Real-estate development in Kazakhstan. Problematic aspects.


1. Objects planning.

The desire of the developer to economize by locating in one area several buildings, using shared driveways and some shared communications - is understandable. However, for some reason, issues of joint use of property by several owners in result of this saving, have to be deciding at the stage of sale of the constructed and taken into use project.

Developer considers that lawyers should be involved when a problem arises. In my opinion - it's not productive. It is impossible to economize in it. Recently, there is a tendency to join lawyers during the design, not only for signing contracts with project companies, but also for direct planning the future division of rights, project management.

1.1. Problems in planning.

Developer often made changes to different parts of the project. Sometimes, it is the change of course or project strategy, often (especially in recent years) – such changes of the projects are the financing banks prerogative.

Lawyers are join the project on last stage.

Issues of further exploitation and joint use of different property and it’s parts are not taken into account during planning.
If the project is carried out without regard to these issues, the difficulties will arise for sure.

1.2. What effect these problems will have after implementation of the project?

  • The impossibility to reach a consensus between several owners and as a result joint equipment and whole project can be suffer (fail, require expensive repairs);
  • The delaying terms for deciding any other current operational issues;
  • The difficulty in concluding simple operational decisions;
  • The rising costs of service;
  • The necessity to follow the general concept of the project.
  • All of these items in the end - only make mischief for the image of the developer, builder.

1.3. What is important to do in the stage of planning? How to anticipate these problems?

  • Determine the time and order of the division of land plots in order to timely taking consent documents for construction and timely availability of documents for the sale of the project as a whole, or in a part;
  • In advance, offer, discuss and conclude jointly with the developer and the envisioned management company variants of management, taking into account the features of the project and its further implementation;
  • Prepare and timely implement “under control” the process for real estate and other property rights transfer, including the process of passing this property to the operational management;
  • Understand - what property and in what conditions it is possible to pass to the city, or leave in joint use, what property to pass for ownership including the building (premises) itself;
  • To decide the issue - where you can apply the easement, and where not. This could be the subject not only for the land plot (see at.195 CC RK);
  • For developing a package of documents, which are necessary to implement the developer’s decisions for implementation, management, and join use of the project as a whole and its parts (purchase agreement, agreement about easement, Protocol on the establishment of the condominium object, Cooperative Charter, Protocol on the management of the condominium object).

2. Management of multifunctional objects of real estate.

On this issue, multifunctional means simultaneously including itself (in the same building), kind of functions, such as: office, hotel, apartments, trade centers, entertainment centers, etc.

I will expose this item through the prism of the following situation. During attraction of world-famous foreign management company (in the following text -MC) by one of the developers of Kazakhstan for own project, a management company propounded a number of requirements. These requirements for the world practice are general, but for our Republic – are hard executable.

For instance, there are some of them:

  • A dominant right of the developer. This means that the MC is ready to work (negotiate, discuss the terms, etc.) only with this specific developer, but not with all future owners of the building or its parts. Need to note, management will spread to whole building.
  • Developer must ensure that if any of the building or its part’s owners will decide to sell their property, located in a building managed by MC, such transaction could be done only subject to the MC approval of the future owner.
  • Developer must ensure and provide guarantee that existing and future owners won’t change this MC for the future 10-20 years.
  • Developer must ensure the inability of the building or its premises owners, managed by the MC, to have influence on methods and techniques of management of their real estate property in managed building.

2.1. The complexity of the issue.

It is necessary constantly to do monitoring of building and it’s premises owners in MC managed building in such ways as observance of the owners change conditions (alignment with MC), inclusion in the primary and following property sale purchase contracts with restrictions and obligations.

As soon as the number of owners in the building exceeds two – according to legislation of Kazakhstan, the condominium rights are rise itself. Such rules are not applicable for non-residential buildings. Thus, it is also necessary to monitor the subscription of agreements about condominium, management of the building and other documents by new owners.

In the legislation of the Republic of Kazakhstan there is no any absolute ready and applicable solutions, the legislation is changed frequently and supplemented - it intends compulsive subscription large number of documents for each sold object in the MC managed building.

2.2. Variants of management.

There aren’t universal solutions in the legislation of Kazakhstan. So, it is necessary to combine all the available variants and opportunities in order to achieve the most appropriate result.

Need to note - foreign MC didn’t accept any of the stated below variants on 100%.

The Condominium. The Cooperative of apartment owners. The most powerful instrument, because it is protected by law and is appeared automatically, as soon as there are two or more owners in the same building. However, in the legislation of RK there are no conditions about formation and registration of the objects of condominium for non-residential buildings. If to take into account only norms of Civil Code, it is theoretically possible to create condominium in non-residential buildings. But when the question of more detailed understanding of the rights and duties of subjects of condominium arise, it becomes necessary to be ruled by norms of a civil contract agreement. After creation of object of condominium, it becomes possible to choose the method of common property management: by its own efforts, creating of Cooperative, hiring third parties or companies.

Trust management of property. Convenient way. All things can be prescribed in the contract, and this contract can be registered in the authorized state bodies. Management companies greatly upset because of possibility of any incorporator of the trust management to terminate such contract, get out of it, or do not sign such contract. According to their opinion Trust management basics in the Civil Code can be interpreted too broadly.

Consumer cooperative, i.e. the registration of an entity in this form. Owners with their apartments and premises are included in this cooperative. The cooperative operates this premises. This variant is not acceptable to the owners. They find it difficult to agree to have in possession share in the cooperative, but not the real estate itself. The negative thing is: losses of the cooperative are distributed among its members, the cooperative members have a preferential right to purchase the assets of the cooperative, and others.

3. Property registration.

3.1 Difficulties and their influence on the terms of registration.

Actual term of the state registration of rights (ownership, lease, usage right) is at least 6-7 months. Whereas according to the law, if to add all the shortest terms it will take within 2-2,5 months.

After studying this section, take into consideration the real terms and correct them necessarily in your project in order to have extra time.

The process is like following:

  • excavation work - 6 weeks;
  • adjustment in cadastral department - 2 weeks;
  • Administration of Architecture and Urban Planning - 4 weeks (adjustment of coordinates and putting it on the cadastral map);
  • Commission by the Akimat Administration on Land Relations - 2 weeks;
  • State branch enterprise of Almaty of Republican State Enterprise «State Research and Production Center for Land Resources and Land Tenure» - 8 weeks (preparation of draft of the resolution);
  • The state act preparation - 2 weeks;
  • Administration of Architecture and Urban Planning - 2 weeks (assignment of a number, address);
  • City Real Estate Center - 1 week (keeping to the base);
  • registration in the Justice Department - 1 week.

Correction - is a new action that is necessary to do in almost every step of real estate registration. And the cause of all is the lack of a single database for the cadastral coordinates. For each state body, there is own: Administration of Architecture and Urban Planning, Real Estate Center, the Justice Department, State branch enterprise of Almaty of Republican State Enterprise «State Research and Production Center for Land Resources and Land Tenure», Administration on land relations. So, it becomes necessary to run across multiple state bodies (authorities), and provide information in all databases to fulfill the process and take all databases in single order.

State Archives. Get information on some previously committed transactions on a particular property is almost impossible. State Archive moved several times previously (2009, 2010) from place to place, there is simply no information, either because of the chaos documents cannot be found. To recover lost documents is extremely difficult. There is no any electronic archive in Kazakhstan (for the date of September, 2012).

In view of the above, we encourage you to involve local professionals with experience and recommendations in order to solve or avoid such complex issues.

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