Introduction of Escrow Accounts for the Construction of Individual Residential Houses
Starting March 1, 2025, Russia will implement an escrow account mechanism for individual housing construction under construction contract agreements. Federal Law No. 186-FZ “On the Construction of Residential Houses Under Construction Contracts Using Escrow Accounts” regulates the financing process: the client’s funds are held in a special account and become available to the contractor only after the work is completed and the project is delivered.
Escrow accounts provide financial protection for citizens, reducing the risk of contractors failing to fulfill their obligations. This measure enhances financial transparency in the construction sector and decreases the number of individuals affected by unscrupulous developers.
The law also establishes mandatory requirements for developers, including information disclosure and key contractual terms. The contract must clearly outline the conditions for the client’s property ownership registration upon project completion.
Upon completion of construction, the client has two options for registering property rights:
- Self-registration by submitting the necessary notifications to Rosreestr (the Federal Service for State Registration, Cadastre, and Cartography).
- Delegating the registration process to the contractor as part of the agreement. In this case, the contractor may apply for cadastral registration and ownership registration by submitting the construction contract and the acceptance certificate.
