"Real Estate and Investments. Legal Regulation", the journal

Issue 2-3 (3-4) 2000

Land Book of Real Estate in Moscow

Goryunov V.A., director general of the Close JSC "Law and Real Estate", corresponding member of the International academy of investments and construction economy

One of instant demands of the process of overcoming of a disastrous state of modern Russian economy is bringing order to the public relations in a sphere of the real property by precise regulation of the rights, duties and liabilities of the subjects of these relations.

It is impossible to solve this problem without creation of an efficiently operating legal field including already existing, but not operating, and also recently created laws. Within the framework of this field the investor, creditor and government structures should work together. The legal field creates the mechanism providing interests, rights and duties of all parties participating in this process, and provides legal protection of the creditor and investor.

The mechanism should regulate all complex of problems during investment, at the same time the lack of it results in the loss of potential investors and creditors. The foreign and Russian investors are ready to invest in economy of the city the capitals in case the created legal field is really operating, clear (with access to the information, possibility of forecasting and easily controlled on all levels) and stable.

For a solution of this problem, and also for elimination of the present legal gaps the adoption of a series of laws is necessary, including the basic one - a Law "On the land Records on the real estate in the city of Moscow ".

The draft of the suggested law provides a supplement of the present mechanism of registration of rights on the real estate in the city with the help of introduction of the Land Records, which is the document on the real estate similar to the passport of the individual. Now registration is realized by the Moscow urban committee on state registration of the rights on the real property and transactions with it and is ended by the giving of a certificate. The given system requires some perfection in view of its several oversights. So, it does not provide mechanisms of rent, deposit, registration of bankruptcy, court decisions and return of the deposit. All these problems can be solved by introduction of the Land Records to the mechanism of registration of the document of a system of confirmation of the real property rights, in which the information of legal and economic character concerning the rights of the subjects on the real property.

At the present moment the draft law has passed the phase of coordination with the interested public authorities. Many from them have brought in the sentences and notes, which were taken into account by the developers and have found reflecting in the draft.

The institution of the Land Records existed earlier as abroad (in Germany), and in Russia. In Germany the Land Records were consolidated in the famous land law (Allgemeines Landrecht 1874) 1, where the common principle was declared, by virtue of which the mortgage right is considered valid only at importation of it in the Land Records. Under the given law the real right on the real estate is closely related to recording in the Land Records. This formal moment added particular force to the deposit. This provision became the beginning of a new time of the hypothecation local law in a history of Western Europe, as, at first, added the public character to the hypothecation and land relations, secondly, added stability and determinacy, thirdly, eliminated diversity of legislative standards in this area of legal life. The given problem was definitively arranged in 1911 by obligatory introduction of the territorial land records in all German lands.

The institution of the Land Records existed in Russia in imperial time and in the first years of the Soviet power. In Moscow committee on land and Moscow committee on architecture there are books of 1937, where the information is present about the legal and physical owners of buildings. In 1953 the Land Records were substituted by the engineering passports of the bureaus of technical inventory and abstracts from them. But neither these engineering passports BTI, nor the abstracts from them give the complete information on legal state of the real estate and its owner.

The introduction of the Land Records is now stipulated first of all by the necessity of engaging of the new investments and active usage of the real property converted now in dead capital, so, necessity of creation of a legal field similar to the existing all over the world. A core of it is the Land Records.

The Land Records will create a legal mechanism contributing to efficient and complete operation of the several legislative documents, including the Civil Code of Russian Federation of article 131 paragraph , Federal act dated 21.07.97 122- "On state registration of rights on the real property and transactions with it", Federal act dated 08.01.98 6- "On an incompetence (bankruptcy) ", Federal act dated 16.07.98. 102- "On the hypothecation (deposit of the real estate)", Federal act dated 29.07.98 135- "On valuation activity in Russian Federation", and directed on normalization of operation of the economy. The Land Records will enable, without offending the present legal system, to provide interaction of the above stated laws, and also laws, which will be passed to solve a problem of engaging of the investments, and to create the mechanism similar to the world one, where the rights of each subject will be lawfully and documentary defended. It is necessary for creation of a uniform legal mechanism regulating a turnover of the real estate and economy in a whole.

