Shareholders can apply for an apartment from a bankrupt developer

Shareholders were allowed to apply for an apartment, even if they declare their claims to the bankrupt developer after the fund agreed to complete the house. This decision was made by the Supreme Court of the Russian Federation (SC). The lower courts previously ruled that a late citizen in this case can only receive monetary compensation, but not housing. The Supreme Court clarified that if there is a registered agreement on equity participation in construction (DDU), the equity holder should be automatically included in the bankruptcy register, which did not happen due to the fault of the manager and the oversight of the fund, but the consequences of their mistakes cannot be shifted to citizens. Lawyers support the position of the Supreme Court, noting that such situations “are of a massive nature.”

The Supreme Court clarified the rights of equity holders to receive apartments in case of bankruptcy of developers. In March 2021, Construction Company ZhBK-3 LLC was declared bankrupt, and in December Vladimir Degtyarev asked that his demand for the transfer of a two-room apartment in an unfinished house in the Saratov region be included in the register of equity holders. He bought the rights of claim for 1.78 million rubles. from the previous investor under the DDU, the assignment of the right was registered in April 2020. The arbitration manager (AC) in January 2021 refused the citizen, citing the missed deadline for inclusion in the register (two months from the date the company was declared bankrupt), and the shareholder went to court.

In July 2022, the Arbitration Court of the Saratov Region recognized the claim of Vladimir Degtyarev as justified, stating “the absence of a counter provision from the developer.” The appeal supported the position of the manager, which was joined by the federal fund for the development of territories (FDT) and the fund for the protection of equity holders of the Saratov region.

According to the appeal, if the claim is included in the register of the developer after the fund has made a decision to finance the completion of construction, then it is satisfied “by paying monetary compensation, and not in kind.”

The fact is that in December 2021 the Saratov Foundation agreed to complete the construction of the house and in March 2022 the court transferred to it the rights to the developer’s land along with obligations to equity holders to transfer apartments. Thus, the court considered, late citizens can only claim money, but not housing. Cassation agreed with this decision.

Vladimir Degtyarev and a number of equity holders turned to the Supreme Court, believing that if there is a DDU, the manager should independently, without the appeal of citizens, include their requirements for the transfer of apartments to the register according to data from the USRN. They insisted that the right of the shareholder to receive housing “cannot be made dependent on whether the manager has fulfilled his duties or not.” The case was referred to the Economic Collegium of the Armed Forces, which supported the equity holders, canceling the decisions of the appeal and cassation.

The Supreme Court referred to the decision of the Constitutional Court of the Russian Federation No. 34-P dated July 21, 2022, which explained that the procedure for transferring the property of a bankrupt developer is a “rehabilitation plan aimed at completing the construction of a house and transferring the premises in this house to real estate investors”. At the same time, in Art. 201.4 of the Bankruptcy Law, there is a simplified procedure in which the claims of equity holders with DDU are included by the manager in the register independently according to information from the USRN, the collegium indicated. And later, when transferring the unfinished building to the fund, you can request documents from the shareholder on payment for housing and, if they are not presented, exclude his requirement from the register.

The funds here act as a form of “using public financial resources” to assist equity holders “in resolving the crisis situation,” the Supreme Court emphasized.

In this regard, they had to “exercise due diligence and establish that the registry was formed by the IA in violation — it unreasonably lacks a number of requirements for registered DDUs.” The shareholder should not suffer from the “negative consequences of the inaction of the manager” and “the consequences of the indiscretion of the funds,” the board admitted. By the time the fund agreed to complete the construction of the facility, Vladimir Degtyarev’s demand should already have been included in the register, and the fund was obliged to transfer the apartment to him after construction was completed, the Supreme Court concluded, upholding the decision of the first instance.

Usually, to be included in the register, you need to submit an application within two months, but in this case, “this is the right, and not the obligation of the creditor-shareholder, since DDUs are registered with Rosreestr and information about this is available to the manager,” notes Vladislav Kocherin, managing partner of Kocherin and Partners law firm. Here the situation was complicated by the fact that “formally, the dispute on the inclusion of the interest holder’s claim in the register was considered beyond the time limit,” and “there are no direct indications of such cases in the law,” points out Igor Guskov, partner of Guskov & Associates.

Andrey Orlov, senior lawyer at Regionservis, “the position of the fund raises questions, given the goals of its activities,” but the Supreme Court “corrected the situation in favor of the consumer, protecting the weak side.” He agrees that the manager’s mistakes cannot be passed on to equity holders. Moreover, at the time of the approval of the decision to complete the construction, both “the fund, and the manager, and the court already knew that there was a shareholder and was asking to be included in the register,” adds Almaz Kuchembaev, head of Kuchembaev and Partners. He draws attention to the fact that the bankruptcy of the developer was initiated by Dom.RF (through which the fund pays cash compensation to equity holders) and the manager was chosen by him, therefore, “probably, the AU can play along with the fund, reducing the number of apartments that, after the completion of the house, will need to be transferred to equity holders.”

Denis Krauyalis, junior partner of the Yakovlev & Partners legal group, emphasizes that the situation when equity holders are forced to be included in the register through the court, despite the manager’s obligation to do this automatically under the DDU, “is not isolated and is rather widespread.” In this regard, the lawyer welcomes the position of the Supreme Court, which should discipline the managers, and also not allow the fund to “avoid accepting obligations” to transfer apartments to equity holders who are not included in the register of the developer through no fault of their own.

Ekaterina Volkova, Anna Zanina