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- Defect market: The Russian Armed Forces has opened the door to compensation for defects in construction
Defect market: The Russian Armed Forces has opened the door to compensation for defects in construction
The Supreme Court of Russia has radically changed the balance of power in the market of new buildings, approving the possibility for legal successors, including legal entities, to demand compensation from developers for construction defects. Now developers are obliged to correct the shortcomings not only for the first owners of apartments, but also for those who purchased housing later. The measure will be effective if it is proved that the housing was intended for personal rather than commercial purposes. The decision provoked a heated discussion among industry experts, sharpening the discussion about the future of warranty obligations, procedures for fixing defects and mechanisms for protecting home buyers. Details can be found in the Izvestia article.
What the Supreme Court pointed out
An individual entrepreneur ordered the construction of a house from one company, and the house was subsequently sold to another person. The new owner already discovered major flaws in the construction and, without waiting for a response from the developer, conceded the requirements for eliminating defects to the successor company.
The trial that began reached the Supreme Court, which for the first time clearly stated: the five-year warranty period is valid from the moment of transfer of the object and applies to all subsequent owners if the housing was purchased for personal needs, and not for business.
Moreover, the Supreme Court found that even if a claim against the developer is filed after the expiration of the warranty period, the owner (or legal successor) retains the right to protection, provided that the defect was discovered during the warranty period. As a result, the range of people capable of seeking repairs or compensation has been significantly expanded, and responsibilities for collecting evidence and documenting problems will be redistributed.
The decision of the Supreme Court of the Russian Federation in case no. A65-17459/2021 (available to Izvestia) provoked a strong reaction from key industry experts.
According to experts, customers and legal successors should especially carefully record the time and circumstances of the discovery of construction defects. Procedures for the acceptance and documentation of defects are now a key success factor in any court proceeding.
Anton Glushkov, President of the National Association of Builders (NOSTROI), notes that the evidentiary process for legal successors can be complicated due to the inability to document the time of detection of deficiencies.
"This is due to the fact that the original homeowners do not properly document the detected defects, and it is more difficult for the legal successor than for the original owner to obtain complete information about the nature and time of the defects," the expert explained.
Against the background of the new clarifications of the Supreme Court, there is also a call for additional legislative initiatives.
Senator, Arbitration manager of the Ministry of Justice of the Russian Federation Olga Epifanova recalls the introduction of joint liability of parent companies for the obligations of their subsidiaries.
Protection mechanisms and consumer errors
Among the additional guarantees, the judges outlined the obligation to apply consumer protection not only to the first homeowners.
Fedor Vylomov, Chairman of the Board of the Rating Agency of the Construction Complex, confirms that the first thing that legal successors may face is the difficulty in collecting evidence confirming the very moment of detection of a construction defect.
— They may lack access to primary documents, inspection reports, or official correspondence with the developer. A lot will depend on how well the previous owner kept records and recorded these documents. Developers will try to challenge the prescription of identifying deficiencies, to question the very date of their discovery," the expert explained.
In this regard, it is especially important to know the current requirements for fixing defects. For example, Sergey Chuzhakov, head of the legal department of the federal company Etagi, explains: the main difficulty will be to prove that the defects appeared or were identified during the warranty period.
— The task is not easy, because it is necessary not only to fix the defects themselves, but also to confirm the deadline for their detection. To do this, first of all, you need to request all the documentation from the former owner — appeals to the developer, to the management company, acts of acceptance and transfer of the apartment, especially if it was carried out with the involvement of a specialized organization and the act is drawn up correctly. Plus, we need to interview the neighbors to find out if they have similar problems," explained Fyodor Vylomov.
How to fix defects: practical recommendations
Experts emphasize that any claim must be recorded in writing, and an official document must be drawn up with maximum detail and mandatory signatures from all parties, including the developer's representative. Photo and video recording of defects is an integral part of the evidence base. Each request to the developer is registered separately.
Tatiana Khlebalina, Deputy Commercial Director for Residential Property Management at ASTERUS, explains:
— Upon acceptance, it is important to carefully inspect the apartment and record all construction defects in the defective statement: it is this document that will form the basis for further requirements for the developer.
The legislation divides defects into essential and non-essential ones. The first category includes violations that make housing uninhabitable, such as cracks in load-bearing walls, floor deformation, or deviations from building regulations, including the tilt of slabs. In such cases, it is necessary to conduct an independent technical expertise, the conclusion of which can be used when contacting the developer or in resolving a dispute.
Acceptance technique: what to check and how to defend your position
In Russian practice, the emphasis has shifted from the date of filing the claim to the time of the defect discovery. This is a fundamental turnaround that allows owners to defend their rights even after the transfer of housing to other persons.
The rules for the acceptance and transfer of an apartment are prescribed in 214-FZ, says Dmitry Vladimirov, managing partner of the IDI-Project project company.
— So, according to art. 7, if an object is commissioned with deviations from the terms of the contract or it does not meet the urban planning requirements, then the shareholder may demand (unless otherwise specified in the contract) gratuitous elimination of deficiencies within a reasonable time, a proportionate reduction in the price of the contract or reimbursement of his expenses for the elimination of deficiencies, - Dmitry Vladimirov notes.
And according to art. 8, before signing the transfer act, the shareholder has the right to require the developer to draw up an act indicating the non—compliance of the object with the terms of the contract - this document also becomes one of the key documents for confirming defects in the transfer of the apartment.
But there is also a question of the responsibility of development structures, which often use separate legal entities with minimal responsibility for the sale of apartments. This problem is particularly acute for the Movement of defrauded shareholders.
— Developers and their management companies often ignore oral appeals or delay responding to written claims, and then declare in court that no complaints have been received. Now, the court will have to take into account the totality of evidence — electronic correspondence, applications to the Criminal Code, photo and video recordings, even the testimony of neighbors. For the court, the main thing is not the date of filing the claim, but the fact and time when the flaw was discovered," Mila Ryabova, coordinator of the Movement of Defrauded Shareholders in Russia, said.
However, the expert also draws attention to loopholes for developers.:
— The Supreme Court's clarification is certainly the right step towards consumer protection. However, it risks remaining just a beautiful declaration that does not work against the most cynical loophole that developers actively use. I'm talking about the vicious practice when a large, nationally known development brand sells apartments through a dummy legal entity specially created for one project," she explains.
As soon as the warranty period comes to an end or massive defects appear, this company is simply bankrupted. All claims and court decisions come up against a wall: the defendant is no more.
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