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«    May 2017    »

Problem of long-delayed construction solved in the Moscow region: will it be detracted out of court?

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Problem of long-delayed construction solved in the Moscow region: will it be detracted out of court?

The Moscow region authorities have decided to pursue a policy of nationalization. And are going to start with long-delayed construction.

The Moscow region Government announced an unexpected initiative having suggested detracting problematic long-delayed construction on an extrajudicial basis. Moscow region Governor Andrei Vorobiev has sent corresponding federal legislation amendments to the RF Minister of Construction, Housing and Utilities, Mikhail Menn.


Have the floor, comrade Mauser! 

Elderly people, like me, may remember a scene seen in plays and films: an official in a leather coat and a mauser in a wooden holster comes to a construction site, calls directors and announces the decision on confiscation of what has been built. Workers and engineers quit the site accompanied by cops, and the gates are locked. Later new owners appear on the construction site.


Law for illegality?

You would say, it is exaggeration, such things are impossible at present. May be. And the Moscow region authorities are not going to act unlawfully. More than that, they are going to supply their actions with a legal basis.     

In particular, as the press office of Deputy Chair of the Moscow regional government, German Elianushkin, reports, the 214-FL and the RF Land Code are supposed to be amended with the compulsory introduction of extrajudicial enforcement of pledge in the construction co-funding contract (CCC), and the procedure of such pledge.

It should be conducted in favour of co-funders by the regional authorised body under any CCC participant’s application. The pledged item enters the common share ownership of co-funders or is for sale by contract.

The received money is paid to CCC participants.

Problem of long-delayed construction solved in the Moscow region: will it be detracted out of court?

On the fence: Happiness is close 

Means against noise

It is not difficult to understand the Moscow region officials: the problem of hoodwinked investors in the region is very acute. In 18 municipalities there are 34 long-delayed constructions and 6256 hoodwinked investors.  The developers of the 18 problem objects have gone bankrupt, heads of 6 companies are taken to court on criminal charges, two of them are wanted.   

It is clear that application to court for hammering these companies takes time, and angry people hold mass-meetings at administrative buildings/ Of course, it is easier to introduce a mechanism allowing to repossess such objects, to sell them at auctions or to sign away for other developers to complete the construction.


Cause for harakiri

But is it better to do as it is easier? Actually, if the Moscow region authorities’ proposals are adopted, construction companies will be deprived of court protection. But they need it as much as co-investors do.   For example, a developer borrows a credit at a big rate, and then he is deprived of hos property thus losing the opportunity to pay back to the bank via restructuring the business or his debt.

Similar practice opens way for corruption, as it depends on a person to declare an object to be a long-delayed construction. Besides, cheats may use the situation: collecting money, starting an object construction and the stopping it for some good reason. And the wait until the objects is determined as long-delayed. 

Developers may become less responsible as they need not care about obligations discharge.


Not to allow

Any extralegal structure, even if it is legalized triggers free-for-all attitude to the process. Victor Pryadein, Head of NOSTROY administration, thinks that just the contrary things should be done.

According to him, when the 214-FL was significantly amended, the emphasis was laid on the government control tightening, all necessary procedures were determined in the law. There is a coverage mechanism – an indemnification fund, construction companies’ project declarations are checked more thoroughly  All these measures are directed not at confiscation of long-delayed constructions but at their avoidance.

Another important thing is to explain to potential buyers that they should not take part in various shady schemes.


Falling into the same trap

And what is business’s attitude towards the initiative of the Moscow region authorities? Different representatives have different viewpoints. But even if business partially supports the initiative, they voice concerns on probable consequences of such measures.

From our standpoint, such experiments are inadmissible and risky. There is a real danger that the initiatives like that will overturn the so long worked for legal structure in housing construction, where much new and useful has been done lately.

Officials may make their life easier but the final result may turn just the opposite to the one the authorities hope for: There won’t be any long delayed constructions, as there won’t be any construction at all. For who would like to take such risks?

Vladimir GURVICH


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