In terms of the number of unfinished buildings, Russia’s southern Krasnodar territory is one of the most problematic regions in the country. Real estate in the south of Russia enjoys a high enough demand. That is why in recent years there has been housing construction is blooming here. However, not all developers are conscientious. Some leave shareholders without apartments and money.
Cases where the authorities had to pull down fully finished high-rise buildings, which were erected without relevant permits, received particularly wide publicity. Especially the resort city of Sochi is best known for that. Usually, construction started as a 2-3-storey house, and under a project of this sort the city administration issued permitting documents. After a short time, the number of stories would increase several times, and flats there would sell like hot buns on a stove. As an alternative, the construction of B&Bs was carried out at the location of garages or boathouses. Until a certain moment, the city and regulatory authorities turned a blind eye to it, and communication lines were installed for bribes. In 2018, fierce fight against squatter development began: Anatoly Pakhomov, the previous mayor of Sochi, rolled up his sleeves to cancel the permissions for the construction and demolition of already built residential buildings and facilities that were used for business purposes. The city administration has identified 597 such objects, and 54 of them are apartment buildings -- the list is posted on the website. The city hall of Sochi got court decisions ordering demolition of all the houses from the list.
During 2019, this issue turned Sochi and the whole Krasnodar region into a place of social tensions resonating at the federal level. Rallies of deceived shareholders, which began in March 2019, visits by federal social and political activists to the region, loud statements and legal proceedings against the city authorities -- as a result, the then mayor Pakhomov was forced to launch dialogue with the protesters.
For instance, in July 2019, Pakhomov held one of the meetings with deceived shareholders. The shareholders of five buildings, the developer of which, Anzor Pruidze, had been convicted for fraud, were invited to the meeting. Each of these houses has a certain level of readiness: some of them are not yet connected to the water mains and electricity, while others have no documents for technical connection to the city networks, and still others are not built at all. Now the defrauded homebuyers have to build houses at their own expense, but many admit that it is not possible to raise the necessary amount of money. In some cases, investors come to rescue. The mayor promised to help as well. "If there are problems with life essential services you have agreed but something is wrong, please feel free to contact me,” Pakhomov said. “I will devote my time to you. For example, you came to a heat supply system or water services company but nobody put attention to your problem -- come to me. I promise I’ll summon both of them, and they will finish everything.”
Evgeniya Dolgikh, Sochi real estate agent, told wek.ru that mass development of prestigious locations in Sochi began in 2010 after it had become known that the city would host the Olympic games. Unlike development companies, private individuals were not aware of the possible consequences. They purchased land parcels for private housing construction and built houses, which were then put into operation under the court decision. Dolgikh notes that until 2018, the authorities closed their eyes to the construction and sale of flats in such buildings, and after receiving the court ruling, the developers found themselves in the legal format. In 2018, massive cancelation of the court resolutions that legalized the houses began on the city administration’s counterclaims.
The Imeretinsky Park residential estate in Pereletnaya Street, 24, was one of the most famous and scandalous objects. In December 2018, the house was declared illegal, as its height exceeded the permitted height requirement for buildings in the Imeritinskaya lowlands. Residents filed appeals but at the session on August 6, the Krasnodar regional court refused to fulfill the demands. "The rights of all owners, including families with children and people who paid mortgages and spent on the purchase their maternity capital have been terminated,” Kristina Melashenko, a lawyer defending the interests of apartment owners, told reporters. “People cried after the session, and it was terrible to see those tears of despair. Today, we have no rights.”
According to Melashenko, the fate of settlements, which the Sochi administration promised to sign with developers of unauthorized construction projects so as not to demolish already inhabited houses, remains unclear, too.
