Anna Zanina on whether non-residential real estate can be recognized as the only housing

The Supreme Court of the Russian Federation (SC) is increasingly turning to the problems of personal bankruptcy, and this is not surprising, given the popularity of the mechanism. In 2023, over 300 thousand people were declared bankrupt; in the first quarter, growth continued; by the end of the year, 350–400 thousand new insolvent citizens can be expected.

Despite the increased attention to this category of cases, the issue of protection from foreclosure of the debtor’s only home has not been fully resolved: what premises should be considered such, whether it is too luxurious, whether it was acquired through deception, and so on. The housing issue in Russia is so painful that no one has yet decided to put an end to it and define clear criteria for protected housing. In 2021, the Constitutional Court tried to do this, outlining the characteristics of a luxury home that does not have immunity from creditors, but this decision only gave rise to new disputes.

The other day, another case regarding the housing of a bankrupt was transferred to the Economic College of the Supreme Court. This time we are talking about a non-residential building in which the debtor actually lives. He insisted that there was no other place to live, and asked that the land plot of 900 square meters be excluded from the bankruptcy estate. m and a garden house. But the arbitration courts refused, since the house is not residential, the debtor initially did not mention its presence and is generally registered in another city.

In a complaint to the Supreme Court, the bankrupt explained that although the house was not registered, according to the expert’s conclusion, it “meets the requirements for residential premises, their reliability and safety.” No one disputed the fact that the debtor and his wife lived in the disputed house and did not refer to the luxury of the property; references to abuse of law also need to be checked, the Supreme Court noted, deciding to consider the dispute.

There is no obvious answer as to whether non-residential real estate can be recognized as the only housing. On the one hand, the formal approach of the courts is inappropriate here: you cannot evict a person onto the street just because the house has not yet received residential status. On the other hand, you cannot leave any object to the debtor only based on the fact of residence, otherwise you can grant immunity to a garage, a barn, or an office.

Lawyers have different opinions, but the majority considers it possible to leave a garden house or apartment to bankrupts. The Ministry of Economy expressed a similar opinion in 2019. In a response to the Ministry of Justice’s bill on the criteria for luxury housing, it called it a violation of the “fundamental right to housing” that immunity is given only to formal residential premises, although many people live in apartments or unfinished houses. But the amendments were not adopted, and the issue hung in the air.

Lawyers believe that the position of the Supreme Court can attract the state’s attention to the problem of single housing, “move the situation from a dead point and motivate the legislator to resolve this issue.”