Oda Russian Commercial Law 2007-1

of Immovables and Transactions involving Them was enacted, that a uniform system of registration was introduced throughout the country.49 According to this Law, the Ministry of Justice was to administer the Register, but now, the Federal Registration Service administers the system. For certain kinds of immovables, e.g. ships and aircrafts, a special register is administered by other agencies. As late as 2001, the Ministry of Justice reported that the development of local land registries has been completed; there are 1,400 local registries and their outlets with 2,000 registry of cials.50

The Register is not always accurate:

The administration of a district issued a certi cate of consolidation of land of 6.12 hectares for an inde nite term of use to a joint-stock company, instead of the original certi cate for 5 hectares.As a result, 1.12 hectares of land were taken away from the user of the adjacent land. No measures of acquisition or redistribution as provided in the 1990 Land Code were taken. In fact, there had been a dispute over these 1.12 hectares. The commercial court found the decision of the district administration to be null and void.51

In cases where the entry in the register and the factual state of affairs contradict, in some jurisdictions such as Germany, the entry in the register prevails. However, this is not the case in Russia. This is understandable in a country where the register has just begun to develop and does not necessarily re ect the true state of rights. On the other hand, the registry is responsible for the accuracy and authenticity of the information contained in the register and is liable for errors by fault.

Immovables subject to registration include pieces of land, acreage of subsoil, forest, buildings, houses, ats, installations, engineering and transport infrastructures etc.

Rights on immovables which are subject to registration are:

i)right of ownership;

i)right of economic management;

iii)right of operational administration;

iv)life-long, inheritable right of possession;

v)inde nite right of use;

vi)hypothec;

vii)servitude.

49SZ RF, 1997 No.30, item 3594.

50“Novost’Ministerstva Iustitsii RF”, www.scli.ru/news

51V.Kostiuk, “Pravovye problemy regulirovaniia zemel’nykh otnoshenii i sudebnaia praktika v usloviiakh formirovaniia zemel’nogo zakonodatel’stva” KhiP, 2000, No.3, p.31.

The objects of registration are “immovables and relevant transactions (juristic acts)”. Transactions involving immovables which are subject to registration include:

i)contract of hypothec;

ii)contract of sale or exchange of residential premises

iii)contract of sale or lease of an enterprise as a proprietary complex;

iv)gift of immovable or part of it;

v)contract of lease of a building or installation exceeding one year (if the party is a juridical person, regardless of the length of the term, it must be registered);

vi)contract of lease of other kinds of immovable, regardless of the length of the term.52

The above real rights and the transactions involving them are registered in the Uni ed State Register of Immovables and Transactions involving them (ediny gosudarstvennyi reestr prav na nedvizhimoe imushchestvo i sdelok s nim). The Register is divided into sections allocated to speci c properties. Each section is composed of three parts:

Part One – description of the object property

Part Two – entry of the title and other real rights, transactions on the disposal of the property

Part Three – entry of encumbrances and other real rights

Each section has a “cadastre number” of the land.

According to a commentary, the registration of real rights and the registration of transactions involving real rights do not overlap.53 For example, a contract for sale of land does not require registration, but the title which results from the sale requires registration. The legislature may have intended to enable the lease of immovables (not a real right) to be able to be registered by requiring registration of juristic acts. However, it is not clear why registration of the contract and the resulting right both have to be registered in transactions involving residences andats, while registration of the right alone is suf cient in land transactions. The commentary explains that when the situation is complex and state supervision is needed not only for the transfer of rights, but also for the juristic acts themselves, registration is required for both.54

52S.A.Stepanov ed., Kommentarii k grazhdanskomu kodekusu Rossiiskoi Federatsii, Moscow 2006, p.214.

53P.V.Krashninnikova ed., Postateinyi kommentarii k federal’nomu zakonu o gosudarstvennoi registratsii prav na nedvizhennoe imushchestvo i sdelok s nim, Moscow 2000, pp.42-43.

54Ibid.

As a general rule, the acquisition of the right of ownership by means of contract takes effect by transfer of the object, unless otherwise provided by law or contract. However, if state registration is required for the disposal of property, the title is acquired only by registration, unless the law provides otherwise (Art.223, para.2). A provision in the contract law part provides that the performance (ispolnenie) of a contract of sale of immovables by the parties before state registration of the transfer of title does not serve as a basis for changes in relation to a third party (Art.551, para.2). Thus, the buyer of an immovable has no power to act as the owner of this property before registration. A contract transferring the property to another person by the buyer before registration of his title is considered to be void:

A joint stock company sold a building to an individual entrepreneur. The buyer did not pay the price to the seller nor did he register the building in his name. The entrepreneur then sold the building to a third party, and disappeared with the money which he received from the third party. The joint stock company brought an action asking for the contract between the individual entrepreneur and the third party to be declared void. The court found that since the individual entrepreneur did not acquire the ownership right due to the failure to register (Art.223, para.2), he had no power to dispose of the property, and therefore, the sale between the him and the third party was void. The court also pointed out that the third party had failed to check the title of the entrepreneur to the building, particularly in the Register, and therefore, acted “on his pain and risk”.55

