OREANDA-NEWS. September 28, 2011. The insurance company ROSNO, together with the Moscow Guild of Realtors (MGR) held a roundtable discussion on the topic "Real Estate with Guarantee. Current and Future Mechanisms Protecting Individuals Against Loss of Housing Title: Their Advantages and Shortcomings, Development Priorities." The event was attended by directors of such real estate agencies as Sobstvennik, Prostor, Penaty, NeoRealty, Century 21 Vostok, representatives of Investtorgbank and Mosoblbank, reported the press-centre of ROSNO.

"Today, the real estate market is facing a very serious problem. Russia has no practically useful title protection mechanisms. Just one Zamoskvoretsky court taken alone hears 5 to 6 cases daily on invalidation of real estate transactions", states Mr. Vitaly Ous, Director of the Financial Risks Insurance Department of OJSC IC ROSNO.

"A comprehensive effective system guaranteeing the rights of housing owners must be established in our country", supports Mr. Ilya Shkop, Chairman of the Board of MGR.

According to Mr. Vitaly Us, two legal relation models exist abroad: the European model and the North-American model. The first model is based on registration of title itself, and in this case legal cleanness of the real estate object is checked within one month by public notaries representing government authorities. Therefore, government is liable to victims for payment of full compensation in case if the transaction is recognized to be invalid. In America, on the contrary, it is the transaction itself (the fact that it has been effectuated) that should be registered, and title insurance serves as the guarantee. For example, in the U.S., over 90% of all real estate has been insured for the entire possession period.

"On the one hand, Russia embodies both the European and the North American models. The Registration Chamber, representing the government, would register a transaction only after checking it for validity. On the other hand, however, public authorities provide no guarantees as to protection of ownership title", says Mr. Sergei Sayapin, MGR President and head of the real estate agency Prostor. Compensation payments to victims are so difficult to procure via judicial procedure that many are left high and dry. And even those who managed to prove that the property was lost not through the owner’s guilt, receive compensations incomparable to the true scale of the damage. Therefore, says the expert, the Finance Ministry’s draft law "On amendment of the articles 31.1 and 33 of the Federal Law „On State Registration of Real Estate Rights and Transactions Therewith“, which describes the mechanism used to pay compensations to those who lose their only housing — and its size of 1 million roubles — represent a huge step towards owners.

As an example, the audience reviewed the Chalayevs family case. Three years ago they purchased an apartment under a mortgage scheme via the realtor recommended to them by the lending bank, and insured it with an insurance company accredited with the bank. Ironically, the apartment was not clean as it was sold under power of attorney issued by the already deceased grandmother of the seller. As a result, Chalayevs were not able to make use of the so called legal cleanness check of the real estate object, and their insurance coverage was also found to be of no avail, as it did not stipulated insurance compensation in such a situation. This family lost the apartment, received no damage compensation, and still had to make monthly loan payments. By now, courts heard this case 16 times, and yet the situation is where it was before.

„Naturally, this is a pure fraud“, says Ilya Shkop. „Yet, in reality real estate agencies are not able to verify all information regarding this or that object. We have no legal grounds to do this. Therefore, we give no guarantees.“ Moreover, adds the expert, vesting realtors with such powers would not solve the problem. This resource would be a very tempting piece for criminal elements".

The roundtable discussion participants see the way out in developing unified title insurance rules.

"Together with ROSNO, we have decided to set up a joint workgroup to develop unified insurance standards. It would be excellent to see other insurers join us. Title insurance must be comprehensible to all and be 100% effective. Owners need to be guaranteed that, in case if they lose their housing, they would surely receive compensation from their insurance companies", summarizes Mr. Ilya Shkop.