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Russian developers to insure attracted funds

January 04, 2014, 7:39 UTC+3
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MOSCOW, January 4 (Itar-Tass) - Russian developers now have to insure all the funds attracted from participants in shared construction, in accordance with the amendment to a federal law effective since January 1, 2014.

Earlier, the developer's obligations could be secured through bank guarantee but this guarantee was not mandatory. The new edition of federal law #214 makes liability insurance a mandatory procedure and lists additional instruments to protect stakeholders. Protection is offered through bank guarantee, a mutual insurance company or an insurance policy.

Starting from January 1, 2014, a developer cannot attract the money of the participants in shared construction without insuring it or without receiving bank guarantee for the attracted sum. If the developer fails to meet his obligations, the attracted money will be returned to participants in shared construction. Supervising bodies are given the opportunity to check housing under construction more than three times a year.

In case inspectors find violations, the housing, suspicious from the legal point of view, should be removed from advertisement.

In October 2013, State Duma deputy Alexander Khinshtein suggested tougher requirements for developers in housing construction. Speaking at an all-Russian conference in Sochi over state regulation and control in shared construction, Khintshtein said the number of cheated investors reached 80,000 in 62 Russian regions.

The Regional Development Ministry said more than half of cheated investors lived in ten Russian regions: Bashkortostan, St Petersburg, Voronezh region, Moscow region, Novosibirsk region, Nizhny Novgorod region, Rostov, region, Saratov region, Samara region and Krasnodar territory. According to official reports, the Central Federal District has 224 problem construction sites with 20,000 registered shared construction participants cheated by developers.

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