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liens), their accrual, transfer and termination are subject to
state registration in the Unified State Register of Real Estate
(Russian abbreviation is EGRP).
• Rights which arose before 1998 are not required to be
registered and will be recognised as valid by the state.
These rights must, however, be registered upon transfer or
encumbrance.
• Some agreements under which rights in rem and
encumbrances which must be registered arise are also
subject to state registration (as provided by law) and may
be considered by a court as non-concluded without such
registration (e.g. long-terms leases).
• The Unified State Register of Real Estate is, for the most part,
a matter of public record and any person may request an
extract from this register in relation to particular property.
The extract will contain a description of the property (type,
address, size) and reflect the type of registered right to the
property, the holder of the right, as well as encumbrances and
restrictions of the registered right as at the date of the extract.
State Real Estate Cadastre
• All real estate in Russia is also supposed to be recorded in the
State Real Estate Cadastre.
• Conveyancing or encumbering land plots which have not
undergone the procedure of official survey and cadastral
record are deemed null and void, though forward sale and
forward lease (whereby an agreement envisages conveying
or encumbering title that is yet to be created) are allowed
(at present, there are no similar restrictions in respect of
buildings and other fixed facilities).
ACQUISITION OF REAL ESTATE
• There are two main structures for the acquisition of real
property: asset purchase (acquisition of real property directly
from its owner) or share purchase (acquisition of a holding
company which owns relevant real property).
Asset Purchase
• Where a deal is structured as an asset transfer, the target’s
liabilities, including tax liabilities and penalties, should not
(subject to careful structuring) transfer to the purchaser.
• However, the key disadvantages of a sale of assets are:
–– administratively they are more cumbersome than an
acquisition of shares;
–– the acquisition may require obtaining new licences and
permits, novation or assignment of contracts; and
–– the acquisition may lead to Russian VAT being payable.
• A typical asset purchase transaction is a two-stage process
involving the execution of a sale and purchase agreement and
registration of the transfer of title in the Unified State Register
of Real Estate.
• The sale and purchase agreement must be a single written
document; an agreement by fax or exchange of letters is not
valid.
• The hand-over of the property is effected by completing a
document which formally conveys the property from the seller
to the buyer.
• As a general rule, if a building or other immovable facility and
the underlying land are owned by the same person, a sale of
the building without the underlying land (and vice versa) is
not allowed; if the land is owned by someone other than the
owner of the building, the building can still be sold, and the
new owner will enjoy the same rights to use the respective
part of the land plot underlying the building as the previous
owner of the building.
• Russian law also knows the concept of forward agreements
in relation to real properties (agreement in relation to
real properties which are under construction or even
not in existence); currently it is possible to enter into
forward leases, forward mortgages and forward sale and
purchase agreements. In each case the agreement must
contain a detailed description of the future real estate to
be encumbered or transferred. This new concept allows
developers and investors to form a pool of anchor tenants,
obtain financing from banks by mortgaging the future building
and sell the building on before it is fully constructed.
Share Purchase
• Share purchases are still a very popular way to acquire real
property in Russia. The major risk of a share acquisition is,
of course, that a buyer will also assume all of the target’s
existing liabilities (subject to any contractual apportionment
and post-acquisition risk mitigation strategies). This means
that thorough due diligence of the historic activities of the
target is crucial.
• There are, nevertheless, numerous advantages of a share
purchase structure, chief among which are: avoiding the
need to reapply for licences and permits; a less complex and
burdensome acquisition process; no Russian VAT; and the
avoidance of business interruption.
ACQUISITION BY FOREIGN
INVESTORS
• Subject to the following restrictions, real property can be
purchased or leased by foreign individuals and companies for
their own use or as an investment:
–– foreign individuals and entities are not allowed to own
land in areas adjoining the borders of Russia or land
located within the boundaries of a seaport; and
–– foreign individuals and entities as well as Russian entities
with over 50% foreign participation may not own
agricultural land.
• There are no specific restrictions as to lease of land or
ownership or lease of buildings and facilities by foreign
nationals.
COMMERCIAL LEASES
• Commercial leases are treated very much as a matter of
private concern, with a rather limited number of mandatory
rules and restrictions.
• While most of Russia’s land is still state or municipally owned,
commercial property is predominantly privately held.
• As a matter of practice, commercial lease terms tend
to favour the landlord or the tenant depending on their
respective economic strength, bargaining power and the
market conditions in the relevant location.
• In the past few years the lease market in the developed
regions of Russia such as Moscow has been heavily landlord-
driven, and leases have tended to benefit the landlord (for
98 Investors Guide to Europe 2015