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The bill on the liability of self-regulating organizations to owners of real estate

DATE: January 12, 2023 | AUTHOR: AT

The government of the Russian Federation has submitted a bill to the State Duma providing for the subsidiary liability of self-regulating organizations to owners of buildings.

The aim of the bill is to introduce into the Town Planning Code of the Russian Federation a provision on the subsidiary liability of a self-regulating organization for the claims of the owner of the building or structure ("Owner") on compensation for damage caused by the destruction or damage to the relevant facility (or part thereof) as well as damage caused to the Owner by violation of safety requirements in demolishing the facility, provided that

  • the harm was caused by an SRO member (e.g., a builder, designer);
  • the harm was caused due to defects in the SRO member's work on engineering surveys, design, construction or demolition.

Thus, an SRO under the proposed provision will be held liable when liability of an SRO member arises directly to the Owner. Therefore, the Owner will not be able to file a claim against the SRO for damages caused by the construction of a building if the Owner acquired the building not as a result of construction but, for example, under a sale contract – it will not be the SRO member (contractor) but the seller who will be liable to the Owner.
As of today, the TPC already provides recourse liability of SRO in case of damage caused to third parties as a result of destruction of a building or violation of safety requirements during its operation and demolition (paragraph 2 part 5 article 60 of TPC) as well as subsidiary liability for obligations of an SRO member in case of his/her violation of a works contract concluded with the use of competitive procedures (paragraph 1 article 60.1 of TPC).
We believe that the entry into force of the proposed provision will cause an increase in the amount of contributions from SRO members to compensation funds, as well as an increase in the number of cases of involving SRO as co-defendants or third parties in disputes from construction contracts, initiated by client.
The owners of premises and parking places in buildings are not mentioned in the bill as persons entitled to file a claim against SRO. We do not exclude the possibility that, if the bill is adopted in the current version, the proposed provisions will be interpreted broadly or applied to relations regarding the loss or damage of premises and parking places by analogy of statute. The bill in its current version provides that the relevant changes to the TPC enter into force on September 1, 2023.

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