Judgment of the Constitutional Court of 24 March 2015 № 5-П upon the petition of citizen A.M.Bogatyrev

Legislation in question: Article 19 of the Federal Law “On the Implementation of the Housing Code of the Russian Federation”

Legal issue: Constitutionality of remaining of the right to use residential premises at a housing co-op with persons who had original title to it, when such residential premises were sold at a public auction as a remedy to rectify default in repayment of a mortgage.

Ratio decidendi: The regulation in question contradicts the Constitution due to the fact that it does not constitute an appropriate guarantee for protection of rights of the parties in the civil circulation acting prudently and in good faith, as long as it allows to preserve encumbrances during transfer of a residential property title in case of a sale of such property at a public auction as a means to rectify default in repayment of the mortgage, provided that the requirement of State registration of encumbrances has not been legally enforced. Federal legislature has to develop an appropriate legal framework, allowing for the maximum transparency of information on all the third party rights to the titles of all alienated properties.

Dissenting opinion:
  • Family members of a housing co-op member have the right to use a residential property independent of the title possession and it remains even after the title is transferred to a different person. This does not allow to raise a question of the residential property title holders’ constitutional rights infringement. The article in question does not contradict the Constitution due to the fact that the exercise of owner’s rights should not cause the limitation of the rights and freedoms of persons, holding the title of residential property and exercising their constitutional right for abode.

  • (concurrent opinion) Acceptance of unlimited corporeal right is inadmissible in the court of law. Widening the circle of persons holding corporeal rightы always leads to the limitation of the most important corporeal right - Protection of Private Property, since their relation resembles the one of connecting vessels holding a liquid. One ought to consider existing political choice in favour of priority of collective benefit of the citizens in need of the housing and thus interested in mortgage industry development. While solving particular disputes, the courts have to consider an economic logic the social-economic decisions are based on. Based on the existing choice of the trend in social housing policy, the federal legislature has adopted the laws intended to create the legal framework aiding in development of residential mortgage industry, construction mortgage industry, as well as development of housing market as a whole, having reduced the risks and restrictions for the residential mortgage industry and creating the conditions for inflow of additional investments into this sector of economy. The goal of legislature, as well as political brunches of the government is obvious - to increase the purchasing accessibility of the housing, especially for young families. The legislature has found itself faced with a difficult choice between interests of the family members of a last owner and the interests of citizens in need for additional funding of housing construction. The choice was made in full compliance with a Theory of a Rational Choice and an applicable criteria for decisions efficiency, utilized by the institutional economics. The courts do not have to take into consideration the motivation of the property buyer. Even if he/she buys the property at a public auction not to reside in it, but to use it as an asset for future profit taking, the constitutional statement postulating that “right of private property is protected by the law”(Article 35, Part 1, the Constitution of the Russian Federation) should determine the courts’ application of the law.

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Subject area:
Economic activities, finances housing law