The Supreme Court of the Russian Federation will decide how to distribute the proceeds from the sale of land pledged to the bank within the framework of the bankruptcy of the developer

The Supreme Court of the Russian Federation (SC) will decide how to distribute the proceeds from the sale of land pledged to the bank within the framework of the bankruptcy of the developer. The bank believes that since there are no construction in progress on the land, it should receive up to 95% of the cash. But then the equity holders or the fund that came in their place will not get anything. The lower courts sided with the bank. Lawyers are divided.

The dispute on how to divide the proceeds from the sale of land in the bankruptcy of the developer between the bank and equity holders was referred to the Supreme Court. In February 2016, Primsotsbank issued a loan to Stroyuniversal LLC for 80 million rubles. ZhSK “Uralenergostroykompleks” vouched for the company, laying two land plots in Yekaterinburg with a total value of 11.74 million rubles. Both sites could be used for construction of apartment buildings, they were registered encumbrance in the form of contracts of equity participation in construction. A dispute arose about the distribution of money from the sale of these plots.

Stroyuniversal went bankrupt, and the bank entered the register of its creditors with a debt of 81.29 million rubles. Then the ZhSK also went bankrupt, to which the bank also filed claims within the value of the pledged property. Based on the results of a forensic examination, the plots were valued at 4.45 million rubles, for which the bank was included in the register as a secured creditor. Also among the creditors of the housing cooperative were citizens-shareholders, their claims were transferred to the Fund for the Protection of the Rights of Shareholders of the Sverdlovsk Region.

In June 2022, the housing cooperative plots were sold at auction for 22.75 million rubles, in July the bankruptcy trustee paid the bank 4.45 million rubles. But the bank considered the amount underestimated and challenged it in court. The bank insisted that it should receive from 80% (if there are first and second queues of creditors) to 95% (if there are no such queues) of the value of the property sold under Art. 138 bankruptcy law. The manager also referred to the fact that a pledge is also imposed on the unfinished land and the land of the developer in favor of equity holders (the fund), who should receive part of the proceeds.

The Arbitration Court of the Sverdlovsk Region in August 2022 recognized the lawful amount of payments to the bank in the range of 4.45 million rubles, but the appeal awarded him 80-95% of the proceeds. The court noted that the estimated value of the pledged property, 4.45 million rubles, “essentially has an accounting character” and is used to determine the number of votes at the meeting. The final value of the collateral is formed “at the time of sale”, and the amount of payments “depends on the actual proceeds and is not limited to the estimated value.” Cassation agreed with this, adding that there are no unfinished construction projects on the sites, so equity holders cannot claim money.

The Fund appealed this position to the Supreme Court, insisting that there should be special rules for the bankruptcy of developers. Yes, Art. 201.14 establishes that when selling unfinished buildings and plots, the bank is entitled to 60% of the proceeds, and 25% goes to equity holders (fund). The dispute was referred to the Economic Board of the Armed Forces, consideration is scheduled for July 27.

For the first time, the Supreme Court will take up a case in which “the issue of the targeted nature of the land plots owned by the bankrupt developer and its impact on the distribution of proceeds from its sale is seriously raised,” notes Anton Kravchenko, senior lawyer at Arbitrazh.ru. Lawyers interviewed by Kommersant are unanimous that the bank has the right to claim more than 4.45 million rubles, but disagree on how much more and why.

BGP Litigation lawyer Anton Baturin believes that the bank should receive 60%, and the fund – 25%, even if an object is sold that is not burdened with a pledge in favor of equity holders. In his opinion, the presence or absence of construction objects on the site does not matter, the main thing is that the developer goes bankrupt.

But the head of Kuchembaev and Partners, Almaz Kuchembaev, believes that when there is no unfinished construction on the ground and even a building permit has not been issued, “then there are no equity holders, which means Art. 201.14 doesn’t work.” In this case, in his opinion, it is logical to apply the general rules of Art. 138, where the bank gets 80-95% of the proceeds. If, as in the housing cooperative case, construction has not been started, but plots have been allocated for housing development, equity holders (the fund) cannot be deprived of part of the proceeds, Mr. Kuchembaev believes. Anton Kravchenko shares this point of view, noting that Art. 201.1, a land plot is understood to be one “which is built up or is to be built up and on which the construction object is located or should be built.”

There is no single approach to such disputes in practice. But, notes Anton Kravchenko, for example, in 2021 the Arbitration Court of the Volga-Vyatka District supported the limitation of the bank’s share to 60%, citing “the lack of evidence by the creditor that the disputed plot was planned for a different purpose than the construction of an MKD.” In his opinion, the economic board of the Armed Forces can take the same position in the ZhSK case.

Ekaterina Volkova, Anna Zanina