According to draft law "On the Land Records on the real estate in the city of Moscow" the land Records will be issued by the Moscow town BTI and stored by the owner. The state registration in the Land Records completely corresponds to the federal Act dated 21.07.97 122- "On state registration of the rights on the real property and transactions with it". The duplicate of the Land Records will be stored in the Moscow urban committee on registration of rights on the real property and transactions with it. The book will consist of four sections: description of plant of the real estate, cost indexes, records about the owner of plant of the real estate and owner of other real rights on it, notes about limitations. All modifications concerning definite plant of the real estate will be registered in the Land Records. Thus, the Land Records will contain all information, which can be necessary for the owner for accomplishment of the estates in land. The co-signatory of the owner will just have to consult the Land Records of the owner to make sure, that that he has all rights of order by the appropriate real estate. In the Land Records the owner of plant of the real estate, its valuation, all entities possessing any rights concerning the given plant, limitations made on the plant by court, law or agreement will be indicated. It will facilitate operations with the real estate and will allow using it efficiently in municipal economy, including through the mechanism of the hypothecation.

In modern conditions of inflation the deposit acquires the increasing value among other ways of ensuring of execution of the civil-law liabilities. At first, the mortgage contract of asset provides availability and safety of this asset for the moment, when the debtor should pay off with the creditor, and the cost of a pledged asset will increase proportionally to the rate of inflation. Secondly, the deposit of the debtor's asset provides to the creditor - pledgee a possibility to satisfy the demands at the expense of the subject of deposit, that gives him an advantage before other creditors. Thirdly, a real danger to lose an asset is a good incentive for the debtor to serve his liabilities properly.

The reliability of mortgage crediting consists also in the fact that the state defends the pledgee even at bankruptcy of the pledger.

The crediting under the deposit of the real property can solve a problem of shortage of money resources for the state and municipal formations, because they are the largest landowners in territory of Russian Federation. Now all this real estate is a dead capital and isl not used.

The first attempts of usage of the hypothecation were not successful as it was expected. The attempts of creation of mortgage banks also failed. The majority of them have ceased the existence, having even not reached the initial minimum standards on relation of the authorized and attracted capitals. The reason for the failures consists in the oversights of a legal medium, in separation and lack of coordination of the legislative documents and lack of the mechanism of the deposit of the real estate being a link between the local law and practice of its application in modern economic conditions.

Last years the development of elements of mortgage crediting began to be realized not through the specialized mortgage banks, but within the framework of activity of the largest universal banks. But here also there were no positive results, as the interest rates on credits, given out by universal banks, under the deposit of the real estate exceeded a level of rates on the usual credits. It can not be called a positive factor influencing the development of housing construction and other significant sectors of the Russian economy.

Simultaneously with registration of the deposit the Moscow urban committee on state registration of the rights on the real property and transactions with it in the Land Records will be made a record about issuing of the mortgage with the indicating of its number, holder and date of issuing. Thus, the Law "On the Land Records on the real estate in the city of Moscow" will promote the appearance and spread of the mortgage as the liquid security, foreseen by Federal act dated 16.07.98 102- "On the hypothecation (deposit of the real estate)". The appearance of the mortgage will enable to release the mortgage liabilities and will have a positive effect on the turnover of money resources in country. Money will be not only means of accruing and paying, but also a circulating medium, that is especially important in conditions of financial crisis in Russia.

The introduction of the Land Records in Moscow will considerably improve an investment climate, as it will create a mechanism of regulating of the market of the real estate responding international demands, due to which the investor's (creditor's) rights will be lawfully and documentary defended.

The introduction of the Land Records means for the city, besides engaging of the investors and creditors, an appreciable simplification of taxation. All information from the Land Records will be directed in a common information center the Urban cadastre, and therefrom - in the tax service of city. The information on valuation of the real estate and transactions will become public. It will practically reduce a possibility to hide and to underestimate the taxes on real estate and transactions with it. Besides the introduction of the Land Records will enable to use plants of the real estate being in the state and municipal property efficiently.

Summarizing, it is necessary to tell that at the given stage of development of economy the introduction of the Land Records is necessary in Moscow, as:

1) Without it the present legislative acts can not act to the full;

2) The Land Records is a core of the mechanism of engaging of the Russian and foreign investors and creditors, as it can give them an absolute warranty of return of invested financial assets. The Land Records reduces the risk of the investors and creditors, makes operations with the real estate less risky. The Land Records will promote development of mortgage crediting and issuing of the mortgages - nominal financial credit instruments;

3) An effective utilization of the real estate, which now is outside the turnover and is converted in dead capital, in a property turnover it is possible only in case, when there is a mechanism of precise definition of the rights on the real property and operations with it of banks and other credit organizations, which will be created by the Land Records;

4) The Land Records will promote ordering of a turnover of the real estate, efficient and complete taxation.