Legislation in question: Article 31.1 of the Federal Law “On the State Registration of the Ownership Rights to Real Estate and Transactions Therewith”

Legal issue: Is the state liable for compensation issued to the good-faith purchaser of real estate, when such transaction was later annulled by the court, with such compensation based on the fact that the relevant state body bears responsibility for wrongful actions while registering the rights to said real estate (residential property).

Ratio decidendi: Regulation in question is contradictory to the Constitution due to its ambiguity: the courts deny the petitioners’ claims based on the interpretation of regulations as applicable only in cases when it has been determined that the relevant state body has conducted illegal acts while registering the rights to residential real estate, whereupon the owner has lost his/her property. However, analysis of the legislative process materials shows that the legislature has pursued a goal of providing a compensation to the good-faith buyer for his losses regardless of the fault of the State, i.e. when his right for the ownership was rescinded not due to any fault of the employees of registering body, but due to the actions of the third parties. Additionally, the goal was not to compensate the purchaser’s loss in its entirety, but to partially remedy the consequences of negative results, to stimulate the turnover of the residential real estate, and in some cases - also a secondary guarantee of the right of abode.