There is no prejudice for ownership of real estate in Russia, between foreign investors and Russian residents, and foreign investors have equal rights to acquire an ownership right to real estate (land plots or buildings). There are a few exceptions to this rule. However, these exceptions do not impact the investment market.
For example, foreign investors are not allowed to acquire an ownership right over some specifc land plots such as land in border areas, agricultural land or land plots within the boundaries of a port. The restriction concerning agricultural land plots is set out in the Agricultural Land Transactions Law and also extends to Russian legal entities where the equity participation of foreign nationals, foreign legal entities and/or stateless persons exceeds 50 %. However foreign investors are able to lease agricultural land plots.
Under Russian law, buildings and land plots are considered to be separate immovable property and therefore can be owned by different organisations or natural persons.
However the Russian Land Code provides that “buildings follow the fortunes of the land they are situated on”. In other words, a single owner who owns both the land plot and the building located on it cannot dispose of them
separately. The ownership right can be acquired from the registered owner on the basis of a sale and purchase agreement or
through the construction of a new building on a land plot, which is owned or leased by a developer.
In order to be valid, the sale and purchase agreement for real estate must be concluded in a simple written form and
must satisfy the following essential conditions:
- the seller must be the registered owner of the building;
- the seller must be the registered owner or registered tenant of the land plot beneath the building;
- it must contain a description of the property; and
- it must contain the purchase price. According to the Russian Land Code the following provisions in a sale and purchase agreement for a land plot are invalid:
- the right for the seller to buy back the land plot which has been sold;
- limitations of the further disposal or usage by the buyer of the land plot which has been sold; and
- limitations on the liability of the seller for third party claims. In order to register the buyer’s ownership of real estate in Russia, of the building and the land plot beneath it, the buyer and the seller must deliver to the Property Register the following:
- the common application for the registration of the transfer of the ownership title from the seller to the buyer;
- the sale and purchase agreement; and
- some formal documentation identifying the parties to the transaction, for example, incorporation certifcates, documents confrming the authorities of the physical persons who have signed the sale and purchase agreement on behalf of the parties, corporate approvals etc.
In order to acquire the ownership of a building through its construction, the developer must be either the owner or the registered tenant of the construction site. Where the developer is the registered tenant, the lease agreement must expressly permit the tenant to construct the building on the site and to register his ownership of real estate in Russia for the building. The acquisition of ownership though the construction of a new building requires receipt of the construction permit, commissioning permit and cadastral passport of the new building, as these documents must be provided to the Property Register (see also section 4 “Zoning” below)