Category: Uncategorized

Following the Croatian parliamentary elections in November 2015, a new Government was formed at the end of January, spearheaded by Prime Minister Tihomir Oreskovic.

The new Government is taking over a state with an economy showing signs of recovery following many years of recession, with yearly growth recorded at approximately 1.8%. However, in spite of these positive signs, Croatia undoubtedly has a long, heavy, and uncertain road ahead in order to achieve complete economic recovery. As a result, the Government has introduced guidelines to encourage further growth by increasing the country’s economic competitiveness and credit rating, decreasing its public debt, and increasing its attractiveness for new investors.

In the Prime Minister’s announcements, as well as in the drafts and proposals issued by governmental authorities responsible for management of state assets – above all the State Office for State Asset Management (DUUDI) – the need to divest more than EUR 500 million in state assets is consistently pointed to as a necessary measure. The country’s previous experience with selling state-owned shares in companies makes it questionable whether the proposed model will be successful and attractive to buyers this time, especially as state-owned shares in valuable companies – because they have been declared “strategic” – are not on the market. However, the state’s real estate portfolio might potentially be recognized by investors as a sound opportunity to invest in Croatia.

The state intends to put on the market and thus “activate” a large amount of state-owned real estate which currently represents merely unused potential and only generates expenses. A substantial amount of this real estate takes the form of state-owned apartments, business premises, and construction land. What could be especially interesting for investors is the formerly military-owned real estate, the management and disposition of which DUUDI took over from the Ministry of Defense upon its declaration that it had no value from a military perspective. So far DUUDI has recovered more than 320 separate pieces of this former military real estate, located throughout Croatia and encompassing significantly large plots of land and a whole range of buildings and other premises, several of which are located on the coast or in the vicinity of larger towns. These features in particular are the reason that this military real estate offers a great investment potential, especially in the tourism and industrial sectors. And indeed, a number of foreign and domestic investors have apparently already shown their interest in several sites from this portfolio. 

However, before placing this real estate on the market it is necessary to resolve its legal status and to make certain interventions within the legal framework and spatial planning documentation. In particular, because of the military-related status of the real estate, in most cases the ownership of the real estate has not been updated and buildings on the land have not been recorded either in the cadaster or in the land registry. Furthermore, former military facilities have mostly represented “holes” in spatial planning documents, with zoning designations yet to be determined – though this could also be an advantage, providing a flexibility to adapt the designation to investments needs. 

With respect to the means of disposing the former military real estate, it is the state’s intention to primarily assign the real estate to investors on the basis of rights limited to a certain period of time (building rights, leases, concessions, etc.) for a maximum period of 99 years. The disposition should be carried out by way of a public tender, and only under exceptional circumstances, if certain legal conditions are met, could the state property be disposed of by way of a direct agreement.

To conclude, in order to lower the deficit and encourage investment into the country the state intends to reach into its treasure chest and offer to investors former military real estate, some of which has exceptional touristic and industrial potential. It remains to be seen whether investors will recognize the potential of this currently “dead” property and whether the state will have enough strength and wisdom to see this reanimation process through.

By Marin Vukovic, Partner, Divjak, Topic, Bahtijarevic

This Article was originally published in Issue 3.2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

As is well known, the Austrian real estate market is very stable. Neither the financial crisis nor other events at macro and micro economic levels have led to a massive fluctuation in the yields and values of properties in Austria. Consequently, the Austrian real estate market has come into consideration by foreign investors.

However, recent developments in Austrian legislation will have an influence on the real estate market in Austria, as new ways of structuring real estate transactions will have to be considered. 

In the past, the land transfer tax was triggered if all the shares in a corporation owning a property were pooled together. However, the tax could be avoided if the purchaser did not buy 100% of the shares in the company owning the property but bought them with a second entity/person. It was sufficient if the second buyer only bought a minor share in the target (e.g., 0.1%).