Thus, when purchasing immovables, the buyer is expected to check the register and ensure that the seller really has got the title, and if necessary, the registered transaction.56

On the other hand, it is not clear from the Civil Code what would happen if the seller sold the immovable to another person after the sale to the rst buyer, but before registration by the rst buyer. In such cases, the second buyer would have relied on the register which showed that the seller was still the title holder. A commentary suggests that the seller loses the right to dispose of the property once the contract has been performed and thus, the rst buyer retains the title.57 On the other hand, Article 551, para.2 of the Code can be interpreted as stating that the seller retains the title until registration and is entitled to dispose of the property. However, this interpretation is criticised as allowing abuse of rights by

55Item 2, Information Letter of the Supreme Commercial Court No.21 of November 13, 1997.

56S.F.Savkin, “Sudebno-arbitrazhnaia praktika po sporom, sviazannym s zashchitoi prava sobstvennosti i drugikh beshchnykh prav”, VVAS RF, 1998 No.10, pp.67-68.

57Sadikov ed., supra, p.139.

one of the parties to the transaction.58 According to the Decision of the Plenum of the Supreme Commercial Court on the application of the Civil Code, until registration, neither the seller nor the buyer is entitled to dispose of the property.59 The Commercial Court has always maintained that until registration of the transfer, the title remains with the original owner.

State enterprise “Pishchepromsyr’e” brought an action to the Moscow City CommercialCourtvisàvistheDepartmentofStateandMunicipalPropertyoftheCityofMoscowfortherecognitionofthecerti cateofownershipofabuildinglocatedinMoscow as valid.As third parties, an open joint stock company “Chaiservis” and “Moskovskaia chaerazvesochnaia fabrika (hereinafter, “the Fabrika”)” took part. This was before the present Law on the Registration of Immovables and Transactions with them came into force.

In the course of enforcement of a judgment, the court bailiff seized the disputed premise which, according to the certi cate of April 15, 1998, belonged to the Fabrika. Despite the seizure, on December 17, 1998, the Moscow City Department issued another certi cate which acknowledged the title of Chaiservis to the property. This case was, in substance, a claim by the plaintiff to invalidate the registration of the properuy by Chaiservis. The rst instance court ruled that at the time of the seizure, the property belonged not to the Fabrika, but to Chaiservis, which was set up by the resolution of the shareholders of the Fabrika. The lower court found that the Fabrika had lost its title by contributing the property to the capital of Chaiservis on July 8, 1998.

The Supreme Commercial Court quashed this decision on the ground that this was againstArticle 223 of the Civil Code which provides that the right of ownership emerges by registration. Since, at the time of the seizure, the title of Chaiservis was not registered, the owner was still the Fabrika.60

After the performance of the contract, if a party fails to cooperate in the registration, the other party may initiate an action against this party. The court, in such cases, examines the existence of a valid contract between the parties and the fact of the transfer of the property, and may render a judgment on state registration of the property. The party which failed, without justi able reason, to cooperate may be obliged to pay damages for the delay in registration (Art.165, para.3).

58Savkin, supra, pp.67-68.

59Item 14, Decision of the Plenum of the Supreme Commercial Court of February 25, 1998, No.8.

60Decision of the Presidium of the Supreme Commercial Court, June 19, 2001, Case 193/01.

It is not clear how the court is to effect registration. The information letter of the Supreme Commercial Court suggests that the judgment of the court serves as the basis for the obligation of the registering agency to register the transaction.61 In a case where a bank brought an action against a company for its failure to register the contract of pledge (pledge of a complex of movable and immovable property), the lower court did not involve the registration chamber as a party, but merely invited it as a third party joining in the side of the defendant. This was found to be wrong by the Supreme Commercial Court, which suggests that in such cases, the agency of registration should be brought in as a defendant as well.62

The Uni ed State Register of Immovables and Transactions involving them is open to the public. The agency which administers the register is under an obligation to provide any person with information on the fact of registration and the rights which have been registered (Art.131, para.4).

A system which is closely related to the registration of immovable is the State Land Cadastre (kadastra). The Land Code provides that the State Land Cadastre is a systematised compilation of information concerning land, including the location, value, size of the pieces of land and the objects rmly attached to them, and the entities which have rights over them (Art.70, para.1). The system is governed by the Law on the State Land Cadastre of 2000.63 This should not be confused with the Uni ed State Register of Immovables and Transactions Involving Them. Through this system, each piece of land is “individualised” and valued. Each piece of land is assigned a registration number.

The information contained in the register includes:

i)cadastre number (kadastrovye nomera);

ii)address;

iii)size;

iv)category of land and use;

v)description of the border;

vi)registered real rights and restraints (encumbrance);

vii)economic characteristics, including the amount of payment for the land;

viii)quality of the land;

viv) existence of objects rmly attached to the land.

61Item 1, Information letter of the Presidium of the Supreme Commercial Court of November 13, 1997, No.21.

62Decision of the Presidium of the Supreme Commercial Court, May 30, 2000, Case 5210/99.

63Law No.28-FZ of January 2, 2000.