Purchase a Property in Russia
Purchase a Property in RussiaUpdated on Thursday 10th January 2019
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Russia offers various business opportunities for entrepreneurs and real estate investments are also considered important when opening a business in Russia. Investors who want to purchase a property in Russia are advised to seek specialized help.
Moscow and St. Petersburg are two of Russia’s most developed cities. These two cities attract foreign investors and they are prime locations for real estate investments. However, other cities also offer business opportunities in Russia and the real estate market is always evolving.
Our lawyers in Russia can explain the steps for buying a property in this country. We can also help with the preparation of the sale-purchase agreement for real estate transactions in Russia.
Real estate purchase regulations in Russia
According to Russian law, foreigners are usually allowed to purchase or rent property in Russia, but certain exceptions apply. Also, in order to be allowed to buy a property, the foreign citizen must hold a valid Russian resident permit.
The Russian Land Code stipulates that foreign people or foreign legal entities cannot own properties built on borderline zones. Foreigners also have restrictions regarding the purchase of agricultural land in Russia.
When searching for a property in Russia, foreigners are advised to seek the help of a specialized real estate agency. This minimizes the risks and protects the buyer from fraud. Our attorneys in Russia can recommend real estate agencies in Russia and inform you during the purchase procedure, to make sure that everything is done according to law.
Due diligence when buying a property in Russia
The due diligence procedures are recommended in the case of residential real estate properties, however, they become mandatory in the case of commercial purchases.
This step is usually completed before the acquisition of the property as it implies a thorough verification of the property to be purchased. Also, it is the future owner’s responsibility to ask for real estate due diligence procedures before buying a property. This can be completed by a law firm in Russia when it comes to the legal side of the transaction and by an architect or any other team of construction experts when it comes to the technical side of the transaction.
The first verification of the property will be completed with the Russian Land Register.
Buying residential real estate in Russia
There are no restrictions related to buying a residential property in Russia. Moreover, there are several laws which provide for the sale and purchase of real estate property for residential purposes in Russia. These laws are:
- - the Housing Code which is the most important law when it comes to defining residential real estate;
- - the Civil Code which provides for the right to acquire real estate in this country;
- - the Contract Law which provides for the information which must be contained in a real estate sale-purchase contract;
- - the Federal Law on the Registration of Titles and Real Estate Contracts which provides for the registration of properties with the Land Registrar.
As mentioned earlier, any Russian or foreign citizen can buy real estate for residential use. The exception for foreign citizens resides in purchases on border and seaport areas. However, an important aspect should be considered here: the foreign individual can buy a property built on such land plots but are restricted from buying the land the property is built on.
Our Russian lawyers can offer detailed information on the conditions imposed on foreign citizens interested in acquiring residential real estate properties.
Another important aspect which should be considered when deciding to buy a property in Russia is related to the categorization of the real estate. Fortunately, the Russian Housing Law is very strict about the categories of properties which have a positive effect on the price because the Act provides for every type of unit which can be purchased here.
Purchasing real estate through mortgage
The Russian legislation allows foreign citizens who want to acquire a residential property to apply for a mortgage with a local bank. One of the conditions for obtaining the financing is for the mortgage to represent a maximum of 80% of the total price of the property. Also, foreign citizens looking to obtain financing for buying real estate must submit proof of financial stability, such as an unlimited employment contract or other stable sources of income in Russia.
Acquiring commercial real estate in Russia
Not only foreign citizens are allowed to buy properties in Russia, but foreign companies are also allowed to buy real estate for commercial use. There is a clear distinction between the two types of real estate purchases, however, the same restrictions apply when it comes to the areas in which such properties can be bought.
There are also cases in which commercial property purchases involve agricultural land, however, in this case, the foreign company will only be entitled to use the land plot for the commercial activities which include completing various types of agricultural works. The right to use such property is granted through concession agreements.
One of the easiest ways of acquiring commercial real estate property in Russia is through mergers and acquisitions, which are regulated by the law with the same name. This procedure implies a foreign company to take over a local business with all its assets, including the real estate ones. However, the foreign company must pay attention to the regulations imposed by the Civil Code.
An interesting aspect when buying real estate in Russia is that aircraft, vessels, and navigations boats are also considered real estate property when purchased by a company. Our lawyers in Russia can offer more information on this aspect.
Elements of the real estate sale-purchase agreement
When buying real estate in Russia, the Contract Law must be respected. The following elements must be present in the sale-purchase agreement when buying Russian residential or commercial real estate:
- - full information about the property, such as the complete address;
- - the full price of the property;
- - information about the seller and the buyer;
- - terms related to the payment of the price;
- - the procedure for transferring the property to the new owner;
- - information about all the individuals who will reside in the property, in the case of residential real estate purchases.
Also, if any special mentions are agreed by the seller and the buyer, these must be stipulated in the contract.
The sale contract of commercial real estate property is slightly different from that a residential property because the former enters the merger and acquisition deals regulations. In this case, the contract must contain a few more elements, among which a description of the property with all the facilities on it, the warranties and the representations of the property.
Our Russian law firm can help foreign citizens and investors with the preparation of real estate sale-purchase agreements.
Steps for purchasing a property in Russia
After finding a property that meets their needs, buyers must meet the owner and draw up an initial agreement. This document describes all the provisions of the final sale purchase agreement and includes information about the necessary documents.
The buyer must make sure that he/she can provide the entire negotiated sale price for the property. After the payment has been made and confirmed, both parties must sign the final purchase agreement in front of a notary. An acceptance agreement must also be signed on the same date the property is transferred to the new owner. This document certifies that the property was transferred in an acceptable condition.
The new owner must register the property and the former owner must perform a de-register procedure. The following documents need to be provided for the registration of property in Russia:
- - an application signed by the parties,
- - identification documents (passports for foreigners, translated into Russian),
- - the sale contract,
- - acceptance agreement,
- - documents stating who will live on the property.
The documents must be filed with the Land Register in Russia.
Fees related to buying real estate in Russia
The following fees and taxes must be considered when purchasing a property in Russia:
- - the real estate agent’s fee, if such service has been used;
- - the documents notarization fee;
- - the property registration fee;
- - the value added tax.
Why purchase real estate in Russia?
Contrary to some beliefs, buying a property in Russia is not expensive. Thanks to the Housing Law which provides for a strict categorization of real estate units, a foreigner can choose the most appropriate type of property they want to buy. Also, real estate transactions are very safe if all the procedures which need to be completed before and after agreeing with the seller follow the right order.
Our Russian lawyers can duly represent you during a real estate purchase process in Russia. Please contact our Russian law firm for a detailed offer and then discuss in detail about purchasing a property in Russia. We remind foreign citizens that it is their duty to register a property with the Land Register once they bought it.