Owning an apartment in Moscow

1. Owning an apartment in Moscow Alians OM l a w f i r m

2. “Before to desire something you should enquire whether the actual proprietor of the desired is happy.” F. de La Rochefoucauld

3. What do you buy with an apartment? • a share in the common areas, such as: entrance halls, staircases, corridors, service floors or areas, attics • equipment serving more than one apartment, such as: lifts and lift shafts, engineering systems (water and heating pipes, electrical wires, etc.) • capital elements of the building, such as: roof, foundations, external walls • the land plot under the building, including: adjacent “green” plots, roads and other constructions serving exclusively the building hereinafter referred to as “Common Property” Art. 36 of the Russian Housing Code

4. Obligations of apartment owners • bear the burden of maintenance of the owned apartment AND • bear the burden of maintenance of the Common property hereinafter referred to as “Owners obligations”Art. 30 of the Russian Housing Code

5. How to perform Owners obligations? • through direct management of the building by the owners themselves • through a partnership of apartment owners (“TSZh”) • through a management company Hereinafter referred to as “Means of Management” Art. 161 of the Russian Housing Code

6. Who decides on Means of Management? • The decision on the Means of Management shall be carried out by a General assembly of the owners of all premises in the building (both residential and non-residential) • The decision shall be made by majority of votes • Each participant shall have the number of votes proportional to the area of his or her property in the total area of the building excluding common areas • The decision carried out by the General assembly is mandatory for all owners of premises in the building • The decision may be changed at any time • In case owners do not chose the Means of Management before 01 January 2007, the city hall will make the decision instead Art. 161 of the Russian Housing Code

7. Management through TSZh • There can be only one TSZh per building • TSZh must have as members owners of the premises representing more than 50% of the votes • TSZh shall sign contracts for management of the building with non-member owners of premises • Terms and conditions of the contracts for management of the building to be signed with TSZh non-members shall be the same as for members (list of the services to be provided and their cost shall be fixed in the contract ) • TSZh shall manage the building (ensure all kind of current repairs, pay for utilities provided to the Common property) • TSZh is liable for any debt arising out of the building management Chapter 13 of the Russian Housing Code

8. TSZh bears the burden of maintenance of the Common property only TSZh does not become the owner of the Common property, it is only managing it TSZh can not dispose of the Common property Individual owners bear the burden of maintenance of their own property by themselves and of the Common property through payments to TSZh Owners lose their ownership rights only once they sell their main property A 2/3 majority of owners is required to dispose of the Common property Do not confuse

9. Management through a management company • The management company must sign a contract for building management with each of the owners of premises in the building (both residential and non-residential) • Terms and conditions of the contracts for management of the building to be signed shall be the same for everybody • The list of the services to be provided and their cost shall be fixed in the contract for management services • The minimum term of the contract is 1 year, the maximum term is 5 years Art. 162 of the Russian Housing Code

10. If the building is too old • Upon the decision of 2/3 of the owners of the premises in the building it may be reconstructed • If reconstruction is impossible, it may be recognized, after an examination by a special commission, as “subject for demolition”

11. If the building is “subject for demolition” • The procedures to recognize the building as “subject for demolition” are set in the Russian Government decree No.47 dated 28/01/2006 • If the building is recognized as “subject for demolition” the owners shall, in accordance with Art. 32 (p.10) of the Russian Housing Code, demolish the building within a reasonable time frame • If the owners fail to demolish such a building, the City Hall shall have the right to seize it for municipal needs • If the owners demolish such a building, they will keep the ownership right over the land plot once occupied by the building

12. How to defend the building against demolition The only thing the City Hall or a potential investor are interested in is the land plot Get ownership of the land plot and the risks of demolition will significantly decrease

13. Ownership of the land plot • The land plot may be recognized as owned by the building’s proprietors only if it has a cadastral plan • New buildings (completed after 1 March 2005) may be commissioned only if the land plot they occupy has a cadastral plan • To acquire a cadastral plan for the existing building the General assembly of owners of premises in the building shall decide to define such land plot and entrust one of the owners to take the necessary measures • The land plot is considered as transferred into property of the owners of premises in the building for free from the moment its cadastral plan is drawn

14. “There is nothing better than practice confirmed by theory, and theory confirmed through practice” Vladimir I. Lenin “Imperialism and Imperio-criticism”

15. Regarding Management of the Building • Whatever form of Building management you choose, some of your neighbors won’t feel comfortable if as a result of your choice there will be an increase in Communal expenses. Therefore the choice will be between either enforcing the majority’s decision (through courts) or subsidizing the Communal expenses • When counting voices do not forget that if some of the premises do not have private owners, it does not mean that no-one owns such premises at all. In most of the cases such premises are owned by the City Hall • Inform the local Uprava of any decision or change of decision regarding the means of management of the building

16. Regarding TSZh • If your building is located on the territory of the Central Administrative District and the share of public housing in your building is large, it is sometimes wiser to create a TSZh with the help of the special State-owned enterprise (GUP) “Housing Reform Assistance Center” • Always remember that if the TSZh has as members owners representing less than 50% of the votes, it shall be liquidated • Always remember that a TSZh is a legal entity and therefore (even though it is a non commercial entity) has to file taxes. The person responsible for due execution of this obligation is the TSZh’s president (chairman)

17. Regarding land plots • Remember that the City Hall is very poor and has no money to finance works related to the definition of the land plots and drawing up of cadastral plans. Prepare yourself to pay for the work from your own pocket or wait in queue for the required funds (unless you find the right connections) • It is always more difficult to claim the rights over a land plot when the building is already in sight of a prospective investor

18. The END No lawyers have suffered during the preparation or presentation of this document. We hope the same for the owners and real-estate specialists attending the meeting. Produced by Alians OM www.aliansom.ru