As of January 1, 2016, however, the land transfer tax is triggered if 95% (and not 100% as in the past) of the shares in a partnership or corporation owning a property are transferred to one entity/person or pooled in one hand. Furthermore, the calculation basis for the tax has been significantly increased, and the transfer tax now amounts to 0.5% of the property value and not, as in the past, to 3.5% of three times the Einheitswert (the previous valuation system used by authorities).

In addition, a new special provision has been implemented for partnerships. The land transfer tax will now be triggered if, within a period of five years, at least 95% of the shares in the assets of a partnership owning a property are transferred to new shareholders.

However, there are ways to avoid the land transfer tax by using tailor-made structures for the transactions – for example, if a minor share of at least 5% is bought by a second entity/person or if a partnership buys a double-deck structure.

In addition, the real estate tax on profits has been increased.

Also, the corporation tax of 1% on capital contributions from shareholders has, since January 1, 2016, ceased to exist. It will therefore be easier for shareholders to provide capital to SPVs in Austria. In the past, it was necessary for the grandparent company to make the capital contribution if they wanted to avoid corporation tax; today the shareholder can provide the capital contribution directly, without triggering the corporation tax.

Like many other European countries, Austria is also currently facing a large flow of refugees, and amendments to the building acts of each Austrian province are being discussed. These amendments would facilitate the erection of temporary buildings for refugees by easing the approval process, so building permits can be granted without requiring compliance with all the provisions of the building acts. However, some fear that this interim solution could become a permanent one and that this interim solution will be misused for future projects. 

Finally, an amendment of the Austrian Rental Act, which is applicable to most residential and commercial leases, is also under discussion. The act contains very strict regulations as to rent and refurbishment works, etc., and mainly protects residential and commercial tenants´ interests. The goal of the amendment should be the simplification of these very complex and complicated regulations. Foreign investors are also astonished by the fact that commercial tenants are protected in more or less the same way as residential tenants. Reform of Austrian rental legislation is, in essence, a never-ending story, and this situation may not change, as the parties involved have interests which are not mutually compatible. Modern rental legislation which made the Austrian real estate market more attractive for investors would be welcomed here.

By Johannes Hysek, Partner, CMS Austria

This Article was originally published in Issue 3.2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

For the purpose of attracting new investors and facilitating the implementation of new investment projects in Slovakia, the Slovak Parliament has recently adopted an amendment to the Act On Certain Provisions Relating to the Preparation of Significant Investments (“Act on Significant Investments”) and several amendments to the Building Act governing the general procedure for expropriation of real estate, territorial proceedings, and building permit proceedings.

The new legislation was adopted primarily to address two major issues that were hindering the implementation of large investment projects.

First, areas that are appropriate for implementing the investments, such as strategic parks, are often unprepared for construction (e.g., there are complicated property rights to the real estate or there is no infrastructure of any kind).

Second, the process of gaining the necessary permits (i.e., the zoning plan, zoning decision, and building permit) and of expropriating the real estate affected by the investment was very lengthy and cost consuming.

The new legislation provides a solution for both of these issues.

The changes to the Act on Significant Investments are directed at solving the first of these issues by facilitating the preparation of undeveloped areas that can be used for the implementation of major investment projects, particularly in the industry, services, and research and development areas (i.e., construction of strategic parks and production plants).

Previously, essentially only constructions with initial costs in the amount of at least EUR 100 million or a construction with national economic importance leading to the creation of at least 300 new jobs could be certified as a “significant investment” (i.e., classified as a construction in the public interest by the Slovak government). 

However, under the new legislation, a certificate of significant investment can now also be issued to wholly state-owned companies to prepare suitable (i.e., undeveloped) areas for the subsequent construction of strategic parks. This means that prior to the construction of the strategic park itself, the state can – by virtue of a certificate on significant investment – arrange the property rights to the real estate in the area designated in the certificate for the realization of the investment (the “Designated Area”), develop the road or access roads, develop the railroads, and develop the related ancillary buildings and facilities, etc.

Another important change is the statutory right of first refusal, which originates on all of the real estate in the Designated Area for the benefit of the state. The right of first refusal arises by virtue of law as soon as the certificate on investment is issued and shall to a great extent help to eliminate the speculative transfers of the ownership rights to the real estate in question prior to the process of buy-out or expropriation of the real estate in the Designated Area, which was often the case in the past.

