Developers and shareholders: Strategies to help defrauded shareholders until 2024

Kremlin today

During the meeting of the State Duma held on December 17, in the final reading was adopted a law, which preserves the existing principles of land leasing to developers to complete the construction of problematic residential facilities. State and municipal territories are provided in a no-auction format. This mechanism has been extended until January 1, 2024.

During his speech on this issue, the Chairman of the State Duma Vyacheslav Volodin recalled that back in 2018 to help defrauded citizens was formed “a simplified procedure for the provision of compensatory land plots for developers who have undertaken to complete the construction of problematic facilities”.

According to initial assumptions, by 2022, solutions will be found to the problems of all defrauded shareholders. However, to date, according to the Unified Register of Problem Areas, 2,600 houses have this status. About 2,000 of them were built by bankrupt developers.

Source: duma.gov.ru

The Chairman of the State Duma noted that among the thousands of victims there were many families with children. In order to invest in the project and get an apartment, they took out mortgages and micro-loans, rented housing, but were deceived and did not get a legal residence. Vyacheslav Volodin stressed that, due to limited co-financing budgets for shareholder aid programs, the only true solution is to transfer land to bona fide developers and prolong this practice until 2024.

“This is an additional way of restoring the rights of defrauded citizens. It allows the regions to attract private investors for the completion of problematic objects without requiring budgetary financing”,  –  noted the Chairman of the State Duma.

Alexander Yakubowsky, a member of the State Duma’s committee for Construction and Housing, commented on the implementation of this law and assistance to defrauded shareholders.

— Vyacheslav Volodin has noted the acuteness of the problem of defrauded shareholders. What do you think will be the final word in the resolution of this issue?

— In fact, the final decision will be when all the houses in the Register of Problems are either completed or compensated for those whose rights have been violated by participating in the construction of apartment buildings. The deadline for that is clear, the end of 2023. In the past, the seventh convocation, pursuant to the President’s instructions, the State Duma has established legal mechanisms to restore the rights of defrauded shareholders, among other things, the creation of the Federal Fund for the Protection of the Rights of Citizens Participating in Equity Construction – a unified register of problematic objects – made it possible to make the procedure for declaring a house problematic and the whole procedure for its completion completely transparent. We also had another important task – to eliminate the possibility of new defrauded shareholders. And thanks to the reform of equity construction, the introduction of project financing and escrow accounts, the consolidation of developers’ payments into the Fund, we have achieved this. Now the bankruptcy of the developer does not lead to cheated shareholders, and citizens’ means are not only fully protected against misuse, but also insured. And it should be noted that before that, up to 50,000 citizens fell into the category of defrauded shareholders every year.

— What measures will be taken to complete the construction of the existing 2,600 houses within the specified time frame (until January 1, 2024)?

—Certainly, our task as legislators is to monitor the enforcement of the law and, if necessary, to adjust the legislation, eliminating possible difficulties in restoring the rights of defrauded shareholders. We do this work in a systematic way. The Public Prosecutor’s Office is often involved, and it should be noted that its active role is very important, including in the recognition of the Federal Fund and regional authorities as victims in criminal investigations, which will enable them to claim compensation from negligent developers and to direct that money towards completion. The absence of project documents for many houses, which were often deliberately destroyed by developers, and without which it is impossible to decide on the fate of an apartment building, seriously slows the process of restitution.

— It is also necessary to envisage the possibility of putting the completed houses into operation on the basis of the requirements of urban development legislation that were in force at the time of obtaining the building permit, such proposals are being prepared. And, of course, this is the use of parliamentary control over the compliance of regional authorities with their obligations to restore the rights of defrauded shareholders.

It is also necessary to provide an opportunity to enter the completed homes into operation on the basis of the requirements of urban development legislation in force at the time of obtaining a building permit, such proposals we are now preparing. And, of course, it is the use of parliamentary control over the observance by regional authorities of their obligations to restore the rights of defrauded shareholders.