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What is hidden behind the reform of family law?

DATE: July 17, 2020 | AUTHOR: AT

On November 14, 2019, a bill aimed at improving the regulation of property relations between spouses was submitted to the State Duma. On July 15, 2020, the State Duma of the Russian Federation passed the bill in the first reading. The authors of the bill propose:

1. To give the right to the Rosreestr to register the right of common joint property independently, despite the submission of an application for registration of the right by one of the spouses.

Such changes provide an opportunity for substantial abuse on the part of the second spouse, who may hide or simply do not know about whose money was used to buy a real estate object, as well as on the part of Rosreestr, since the establishment of such circumstances as the purchase of the object at the expense of money received as a result of gift, inheritance or other gratuitous transactions is the exclusive prerogative of the court. The novelty requires substantial improvements. For example, the legislator may give Rosreestr the right not only to clarify the marital and family status of the applicant, but also to request information on the availability of notarized marriage contracts and agreements on the division of jointly acquired property or make a register of marriage contracts, existing since 2014 and available only to notaries, open by analogy with the register of inheritance cases. Without such checks it is not possible to solve the problem of illegal registration actions and violations of the principle of reliability of the register.

2. Do not divide between spouses the property, the division of which is impossible or will entail a disproportionate reduction in the value of such property.
The Bill proposes to point out the inadmissibility of fragmentation of such objects (indivisible things, complex things, the right to participate in the economic society in the amount of not less than 10% of the share capital, etc.) as a result of the division of the common property of the spouses. A spouse who has sole or preferential use of things or who has sole or exclusive corporate or other rights has the right to transfer the said objects to his or her personal ownership, unless the other spouse proves his or her substantial interest in the use of the object. If such indivisible property is transferred into the ownership of one of the spouses, the other spouse shall receive monetary compensation against the share due to him/her and the right to establish a pledge on such property until such compensation is paid. The idea allows to avoid entrepreneurial and other risks, at the same time it is obvious that the concept of materiality of interest is of evaluative nature and will be established by the court in each specific case on the basis of his inner conviction, which does not allow to fully level the possible risks. Moreover, the problem of determining the amount of compensation remains open.

3. The inability to challenge the marriage contract on the grounds of “extreme disadvantage”.
The developers of the bill propose to delete from paragraph 3 of Art. 42 of the Family Code of the Russian Federation the basis for the invalidation of the marriage contract: the terms of the contract put one of the spouses in an extremely unfavorable position, in connection with the fact that the category of “extremely unfavorable position” is evaluated, investigated by the courts widely, not at the time of conclusion of the marriage contract, and in respect of the circumstances that have developed many years after that. At the same time, the legislator indicates that the draft does not abolish the right of one of the spouses to demand the recognition of the marriage contract null and void on other grounds, such as in connection with the bondage of the marriage contract (paragraph 3 of Article 179 of the Civil Code). The transaction may be recognized as bondage, if one of the parties committed it on extremely unfavourable terms for themselves because of the difficult circumstances, which the other party has used. Thus, the legislator, following the principle of Pacta sunt servanda (“agreements must be observed”), actually deprives one of the spouses of the right to protect their interests, complicating the process of proving the invalidity of the marriage contract.
4. Introduce the institution of joint bankruptcy of spouses.
The joint bankruptcy of the spouses allows to solve a number of problems arising in the sale of property, which is in common joint ownership of the spouses. Courts will be much easier to realize the common property of the spouses in a single process with the participation of single creditors, to whom the spouses have common debts. In particular, this will make it possible to optimize the process and reduce court costs for financing bankruptcy.

Please, find the update here.

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