The second issue – the onerous permitting and real estate expropriation processes – can only be resolved if there is a more effective and easier process for territorial proceedings and a simplified process for building permit proceedings. This required changes to the Building Act.

As a result of the first major change, no zoning plan or zoning decision is needed to initiate the process of expropriation of the real estate in the Designated Area. A certificate on significant investment delivered to the investor is sufficient for that purpose – i.e., the state can start the process of expropriation based only on the certificate on significant investment and without requiring a new zoning plan and zoning decision, which are always necessary in public projects of a smaller size.

As to the process of territorial proceedings, no zoning decision is necessary either for constructing a strategic park or for preparing the area for the construction of a strategic park by the state, if the functional use of the area does not conflict with its location and previously approved zoning plan.

Following the changes to the law, only a building permit is necessary. Moreover, the investor does not have to prove ownership of the real estate in the Designated Area before the building permit is issued, unlike in the standard proceedings on building permits, in which ownership has to be proved to the building office at the commencement of the building permit proceedings.

These two changes can therefore really speed up the process of preparing an area for the construction of a strategic park and the process of constructing the strategic park itself.

To sum up, the recent changes in Slovakian “significant investment” legislation should greatly facilitate the realization of large investment projects that can boost the economy in undeveloped areas and increase job opportunities. Still, the application of the changes can have a substantial impact on ownership rights to real estate located in the Designated Area, which may lead to challenges to the new legislation in the future.

By Andrea Butasova, Partner and Director, Peterka & Partners Slovakia

This Article was originally published in Issue 3.2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

After several years of crisis, the real estate market in Bulgaria has begun its road to recovery. In particular, due to the increased demand for residential units and office spaces on the one side and the standstill of real estate development on other, a need for new and quality units in larger Bulgarian cities – where most real estate deals are concentrated – has appeared on the market.

This has led to an increased demand in Bulgaria for off-plan properties – real estate properties for which the construction process is already in preparation or ongoing.

The Benefits of Acquisition of Off-Plan Property

The benefits of off-plan properties for developers relate to the possibility of a decrease or full elimination of the necessity for external financing, and to the opportunity to secure the sales of the properties at a very early stage by signing preliminary agreements. For buyers, the main benefits are: (i) the usually significantly lower prices for the properties, and (ii) the flexible acquisition patterns offered by the developers (e.g., payment in installments corresponding to the construction stages). 

The Risks for Buyers

The apparent advantages of off-plan property acquisition are opposed by significant risks for the buyers, often relating to: (i) the timely completion of the construction; (ii) the compliance of the construction with all requirements of applicable law; (iii) the solvency and continued existence of the developer until the finalization of the construction process; and (iv) the transfer of the ownership title to the constructed unit as stipulated in the preliminary agreement. 

Important Documents to be Checked

The purchase of off-plan properties requires a complicated transaction structure. The buyer should sign a preliminary agreement with the developer which simultaneously covers the conditions for the future purchase and assigns the construction process of the future unit to the developer. Furthermore, the preliminary due diligence process should address not only the ownership and construction rights of the developer but also construction documentation such as the investment project, construction permit, and construction deeds (where the construction process is at an advanced stage).

The investment project has to be duly approved by the competent authority – usually the chief architect of the municipality/city district in which the project is located. Approval of the project means that it complies with the requirements of the general development plan and the applicable statutory construction parameters. 

The construction permit has to be duly issued by the competent authority – again the chief architect of the municipality/city district – and also has to have entered into force. The date of entering into force is critical due to the limitation periods which begin running from that date: three years for the beginning of the construction process and five years for the completion of so-called “rough” construction.

The developer also has to provide the buyer with a table for the formation of the price and the built-up-area. This document will provide the buyer with an idea about the full built-up area and the common parts belonging to the future apartment/office, etc. 

Where the construction is already at an advanced stage, a certificate for completed “rough construction” and a deed for this stage will be available. Once the relevant certificate is issued, the developer may start transferring the ownership rights to the future units. 

