VEGAS LEX partner Igor Chumachenko has commented
on recovery of damages from developers for failure to meet construction
deadlines for Radio Business FM.

On
April 18, 2017, Partner, Head of Real Estate, Land & Construction practice Igor Chumachenko spoke on the Risk Index with Nadia
Grosheva program on Business FM radio; he was asked to comment on the story
“Compensation for Broken Deadlines.”

The Kommersant business daily has reported a recent trend: lawyers file claims against developers
for delaying the commissioning of housing and win cases collecting large sums in
damages.

The
Federal Law 214-FZ* is
aimed at protecting co-investors in residential construction projects from the
risks; it gives grounds to impose penalties on developers who fail to complete
the project on time, in addition to damages. Damages include any additional
costs incurred by the potential apartment owners because of the delay, such as
additional interest on the mortgage or the cost of renting temporary housing.
The co-investor also has the right to expect penal sanctions, which are stipulated
in the cooperative residential construction agreements – the size of the
penalty is specified in the law. Usually they add up to a large sum, although the
courts often try to reduce it.

Developers
certainly have mechanisms to protect their interests, as Mr. Chumachenko said
in his commentary: “Until recently, the courts, I think, have observed a
balance of interests, that is, they imposed a penalty, made it as small as
possible. Otherwise, more developers would go bankrupt, which is probably not the
objective of their co-investors. Therefore, as far as the law enforcement
practice is concerned, it should be aimed at maintaining the balance of
interests of the parties, without favoring the developer or the future
apartment owners who co-finance the project.”

The audio is available at

https://vse.fm/station_40/UTC+3/2017/04/18/12:21:00/play

***

* Federal Law ‘On
Participation in the Shared-Equity Construction of Apartment Buildings and
Other Real Estate, and on Amendments to Some Russian Laws’ No. 214-FZ of 30
December 2004.

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