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IUE hosted a discussion club “An Analysis of the Legal Aspects of Direct Contracts on Provision of Utility Services between Utility Providers and Owners of Premises in Apartment Buildings”

On July 19, 2018 IUE hosted a discussion club “An Analysis of the Legal Aspects of Direct Contracts on Provision of Utility Services between Utility Providers and Owners of Premises in Apartment Buildings”. Nadezhda Kosareva, President (IUE) moderated the event. A. Sidyakin, First Deputy Chairperson of State Duma’s Committee on Housing Policy and Housing and Utilities Sector, participated in the discussion club.

Dmitry Gordeev, Senior Legal Advisor, Urban Economy Department (IUE) presented the findings of a study supported by IUE Endowment. The analysis aimed at identifying legal restraints and possible expansion of cases for making direct contracts on provision of utility services between utility providers and owners of premises in apartment buildings for various AB management methods, main problems related to organization of the contractual relations and approaches to solution of the problems.

Among the participants there have been representatives of federal state government bodies, utility providers, homeowners associations, expert organizations and others. They largely concurred with IUE’s experts and agreed that the reform was viable but required further detailed elaboration on a range of issues which are related not only to legal aspects but also to relevant economic and social aspects.

One of the leading experts on housing and utility issues, Sergey Sivaev, professor of National Research University “Higher School of Economics”, Director of Corporate Center (public company “Rostelecom”) evaluated the situation with the introduction of direct contracts, as well as licensing of management organizations and maximum growth index for utility services as an attempt to find a partial solution to a much more general problem of legal imbalances when it comes to sharing the responsibility for an AB condition, which is indicative, in general, of “the system crisis of the Russian Housing Legislation, as it pertains to residential real estate management”.

M. Nikolskiy, Director General, “Regional Investment and Urban Development”, LLC, believes that by using innovations we actually took a step backward from the model of sharing economy being developed all over the world.

N. Pobedinskaya, Deputy Executive Director on Legal Issues, the Russian Water and Wastewater Association asked a question – who will bear the responsibility for maintenance of building-level networks, who will pay for their maintenance? She suggests turning to the experience of foreign countries where a house is a single object with a bulk meter. And a building community decides on how to make settlements with utility providers and how to interact with a management organization.

A. Makrushin, Director General, Association “Housing and Utilities Sector and Urban Environment” noted that, in legal terms, we cannot achieve ‘crystal clarity’ with respect to the issues related to utility services. “We often need to implement fairly sophisticated legal schemes, which do not fit within a common framework”, - he said.

As any systemic solution the contractual reform in housing and utilities sector has its shortcomings, - noted A. Sidyakin, State Duma deputy, - including those identified by the event participants. Presently, State Duma is analyzing the law enforcement practice in relation to direct contracts, and is looking forward to further enhancing the relevant legislation.

At conclusion of the event, Nadezhda Kosareva stated that common property management is the most complex form of those pertaining to socio-economic nature of ownership. In an apartment building there is not a single person who is interested in preserving and increasing the value of the asset. By estimates of Nadezhda Kosareva, “it is for this reason that common property has not been produced on such a scale anywhere in the world – abroad condominiums make up around 5-10%”. Apartment buildings are owned, mostly, by one person, which is the case of commercial apartment buildings. “I see an infinite perspective of solving the issues related to apartment building management unless we curtail the production of condominiums and shift to construction of rental buildings, especially in major cities”, - concluded Nadezhda Kosareva.


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