The most important document, certifying the finalization of the construction and its compliance with statutory requirements, is the exploitation permit. 

Mitigation of Risks

First, buyers should check the market reputation of the developer to determine how many projects he has completed successfully and whether he is/was involved in relevant litigation proceedings. Developers often set up new companies for individual construction projects to protect the rest of their on-going business and properties from any claims related to the particular development being considered. In such cases, it is highly recommended that the buyers request additional security from the developer against payment of the installments. Careful drafting of the preliminary agreement and delaying payment of the prevailing part of the purchase price as late as possible are also essential. A common practice is paying part of the purchase price after the provision of the exploitation permit or even after the expiration of a certain period thereof. However, buyers should aim for the earliest possible transfer of the ownership title to the construction unit. Finally, buyers should request copies of all applicable construction documents, which will benefit them in potential claims within the constriction guarantee periods.

By Darina Baltadjieva, Partner, CMS Bulgaria

This Article was originally published in Issue 3.2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

The decision by property investors to invest in a particular jurisdiction is generally predicated, as it should be, both on financial projections and on investors’ confidence that the ownership titles they are investing their money into are solid and legally secure.

Statistically, the large majority of the titles in Romania have proven to be solid, despite persistent myths about “risky” Romania. The statistical basis for confidence is not necessarily reflected in the investigation reports prepared for investors by their legal advisors, however, which often include a number of caveats hinting at potential risks from third-party claims to title which may arise in the context of ongoing public programs related to land restitution, cadastral survey, and land registration. As a result, investor confidence is often not strong at the time of the initial investment but grows over time. 

In April, 2013, the Romanian government admitted that restitution issues were real and, implicitly, that the advisors’ caveats were legitimate, as according to officials, 200,000 requests for land restitution were being assessed at the time by various administrative authorities. In addition, approximately 3,000 claims for breach of property had been filed with the European Court of Human Rights (ECHR). On October 12, 2010, in fact, the ECHR had asked the Romanian government to revise its restitution legislation in order to ensure an effective restitution mechanism and avoid repetitive requests being made before the ECHR.

In reacting to these problems, the Romanian government has promoted a number of reforms and initiatives in recent years aimed at reducing the legal uncertainty and improving the property market conditions.

First, Romanian Law no. 165/2013 on the measures for the finalization of the land restitution process, which came into effect on May 20, 2013, was designed to reconcile and integrate all previously adopted measures, which were spread over a large number of enactments. As a first step in the process, local authorities were instructed to conduct inventories of all available land resources that could be used for restitution purposes. On December 31, 2015, the government reported that 98% of the inventories at the national level had been completed and set a deadline of January 1, 2017, for the finalization of the restitution process.

Second, a long-awaited National Program for Cadastral Survey and Land Registration 2015–2023 was launched on May 20, 2015, to achieve a systematic registration of all real estate properties (land, as well as constructions) – currently estimated at 40 million – with an integrated digitalized system of cadaster and land registry, to which the government has estimated overall budget allocations of EUR 900 million. Although at the time of the program’s adoption only 18.68% of the overall stock of real estate at the national level was in the system, after less than a year, the statistics of the agency designated to oversee the program showed an increase in registered properties to 21.60% (which represents an increase of 1.17 million estates in absolute value). In urban areas, the number of registered properties exceeds 45%.

The reforms and initiatives described above are producing results, but more time is required. In the interim, many investors wishing to invest with confidence are choosing to acquire title insurance policies. If, for any reason, insurance products are not an option for prospective investors, Romanian legislation offers a number of effective protective measures. Thus, provided an acquisition is made in good faith and a period of time (typically ranging from 3 to 5 years, depending on the circumstances of the case) has passed from the date of acquisition, a title’s registration with the public registry may turn into a strong shield, able to protect an investor’s ownership in the event of potential disputes.

In addition, in October, 2011, Romania enacted a new Civil Code, replacing the 1864 Civil Code. This new enactment strengthened the title to Romanian properties and created the premises for a more powerful registration of properties with the land registry.

