Guiding Lines: Federal Threat

In the summer of this year the St. Petersburg state property management committee, or KUGI, and the Committee for the Protection of Monuments were stripped of their powers to sell or rent out federally-owned properties. As a result, several deals were put on hold; restoration work on a number of sites was suspended. The next item on the agenda is the revision of the cadastre registration system with a view to bringing it in line with federally adopted rules.

It is difficult to understand why the systems that have worked perfectly well for years should be sacrificed for the sake of nationwide uniformity, even more so considering St. Petersburg and Moscow have always been praised for their advanced system of property registration, effective methods of running federally-owned properties and thrifty attitude towards monuments.

It is also worth noting that former Smolny (the St. Petersburg city authority) officials now hold key posts in federal agencies in charge of property management. One can only conjecture why those civil servants have failed to assert a special regime for St. Petersburg, or have been too slow in taking action.

It is quite indicative that the move to bring local rules into line with federal regulations has brought about difficulties in those cities with developed property markets where the problems associated with a transition period had long been solved.

An example from the St. Petersburg City Registration Bureau – later renamed the Main Registration Directorate for St. Petersburg and Leningrad Region – has shown that several months was enough to disrupt the operation of a system that had taken more than ten years to build.

St. Petersburg residents who arrived at the Bureau in January of 2005 to register their property deals discovered that the procedure would now require four weeks although in December while the registrar office was still run by the city government the sale of an apartment took three days to be registered and privatization of an apartment took only one day. Registering a title to a non-residential property or a plot of land took five days or more, new constructions took 15 days or more.

The federal duty imposed on certain types of deals beginning this year considerably exceeded the differentiated tariffs applied by the city in previous years. But, as it soon transpired, that was not the worst surprise.

After the personnel of what was once the City Registration Bureau acquired the status of federal officials their salaries dropped by 60-75%. Many quit, leaving people waiting in line for their applications to be accepted.

In April, the registrar office introduced a token system obliging applicants to call for an appointment in advance. But that move only further aggravated the problem, as places in the queue soon became available for sale, tokens being issued for several months in advance.

By this fall the situation stabilized, owing to the selfless efforts of those officials who had not quit. New employees were hired, the system of summary registration was partially restored and several additional branches were opened. However, it is clear that the reasonable and flexible approach towards registering property titles exercised in the city before Jan. 1, 2005 was abandoned for good.

The next major change was effected on July 8 when the St. Petersburg property management committee – KUGI – was stripped of the right to sell or lease federally-owned properties within the city. On that day, the 1998 agreement between Smolny and the federal Property Ministry (now the Federal Agency for Federal Property Management) expired. St. Petersburg has nearly 18,000 federally-owned properties including those registered with the federal property registrar, federally-owned companies and other assets.

Nowadays KUGI no longer has the right to take any action involving those properties, neither legal nor technical, such as including them in property lists, responding to inquiries, etc.

Smolny fears that the loss of control over those properties by the city will result in the growth of rental arrears, as KUGI no longer has the right to sue tenants who fail to pay. Besides, the new order disrupts the uniform approach towards the management of municipally- and federally-owned property exercised by St. Petersburg for years.

Meanwhile, instead of establishing a territorial branch of the federal property agency (Rosimushchestvo) in his home town Vladimir Putin has agreed to let the city government keep its powers in that sphere, by way of experiment. But the new agreement with the federal authorities has still not been signed. The draft is currently being negotiated and is subject to approval by the federal government. KUGI hopes that will happen before the end of the year.

The fate of the St. Petersburg Committee for State Control, Use and Protection of Monuments – KGIOP – is also unclear. The committee lost its right to oversee federally-owned properties on the same day with KUGI, due to the same reasons.

The Northern Capital has over 3,500 monuments of such a status. Before Jul. 8, acting within the framework of the powers conferred on the committee by the Ministry of Culture, KGIOP was in charge of administering paperwork and authorizing research and development on the premises of federally-owned buildings and historic estates.

After a two-month break KGIOP again took over the federal property under a provisional scheme where the committee experts prepare a report on each particular site whereupon the report is subject to approval by the northwestern branch of the Federal Service for Control of Observation of Culture and Mass Communications Legislation. Nobody knows how long this unusual procedure will be applied. Admittedly, negotiation on the draft of a new agreement whereby KGIOP’s powers are to be reinstated, is underway.

In September, Russia’s federal government approved a draft bill on forming the state property cadastre and cadastre valuation of properties. Once signed into law it will have serious implications for the entire property market, both procedurally and financially. Even though it is still only a draft, it is already causing reverberations throughout the business community.

The goal of the reform is to build a single property database that will include all plots of land, buildings and installations in Russia by the year 2012. Incidentally, in St. Petersburg such a cadastre has already been formed by the local land resources committee and is updated annually.

The fundamental novelty is that the uniform cadastre system will encompass the entire country and will be formed by federal officials receiving their salaries from the federal government. The consequences of the move are easy to predict. For the time being, cadastre registration of properties in St. Petersburg, as well as preliminary work for the registration of plots of land is being financed by the local budget.

It necessary to take into account the fact that today the cadastre registration of properties in the city is free. Applicants only pay for the photographs of the plot, the technical documents for development, etc.

The federal draft envisages the introduction of a state duty that applicants will have to pay for the procedure. Private individuals will have to pay 500 rubles and legal entities 7,500 rubles. It appears that the scheme first tested in the field of property registration is also being applied here: market players will be offered the same service but for a higher charge and of lower quality.