himkah/about/
The Committee for Architecture and Urban Development approved the land plot development plan submitted by Kremlevskie Palaty LLC (InvestStroy) with material law violations. The company was entitled to develop only 10% of the purchased land plot area, instead of 90% thereof. Previous attempts of the Company, including its appeal to the court for invalidation of certain provisions of the land plot development plan were not successful. The first instance court dismissed the asserted claims, including due to partially incorrect wordings of the petition declaration.
Rightmark Group represented the company after the relevant decision was appealed. Experts of our company convinced the court of appeal that the claims asserted by the client were subject to satisfaction, while the first instance decision should be revoked, even despite the fact that the original claims and the appeal petition were incorrectly worded.
Rightmark Group lawyers convinced the court that notwithstanding the imperfect petition form, the claims were reasonable in matter, as violations committed by the Committee materially interfered with the right to develop the land owned by the company. The court of appeal granted the appeal and satisfied the claims of the company, invalidating the land development plan insofar as the disputed elements are concerned, and compelling the committee to bring it in compliance with the current statutory requirements. Understanding the strength of the case prepared by Rightmark Group lawyers, the Committee for Architecture and Urban Development did not appeal in cassation against the court of appeal ruling issued in favour of our principal.
Rightmark Group lawyers provided comprehensive support of the process of purchase of a land plot in Shushary settlement, including the real property located therein. Provided that the purchased real property was mortgaged with a bank, our company elaborated and agreed upon a scheme of partial contract price payment using a letter of credit for early mortgage termination. The funds under the letter of credit were transferred directly to the bank for the seller credit repayment.
As a result, Rightmark Group ensured conclusion of a contract of purchase, release of bank mortgage of the land plot and real property, and state registration of the purchaser title to real property. Further legal assistance was provided to the parties in proper performance of contract and execution of documents on discharge of obligations, as well as release of mortgage of the land plot and real property in favour of the seller.
Construction of multi-storey housing is commenced in the territory intended for integrated development in Vsevolzhsky district of Leningrad Oblast. Rightmark Group built relationships understandable to the land owner and Leader Group construction company, which enabled timely formation of land plots for multi-storey housing within the aforesaid territory, release the property of mortgage and start multi-storey housing construction funded by natural and legal persons in accordance with the Federal Law No.214-FZ.
The parties were provided a transparent and clear settlement plan based on instalment payments using both non-cash resources and other assets. This enables the construction company to timely perform its contractual obligations, and makes it possible for the parties to a transaction to maintain positive advantageous relations over the years.
Transaction support included assessment of an architectural feasibility of construction of apartment buildings with the designed specifications and within the established time limit, including development of transport, utility and social infrastructures. Due to efforts of our lawyers, a lengthy process of contract negotiation resulted in execution thereof.
The developed contracts are distinguished by detailed regulations stipulating the instalment payment procedure, performance bonds, penalties, as well as rights and obligations of the parties in case of the contract termination. The parties also agreed on a non-conventional method of contract price payment. The seller of the land plots acquires rights for a part of residential properties to be created by the purchaser in the apartment buildings under construction as a consideration. The contract also contains an algorithm of land plot price modification depending on changes in the area of apartment buildings under construction. As a result, Rightmark Group developed and suggested to the parties to a transaction a contract establishing, comprehensively and in detail, relationships of the parties, and, above all, protecting interests of the land plot purchaser.
Rightmark Group client won the auction for the sale of a right to conclude a contract for lease of a land plot to site a multi-storey apartment house in Nakhabino settlement in Moscow Oblast. The bidding was challenged by a bankruptcy trustee of LLC Razvitie Krasnogorskogo Raiona-Group, who referred to the right of the aforesaid company to conclude a contract for lease of the same land plot without auctioning. In witness thereof the bankruptcy trustee made reference to the corresponding judgment (delivered after the bidding was held without participation of the winning bidder).
Hence, to protect the client rights interests we represented its interests in two trials:
— with regard to challenge of bidding;
— with regard to acknowledgement of LLC Razvitie Krasnogorskogo Raiona-Group right to conclude a contract for lease without auctioning (where a judiciary act was passed without involvement of the winning bidder, and inclusion in the judicial process was at the appeal stage).
In a case where the right of LLC Razvitie Krasnogorskogo Raiona-Group to conclude a contract for lease without bidding was acknowledged, Rightmark Group secured the client involvement in the case as the third party and the case consideration in accordance with the first instance rules. Activities of Rightmark Group lawyers during the case reconsideration resulted in cancellation of the first judgment by the court of appeal.
