Before the investment project is started a foreign investor should know the specific features of structuring of the project. In real estate issues a foreign investor status is different from a Russian investor one in greater importance of preliminary legal and tax structuring of the project as well as conducting a comprehensive analysis of the rights to the object to be acquired (so-called due diligence).
The following legal aspects are considered for such purpose:
choice of the investment object and due diligence of the rights to the object to be acquired;
the ways of acquisition of rights to the investment object;
financing scheme for the project.
Choice of the investment object
At present in Russia land plots and buildings subject to reconstruction are in highest demand for investment purposes. While selecting the investment object, apart from market factors, it's necessary to pay attention to the legal aspects, which can have great influence on project planning and on possibility of its implementation.
Legal due diligence of investment object
Due diligence of title to investment object. It is important, to verify the acquisition of legal title to the real property, any liens and encumbrances of statutory or contractual nature, whether there are judicial or administrative proceedings in relation to this real property.
Besides due diligence of title, a so-called technical and environmental due diligence should be made, which adds the issues not revealed during the due diligence of title (functional designation -residential or nonresidential, location of the object in an industrial, public and business or residential zone etc.). It's important to verify functional designation of land plot, to which land category it is subject to and whether it's permitted to use it in such a way (whether it should be reclassified to another category), city-planning restrictions, servitudes and other encumbrances on the land, which may result in restrictions of its use and the construction works thereon.
The project documentation must include a section on environmental protection measures. The fundamental principles of Russian environmental law include the principle of full compensation for damage caused to the environment, principle of environmental impact assessment, etc. The documentation of a target land must be complied with state review, which should evaluate, among other issues, the environmental impact of the given object.
Besides that, legal due diligence includes the analysis of whether a complex of issues related to legal requirements was complied with while the title to land was acquired.
The result of legal due diligence can be a revelation of committed violations during the rights to investment object were being acquired, as well as evaluation of risks of future contestation of the investor's rights to the investment object and an investigation of possibilities for reducing the risks.
The ways of acquisition of rights to the investment object and financing scheme for the project are described in the separate parts below.
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