In conclusion, Romania provides substantial legal guaranties related to real properties, and provided that proper legal due diligence is conducted, buyers have sufficient means of protecting their titles against claims from third parties.

By Ciprian Glodeanu, Partner, and Radu Simion, Senior Associate, Wolf Theiss Romania

This Article was originally published in Issue 3.2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

2015 and the beginning of 2016 has been a relatively calm period in the Latvian real estate market, with neither significant ups or downs in the market itself nor any significant changes in the relevant regulations.

The industry continues to deal with restrictions implemented at the end of 2014, when limitations were set on the acquisition of agricultural land. With the aim of restricting acquisitions of agricultural land by so-called inexperienced investors – i.e., persons not involved in agricultural production – limitations were set of 5 hectares for legal entities and 10 hectares for individuals, unless the private individual or legal entity of Latvian or EU origin is involved in agricultural production. Since the vast majority of land in rural areas is formally designated as being for agricultural purposes, these restrictions often pose significant challenges for manufacturing companies wishing to acquire land outside of cities for the purpose of development of manufacturing or other production not related to agricultural activities (i.e., for construction of manufacturing plants and related purposes), even if the land at issue has not been used – and sometimes is not even suitable for – agricultural production. Discussions about changing the criteria by which the status of the land will be determined (i.e., whether the land is agricultural land or not) have been initiated.

In the beginning of 2016, a discussion of significant changes to the required real estate transaction format was initiated, involving a significant increase in the role of notaries public during the conclusion and registration phases of real estate transactions. The Ministry of Justice and the Council of Sworn Notaries are currently developing a proposal to establish a requirement that all real estate transactions be concluded in the presence of a notary public and in the form of a notarial deed. The intention is that the notary public will not only be obliged to verify the identities of the parties but also will be responsible for the content of the transaction itself – and some proposals even empower the notary public to revise the transaction price if the notary deems it inadequate to the market price. Such proposals have resulted in controversy, with many claiming that the increased role of notaries would significantly restrain the parties of a private transaction. Real estate market players such as developers, lawyers, and other real estate service providers mainly claim that, if this initiative is adopted, it will lead to a significant increase in transaction expenses and bureaucratic burdens, which are not justified for transactions solely within the private sector. Currently no specific proposal on the changes has been prepared and submitted; however, it is anticipated that this issue will continue to be controversial in the real estate area at least during most of 2016.

Amendments to the Civil Law were adopted in 2015 and should enter into force on January 1, 2017, providing more specific regulations to separate land and building ownership (as an exemption to the general rule that everything on the land be owned by the land owner). Although separate ownership of buildings was possible before the amendments – through specific, long-term land lease agreements – the almost complete lack of regulation raised questions about the status of ownership rights after the lease agreement expired, as existing law provides only that separate ownership is established during the validity of the lease agreement. By introducing a new category of “building rights”, the current amendments address those specific issues by providing clearer rules on the relationship between the owner of the land and the owner of the building during such building rights period as well as the rules of legal status and position of both after the expiration of the building rights.

Finally, as of 2016, electronic auctions have been introduced and implemented for bailiffs and insolvency administrators organizing auctions of real properties during recovery proceedings and insolvency proceedings. In contrast to direct auction (where all participants are required to arrive in person at a designated place at a designated time), electronic auctions allow participants to bid for and purchase real properties online, thus easing the procedure and, it is hoped, facilitating more activity in this specific segment.

By Linda Strause, Partner, and Nauris Grigals, Senior Associate, Tark Grunte Sutkiene

This Article was originally published in Issue 3.2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

At the beginning of January this year, new provisions entered into force in Hungary affecting the permitting requirements for new residential buildings with a maximum useful net floor area of 300 square meters. These rules allow for the construction of such buildings without a permit, requiring only a simple notification.

Despite a generally positive reception, certain aspects of the newly implemented provisions have received criticism. It seems that the Hungarian legislature has heard the complaints, as – based on a legislative proposal submitted to the Hungarian Parliament – some of the more controversial aspects of the new rules are about to change.