Hence, in a case challenging the bidding reasons for the auction invalidation became inapplicable, and LLC Razvitie Krasnogorskogo Raiona-Group abandoned the claim. Thus, rights of Rightmark Group client to conclude a contract for lease of a land plot to site a multi-storey apartment house were completely restored.
Legal Due diligence was conditioned by the acquisition, by way of privatization, of a block of the company shares which used to be publicly owned. Assessment of identified legal risks resulted in development of recommendations for shareholders to prevent (minimize) adverse legal effects for a joint stock company placed under corporate control, which are caused by failure to register or improper registration of proprietary and liability rights being parts of the company assets, including rights to utility infrastructure facilities, objects of water and subsoil use.
Special nature of this Legal Due diligence was also determined by the special nature of activities of the company which is a local monopolistic provider of water supply, water disposal and heat supply services, as well as a specialist contractor operating utility networks. The Legal Due diligence included assessment of the company activities in terms of antitrust law, assessment of specifications issued by the company for connection of capital construction projects to utility networks, and the company’s compliance with the procedure for connection of capital construction projects to the aforesaid networks.
Rus’ Construction Holding planned to take part in Zavidovo Recreation Complex construction (http://zavidovo.ru/rus/). Rightmark Group was engaged to provide legal support of such participation.
Rightmark Group task at the first stage of project implementation was to conduct a legal analysis of the land plot status, review urban restrictions, assess feasibility of construction within the established time limit. One of the challenges of this project was the need for legal analysis of a large number of land plots for various applications (circa 100) within a tight timeframe. The following step was to develop a project implementation scheme, as well as a contractual framework, in order to balance interests of the project participants.
Unusual nature of this project was due to the need for elaboration of options to provide the necessary utility infrastructure facilities in the development area, including at the expense of subsidies granted by public institutions. Depending on the way to provide the necessary utility infrastructure facilities in the development area, binding relationships between the land owner and developer were built.
Rightmark Group representing interests of Leader Group Construction Company provided legal support of a transaction for purchase of ownership of a land plot with real estate in Yanino Village (Vsevolzhsky district of Leningrad Oblast) for reinforced concrete plant construction. A special aspect of the transaction was that by the time the parties reached an agreement in principle on the transaction, the land plot was not formed. Also, due to payment in instalments the land plot was mortgaged. After legal due diligence of documents for the land plots, including in order to assess feasibility of plant construction in the land plot offered for purchase, and lengthy negotiation of the transaction terms the company Rightmark Group managed to secure conclusion of all necessary contracts and their proper performance by the parties, including mortgage lien release.
Acquisition of land for construction is always connected with urban development and infrastructure risks to be eliminated at the stage of making a transactional decision. Also, acquisition of a land plot to be formed in the future as a result of division of another land plot, is associated with a significant number of buyer’s risks, which requires elaboration of the transaction legal structure. By now Rightmark Group ensured registration of title to land, established servitudes for the adjacent areas for access of construction equipment to the site. Thus conditions are created for commencement of plant construction at the site.
Comprehensive support of activities of Active House development company involved settlement with the management company providing services in the development area, harmonization of documents at the stage of design, construction and sale of real property to end customers. Specifically for this project more than 20 types of contracts were developed to be concluded for the estate construction project implementation. The Company lawyers participated in agreement of terms and conditions of these contracts agreements with contractors and secured conclusion thereof on terms most favourable to the client.
At the initial project stage, the client stated willingness to sell some real property items during the construction. Cottages in this case were to be constructed as per design proposed by the seller or the buyer’s design. As the contract for sale of real property was concluded in a situation where the purchased house did not exist yet and in some cases was constructed according to a custom design of the buyer, it was necessary to develop a property sale scheme protecting the seller as much as possible, in particular against the risk of repudiation of a contract by the buyer at the house construction stage, and refusal to pay for the property. Also, risks and prospects of the construction were forecasted and assessed both by the client (by its own efforts and by outsourced staff), and external companies.
The described activities of Rightmark Group enabled the client to design the cottage estate as well as start construction and sale of real estate (under construction) with minimum economic and legal risks.
A contract regulates and establishes property relations of the parties within the scope of the investment project of integrated land development and multifamily housing to be completed by 2020.
