No Good Way to Buy Your Own Parking Space

Existing legislation lacks provisions to allow the individual ownership of spaces, hampering car owners and developers alike.

Anton Chernykh,
Manager,
Ernst & Young

The problem of registering the ownership of parking spaces in covered, multi-level parking facilities and underground garages with the state is becoming increasingly urgent in Moscow, St. Petersburg and elsewhere in Russia. Indeed, virtually no high-rise residential or mixed-use projects are built now without parking facilities catering to residents or visitors.

Naturally, parking-space owners need legal certainty of their right of ownership to that object. They would ideally like to have their rights to one or more parking spaces confirmed with certificates of ownership of those spaces. However, owners are often unable to achieve this because of existing legislative barriers.   

Under Russian law, immovable properties subject to state registration include the following objects: plots of land, subsurface plots and all land-related assets that cannot be relocated without causing disproportionate harm to their functionality, including buildings, structures and residential and nonresidential units.

A "unit" is the smallest part of a building or structure for which ownership can be registered. To register a title to a car space under the existing legislation, one has to prove that the space meets the definition of a unit, specifically, a nonresidential unit.

Dmitry Tetiouchev,
Partner,
Ernst & Young

Russian civil law does not define the term "nonresidential unit." But by interpreting several legislative acts, a nonresidential unit may be classified as a separate unit that qualifies as a real estate property and is not intended for permanent residence.

In one case, the court refused to recognize a parking space as a nonresidential unit, arguing that the documents relating to the case did not contain information on the physical boundaries that would separate the parking space from other parking spaces in the lot. In that case, the parking spaces were separated from each other with floor markings only.

Thus, the case law defines "being separated" as structural (physical) separation of a unit from other units. As a rule, such separation is achieved by using wall constructions. Therefore, the separation of a parking space with floor paint, which is common practice, does not create a separate unit.

As a result, parking-space owners are legally unable to acquire individual ownership of their parking space (unless it is physically separated) that can be registered and confirmed with an ownership certificate.

So how are titles to parking spaces currently registered in Russia? In the absence of physical separation between them, parking spaces are treated by courts and registration authorities as parts of nonresidential premises inside parking lots or garages. When this approach is taken, the buyer of a parking space does not receive individual ownership of the space, but rather a share of ownership in the entire parking facility.

However, the legal regime of shared ownership of property in Russia involves significant limitations on the use and disposal of the property that is in the shared ownership. Firstly, each of the co-owners is entitled to use a portion of the parking facility in proportion to his or her share in the shared ownership, so often a parking space that one co-owner believes to be his or her property may be quite legitimately used by another.

To avoid such situations and make sure that parking spaces are assigned to specific owners, the co-owners may enter into an agreement to set rules of ownership and use of the entire parking facility, or the procedure for using the parking facility may be established by a court.

Secondly, there are significant limitations on the sale, rent or other disposal of a parking facility or individual parking space as a tangible asset. The disposal of assets in shared ownership is subject to the approval of all co-owners. Thus, from a purely legal standpoint, a co-owner is supposed to obtain prior consent of all other co-owners to rent a parking space, which is quite difficult in practice and, in fact, is rarely done.

Thirdly, under the Russian Civil Code, the sale of a share in the shared ownership of premises is subject to the pre-emption rights of other co-owners, which greatly complicates the transaction.

This legal requirement applies not only to the rights of individuals and entities acquiring parking spaces for personal use, but also to the rights of development companies that build parking lots and garages with a view to sale. Therefore, after such an entity sells a share in the shared ownership of a parking lot or garage to the first buyer of a parking space, it will need to obtain his or her consent for the sale of the next share in the shared ownership, and each new sale it makes will be subject to the prior consent of all the existing co-owners.

Thus, the current situation unduly limits the rights and legal interests not only of those acquiring parking spaces, but also of the entities that build parking facilities aiming to sell them.

This problem can be solved only by amending current Russian civil legislation to enable parking-space owners to register parking spaces as legal objects and obtain individual ownership, because currently even the explanations of Russia's highest courts are not sufficient to secure the rights and legal interests of parking-space owners.