New Possibilities Introduced by the “Simplified Construction Rules”

The new rules require no building permit, but only notification prior to the commencement of construction of new residential buildings with a maximum useful net floor area of 300 square meters. The statute sets out the required content of this notification. 

The most significant difference compared to the permitting procedure is that the floor plan is not a mandatory element of the notification, which focuses on the appearance of the building, rather than on the inspection of its compliance with construction laws.

Only certain elements of the usual construction permitting documentation are required to be attached to the notification, rather than all plans. This may be a relief at first sight, but there are risks too: identical sanctions apply both to “notified” and “permitted” buildings (e.g., fines or even demolition). Given that the authority permits the construction of the building after examining its plans, in order to avoid or mitigate these risks it may be advisable to obtain a building permit prior to commencing the construction (or at least to produce detailed plans for the building).

In addition, the building must be constructed within ten years from the notification of its construction, and an official certificate must be obtained verifying the fact of the construction completion.

Observing the Local Construction Code

In case of the regular construction permitting process, the statutory rules adopted by the local municipality (the so-called “local construction code”) must also be taken into account. The local construction code is critical, since it contains the main rules and parameters for construction of new buildings (e.g., their maximum height, the maximum extent of buildable area, and local building customs), and is the main vehicle by which the local municipality forms its cityscape. The new rules require that only certain elements of the local construction code be taken into account – namely, the maximum allowable coverage of the plot, the maximum allowable building height, the line which isolates the public area and the non-public area, and the type and location of the building.

Since these obligations affect only a small part of the construction, and exclude other important parts of what are often-complex local construction codes, industry experts and local municipalities have warned that allowing the major part of a local construction code to be ignored may harm the cityscape.

To enforce the local construction codes (despite the newly permissive provisions), the local municipalities intend to fight back. For example, one of the districts of Budapest is considering the implementation of a new tax (the so-called “kitsch tax”), which would be payable by the constructor if its building does not meet the criteria set out by the local construction code.

As a solution to this issue, the proposed legislative amendment would widen the scope of the elements that must be observed during the construction of residential buildings, such as local zoning, the rules of sanitation and cleaning, the number of buildings to be constructed on one plot, as well as other rules, such as those relating to archaeology and heritage protection.

The reasoning of the proposed legislation is that the lack of permitting for the construction of buildings means that a new form of cityscape protection is required for local municipalities, with respect to which further statutory provisions will be implemented. The content of these future regulations is still unknown.

In our view, the fact that the notification procedure does not require prior examination of compliance with a local construction code (some elements of which are mandatory) could in fact pose a risk for the builder. In the event that the building authority examines this compliance during the construction and determines that it is lacking, the measures necessary to achieve compliance with the applicable building regulations at that later stage could result in significant costs. Furthermore, should the completed building not meet the mandatory requirements, the building authority may impose fines, or even may order the demolition of the building.

By Monika Frank, Managing Associate, Andreko Kinstellar Ugyvedi Iroda, Budapest (Hungary)

This Article was originally published in Issue 3.2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Although the sanctions imposed against Russia did not have exactly the effect on the country’s economy that was planned, there are still expectations of negative growth and clear signs of an overall massive slowdown.

One of the spheres influenced by these circumstances is real estate, where the market has reportedly decreased by seven percent and the number of bankruptcy cases in 2015 was five times that of 2014. There are no comparative statistics for 2016 available at the moment; however, as many as 167 real estate developers filed for bankruptcy during the first month of 2016 alone.

The rights of creditors and debtors regarding immovable property have to be dealt with by insolvency lawyers regardless of which side they represent. In general, three situations involving real estate within bankruptcy procedures are possible. 

The first involves the debtor as a possessor of a certain real estate asset with a creditor willing to claim it back. In this situation, there are essentially no specific differences with the regular procedure. 