The Company assessed the purchased property, its suitability for investment project implementation, developed the structure of contract relations, including both obligatory arrangements required by law, and advisable ones aimed at protection of rights and interests of the client. Elaborated transaction are designed for long-term use, regulate staged performance by the parties of contractual arrangements, measures for protection of the purchaser rights, liability of the parties and the project closure procedure.
A special feature of the project is establishment of relations between the participants of integrated development of a privately owned land plot for housing construction and implementation of a non-conventional payment method, i.e. the land plot seller will obtain ownership of residential and non-residential premises in apartment buildings as payment.
LENOBLIMUSHCHESTVO brought an action against LOGUP Krasny Pakhar, represented by Rightmark Group, for termination of a right to permanent (perpetual) use of a land plot with an area of over 20,000 ha in Boksitogorsky district of Leningrad Oblast. According to the Plaintiff, the Defendant was to have been deprived of this right, as the land plot was not used for more than three years, starting from 2007. In proceedings before the first instance arbitration court the lawyers proved the fact of partial use of the land plot as intended, which was also recorded in a certificate of audit of compliance with the land legislation.
However, the main reason for claim dismissal was a major violation by public law enforcement bodies of the procedure for forced deprivation of the defendant right to permanent (perpetual) use. In the case under consideration, a notice was issued prior to accumulation of facts, and a penalty was charged only a year after, in fact, as a sanction for another offence. Under such circumstances, the court had no reason to satisfy the asserted claims. The arbitration court of appeal upheld findings of the first instance court. The plaintiff filed a cassation appeal from the trial court and a court of appeal ruling, but the court of cassation upheld the ruling.
What is equally important for the owner is that the court found that the property rights to the building were transferred to the company during the privatization. It is a well-known fact that complexity of registration of title in real property in the process of corporate assets privatization in the 90s, is associated with a need to associate specific real property with the property rather poorly described in previously issued documents.
In 1988, a contract was concluded for lease of production facilities with a purchase option. In 1992, the enterprise assets were purchased in the privatization process. Then in 2010, the City Property Management Committee stated that the disputed building was not purchased in the privatization process and was subject to privatization according to a special procedure. Since the special procedure was not complied with, the building remained the city property. The City Property Management Committee demanded to vacate the building, despite the fact that 18 years had passed and the building is located on the land leased by a commercial entity. Rightmark Group lawyers protected interests of the commercial entity, and the City Property Management Committee claim was dismissed.
Despite the court ruling, the City Property Management Committee attempted illegal seizure of the disputed building, which was successfully prevented by Rightmark Group lawyers. Immediately after the end of the first trial, the Committee illegally registered a title to the disputed building on its favour. To protect the violated rights of the company lawyers filed a statement of claim for declaration of title to the disputed building. A detailed analysis of the legislation in the area of protection of monuments and the relevant judicial practice made it possible for Rightmark Group to defend the client interests in courts of three instances: the company title to the disputed building was recognized.
Rightmark Group developed the cause of action and represented interests of LLC Fregat (developer of the first in St. Petersburg 140 m high skyscraper) before the court in a case order for invalidation of a decision of the St. Petersburg Committee for Architecture and Urban Development serving as a basis for cancellation of the development plan of the land for skyscraper construction earlier issued by the St. Petersburg Committee for Architecture and Urban Development. The aforesaid decision compromised implementation of the skyscraper construction investment project. Thus, the court recognized validity of the developer (LLC Fregat) position prepared by our company, and invalidated the order of the St. Petersburg Committee for Architecture and Urban Development.
Original photo of Leader Tower BC http://leadertower.com/
Rightmark Group representing interests of LLC Leader Group provided support of conclusion of contract for lease of land plots with a right of subsequent purchase thereof. As a result of lengthy negotiations and agreement of terms and conditions our lawyers ensured conclusion of the contract. This contract enabled LLC Leader Group to become the first company in St. Petersburg to exercise the right to multi-storey housing construction in alluvial territory of Vasilievsky Island.
In 2008, LLC Chevakino represented by Rightmark Group purchased at the Property Fund auction 2.17 ha in Nevsky district for RUB 1.1 billion. Under the contract with the City Property Management Committee the developer was obliged to construct an apartment house in this land plot in 49 months. However, the developer abandoned the project, due to the fact that CHPP-2 ash disposal area was discovered in the territory, which failed to comply with sanitary regulations for housing construction. The City Property Management Committee brought a court action for recovery of a RUB 333 million debt and about RUB 1.2 million fine from LLC Chevakino.