The second situation involves property that belongs or belonged to the debtor before the insolvency procedures began. The insolvency officer will be responsible for asset tracing and searching for any transactions that might be contentious from a legal point of view. Any real estate owned by the debtor may be a solid source of funds that can be used for satisfying creditor demands. Moreover, subject to the Federal Law of October 26, 2002, On Insolvency (Bankruptcy) (the “Insolvency Law”), any deed of property disposal may be challenged within a one- or, under certain conditions, three-year term preceding the date when the debtor is declared bankrupt, thus adding to the bankruptcy estate.

According to the Insolvency Law, any property of the debtor, including real estate, shall normally be disposed of by auction, or via public offer in certain situations.

If the debtor is an agricultural company/entity, adjacent landowners involved in agricultural manufacture shall have priority in terms of acquiring the debtor’s property, including real estate.

Certain issues appear when there is a claim regarding rights to apartments or other real estate that were not completed by an insolvent developer. Although since January 1, 2014, changes in the Law “On Co-funding of Apartment Houses and Other Real Estate Construction and Amending Several Laws of the Russian Federation” have made it obligatory for all real estate developers to insure their liability to clients, there are still many incomplete projects from earlier days, and, unfortunately, no guarantee can be provided that a particular developer will not be in default. Specific procedures are covered by provisions of the Insolvency Law in force since 2011, which enables any person who has invested in real estate construction either to claim their rights to the relevant apartment or other object or to demand a return of the investment amount. In the latter case, the investor’s claims shall have a priority over any other demands, except for those arising from personal injuries and labor relationships. For any claims regarding residential property, the insolvency officer shall keep a separate register, and the property handover shall be subject to approval by the court within six months of the appointment of the insolvency officer.

The final situation involves real estate that had not been registered before the application for bankruptcy was filed. In this case, the insolvency officer will be in charge of all related procedures, including registration and filing any suits regarding declaration of title, if required.

Despite the quite significant role of the insolvency officer, which may lead to abuse in certain cases, the rights of the debtors and creditors to the real estate are quite well protected and may be exercised with due legal support.

By Evgeny Kolpinskiy, Head of Insolvency Practice, Peterka & Partners Russia

This Article was originally published in Issue 3.2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

We are excited to announce that the June 2016 issue of the CEE Legal Matters magazine is now out and on its way to subscribers around CEE and the world.

Highlights from the issue, which is already available to subscribers here in electronic format, include:

• Guest Editorial by Thomas Hruby: “Anomalies of Justice”
• The Summary of Deals
• The Buzz
• Summary of Lateral Moves and Appointments Across the Region
• Article: Building Blocks of CEE: Baker & McKenzie’s Dan Matthews says Good-Bye
• Interview: “Time to Party: bpv Braun Partners Celebrates 10 Years of Success”
• Interview: YukselKarkin Confident Going Forward”
• Industry Report: “In Media Res”
• Market Spotlight on the Balkans: Guest Editorial from Damir Topic from Divjak, Topic, Bahtijarevic in Croatia
• Serbian Round Table: Belgrade and Beyond
• Article: A Checkered Reality: Conversation with Damir Topic and Luka Tadic-Colic About the State of Affairs in Croatia
• Market Snapshots from Drakopoulos in Albania (on bankruptcy) and Sasa Vujacic in Montenegro (on renewable energy)
• Interviews with Dino Aganovic (Head of Legal and Compliance at HETA Sarajevo), Anita Pejic Ilisevic (Head of Legal for Croatia and Bosnia and Herzegovina and Compliance Representative Adria Region at Henkel), Milan Lomic (General Counsel Adria & Balkan at L’Oreal), Ante Sucur (Head of Legal Affairs at Intesa Sanpaolo Card Ltd), Sandra Simic (Head of Legal and Compliance Officer at Henkel), and Erion Doko (Head of Legal at First Investment Bank Albania).
• “Expat on the Market” interview with David Schoch of StartLabs and the Serbian Private Equity Association
• Experts Review: Intellectual Property

As always, with the publication of a new issue, the previous issue becomes available to non-subscribers. Accordingly, the April 2016 issue is now available to all. As subscribers already know, that issue includes:

• Guest Editorial by Ted Cominos: “Enormous Change in a Short Period of Time”
• The Summary of Deals
• The Buzz
• Summary of Lateral Moves and Appointments Across the Region
• New Feature: The Chatterbox
• GC Summit Update: An Interview with ELIG’s Gonenc Gurkaynak About His Presentation at the Summit
• Article: “Creative Solutions in a Critical Cause: Women in Law Firms”
• Interview: Assisting Client and Competitor Alike: Bulgarian Lawyer and Legal Recruiter Tsvetelina Zlateva Wears Two Hats
• Industry Report: “Energy in CEE”
• On the Move: Upheaval in Estonia, Kinstellar Enters Kyiv, Varul Disappears from the Baltics, New Split-Off from Karanovic & Nikolic in Bosnia, and more
• Market Spotlight Guest Editorials from Friedrich Jergitsch of Freshfields Bruckhaus Deringer in Austria and Ioana Knoll-Tudor of Jeantet in Hungary
• Round Table: Hope in Hungary: The Return of a Cautious Optimism to the Hungarian Legal Market
• Inside Out Reports: DLA Piper and Baker & McKenzie Advise on Wiener Privatbank Acquisition of Valartis’ Austrian Business
• Interviews with Sergei Stefanishin (Head of Legal CIS and South East Europe at DHL), Daniel Szabo (Country Legal Counsel for Hungary at Hewlett Packard Enterprise), Szilvia Bognar (General Counsel — Law and Compliance at Bayer Hungaria), Janos Jakab (Legal Director at Coca Cola HBC), and Juliana Aufschnaiter (Senior Expert at Raiffeisen Bank International).
• “Expat on the Market” interviews with Rob Irving of Dentons in Budapest and Daniel Mattos of Dentons in Bratislava
• Experts Review: Real Estate

The full electronic version of the April 2016 issue can be found here and the .pdf can be downloaded here.

Ilyashev & Partners has announced that, on May 27, 2016, the European Court of Human Rights (ECHR) accepted for consideration the complaint the firm drafted for its client, the OJSC Feodosia Shipbuilding Company “Morye” (“FSC Morye”), on the purported violation of its rights resulting from what the firm calls the “illegal nationalization of [the company’s] property in the Crimea.”

FSC Morye specialized in military and civil shipbuilding, in particular, the creation of military and civilian boats, hydrofoils from light alloys, and hovercraft. A significant part of its products consisted of warships and multipurpose boats. The State of Ukraine possessed (and still claims) a 100% stake in FSC Morye. In 2004, Ukraine’s Cabinet of Ministers included FSC Morye in the list of companies that had strategic importance for the economy and security of Ukraine, and in 2012 FSC Morye was included in the list of state’s enterprises which were transferred to Ukroboronprom State Concern.

In 2014, according to I&P, the State Council of the Crimea transferred ownership of all movable and immovable property of FSC Morye located on the peninsula to itself. Later, upon the order of Chairman of the Russian Federation Government, FSC Morye was then transferred to the Russian federal property.

Thus, according to I&P, “the Court will actually for the first time consider the legitimacy of interference with the ownership right to the assets of FSC Morye by the self-proclaimed authorities of the Crimea without compensation of their value and violation of the company’s right to a fair trial.”

“It is obvious that such arbitrary decisions of the body acting now under the jurisdiction of the Russian Federation violates the property rights of the company envisaged in Article 1 of Protocol No. 1 to the Convention for the Protection of Human Rights and Fundamental Freedoms”, says Ilyashev & Patners lawyer Oleksandr Dementiev, who co-authored the application to the ECHR.

“The company made every effort to appeal against the decisions of the Crimean authorities in the courts of the Russian Federation, however, the proceedings (quite predictably) had no effect,” stated Roman Marchenko, Senior Partner at Ilyashev & Partners, Morye’s asset manager. “In such circumstances the company had no choice but to complain to the European Court of Justice about the violation of its right to a fair trial guaranteed by Article 6 of the Convention. At this stage, the ‘field of battle’ for the state property confiscated in the Crimea moved to Strasbourg.”