In early 2010, the committee decided to terminate the contract due to non-performance of investment terms. The developer filed a counterclaim with the court, also seeking termination of the contract and return of transferred funds, as an ash disposal area was discovered in the territory that was not mentioned in bid documentation. Thus, through the legal assistance of Rightmark Group, a dispute between the developer and the city was settled amicably, which prevented adverse financial and reputation consequences for both parties.
A business centre under construction in the Constitution Square will have 40 floors and be 140 meters high. Proceedings regarding the skyscraper construction between the developer and the owner of the adjacent building (LLC Petroestate) lasted 2.5 years. LLC Petroestate attempted to judicially prohibit the skyscraper construction and recover the amount of over RUB 1 million from the developer for damages allegedly caused to the adjacent building by ongoing construction works. With legal assistance of Rightmark Group the developer secured that the Arbitration Courts of St. Petersburg and Moscow dismissed the plaintiff's claims. LLC Petroestate understanding lack of prospects of its actions abandoned the principal action.
In course of refurbishment of a building in the city centre the developer enticed an investor which was to obtain ownership of several high end apartments in this facility after the project completion. The developer missed the facility completion deadline, and thus had to pay to the investor a significant penalty under the relevant contract. The investor set the penalty off against the last payments under investment contracts. Dissatisfied with this, the developer registered a title to the whole facility in its favour. The investor resorted to Rightmark Group lawyers on time, and filed a court action for cancellation of the developer’s title and declaration of their title to the apartments. Courts of three instances satisfied the claims, thus protecting the violated right of the investor.
A construction company planned to conclude an investment contract for residential land development in accordance with the urban development plan under the appropriate procedure. Prior to bidding for the right to lease land, a legal entity laid claims to the territory attempting to judicially prove its title to waterworks located in the land plot. Under the law, proof of the title would automatically give the owner of the waterworks the right to purchase this land. The construction company resorted to Rightmark Group lawyers. As a result, absence of grounds for registration of a title to the hydraulic structures was established to satisfaction of court, since the title thereto had passed to the company by universal succession, prior to entry into force of the law on state registration of title to real property and transactions therewith, and the existing documentation did not allow to match the facility, the title to which was claimed by the plaintiff, to the facilities specified in the documents of title. Thus, an investment contract was concluded with regard to this land plot according to the established procedure was signed an investment agreement, and the housing construction is in progress thereon.
Rightmark Group lawyers suppressed activities of bad faith investors which attempted to seize land plots in Priozersky district of Leningrad Oblast owned by citizens on the basis of shared ownership. A legal due diligence was conducted, and lawyers together with investigators found out and established to satisfaction of court that investors used forged documents. The court declared the actions of the investors illegal.
A land plot owner filed a claim for termination of a general investment contract in order to seize an apartment building constructed by an investor company. The first instance court satisfied this claim. Rightmark Group lawyers convinced higher courts in absence of grounds for termination of the general investment contract and protected investments of our client and its co-investors.
6 April 2015 nsp.ruAmendments in the Land Code will definitely affect the real estate market. Contractors and consultants, land owners and municipal officers will have to restructure their operations. Vera Ryabova, Senior Associate of Rightmark group, reflects on opportunities and challenges produced by the revised Land Code.Nedvizhimost i Stroitelstvo Peterburga (St. Petersburg Real Estate & Construction) newspaper, No.14(853), page 16
21 April 2014 vedomosti.ruClauses on infrastructure development payments are being included in investment and land lease contracts throughout the country. However debates whether it is lawful to collect these payments are still continuing. Today the fact that developer money go into the budget does not guarantee that the funds are disbursed for city infrastructure development.Vedomosti newpaper, ‘Nedvizhimost. Steny Biznesa’ (Real Estate. Walls of Business) supplement
10 July 2013 nsp.ruAn apartment hotel is a premium and very popular concept of residential construction. Developers started to implement this new concept from the suburbs. Crystal apartment building in Repino and Landskrona House in Zelenogorsk were commissioned. Having countered the claims, Pioneer Group resumed the construction of Komarovsky Bereg housing complex. Alexander Rassudov, CEO of Rightmark Group legal firm reflects on the legal nuances of transactions with apartment hotels and the intricacies of law to be taken into account by developers and (especially!) buyers.Nedvizhimost i Stroitelstvo Peterburga (St. Petersburg Real Estate & Construction) newspaper
Head of Real Estate and Urban Development Practice
Senior Associate of Real Estate and Urban Development Practice