The Sunny Beach Residential Complex was built in such a way that during the storm the seawaves flooded the balconies of the first floors. A total of 140 families bought flats in the first three 12-storey houses of this complex. On February 21, 2018, the Adler district court denied extension of the period to appeal against the court decision to pull down three 14-storey houses on the beach of the Herota river to the owners of the Sunny Beach residential complex. The future residents found out that the house would be demolished in August 2018. At the same time, they asked the court to extend the deadlines for appealing. The court decision says that "the developers should pull down the unauthorized buildings at their own expense at 4 Belorusskaya Street and bring the land plot to its original condition. The owners asked the administration of the Russian President for assistance in protecting their rights and preventing the demolition of the house.
And here the question arises: why did Sochi squatter development attract this animated interest on the part of the city authorities exactly in 2018? As Ilya Nosov, a Sochi lawyer, explained in his interview with wek.ru, there was a series of arrests of officials in Sochi in 2018. In April, First Deputy Mayor of Sochi Mugdin Chermit, Deputy Mayor Yury Palamarchuk and Head of Property Relations Vladimir Permyakov were arrested. In October, First Deputy Mayor of Sochi Sergey Yurin, his predecessor Anatoly Rykov and a number of other officials were detained and then arrested. A number of major criminal cases are currently under investigation. The suspects are key figures in the government of Sochi Mayor Anatoly Pakhomov. Arrested Deputy Mayor Ivan Bomberger (in spring 2019, he was released but remained under investigation on charges of abuse of office), Vladimir Malov, the head of the Architecture, Urban Development and Planning Department, as well as Sergey Vinarsky, the director of the municipal unitary enterprise Vodokanal. The majority of cases deal with bribes and various illicit schemes in housing construction.
"Pakhomov's associates found themselves between a rock and a hard place,” Nosov says. “On the one hand, long-term agreements with developers, corrupt schemes, millions invested by people in new flats on the beach-front locations. On the other hand, the threat of prison sentences and serious indictments. The officials were forced to show remarkable zeal and began to cancel and tear down everything that had been previously agreed by themselves.”
In late August 2019, Pakhomov announced he would not participate in the early September mayoral election. On September 10, it became known that Alexey Kopaigorodsky, 34, who previously worked as Vice-Governor of the Krasnodar territory took a post of a mayor of Sochi. During the secret ballot procedure at the session of the city assembly, all 44 deputies who participated in the meeting, voted for his candidacy. As experts asserted, Pakhomov's resignation was coordinated with the federal center which had no serious claims to the former mayor. However, as political analyst Dmitri Melnikov told in his interview with wek.ru, at the same time, numerous criminal cases against Pakhomov's inner circle played an important role in this decision.
Under the new mayor, the demolition of the already commissioned houses continued. Thus, in 2020, three multi-storey buildings were demolished: two buildings along Bakinskaya Street: four- and five-storey (total area of objects 1,500 sq.m), as well as a three-storey building with an area of 608 sq.m and a second one-storey building with an underground floor with an approximate area of more than 150 sq.m in Lo’o township.
The topic of deceived shareholders and demolished houses is particularly painful for Veniamin Kondratyev, the current governor of the Krasnodar territory. Though only last year about 10,000 shareholders received their flats, recently, one more meeting of defrauded homebuyers was held a few days ago. An appeal to Kondratyev to resign added to the demands to include their houses in a special all-Russian registry of uncompleted complexes. According to the activists, it was under Kondrateyv’s "effective" leadership that the number of problematic objects increased from 33 to 300.
As the regional government explained, a fund for protection of the rights of individuals - participants in shared-equity construction projects has been establishes in the Krasnodar territory. Its responsibilities include the monitoring of each problematic object. Some of them are being completed by raising investors’ money. In return, the new developer receives unsold space in the house under construction. In some cases, it is even allowed to add more stories or attachments to them so as to sell a few more flats or offices. If there are no vacant square meters in the future housing estate, then the administration gives the investor a land plot in return for completion of the object, where he can also to build a residential or commercial property in the future. Thus, in 2019, fifty long-delayed construction projects were completed in the Krasnodar territory.
For those projects where it is technically impossible or unprofitable to complete construction, a different plan is provided. The affected investors will be paid damages.
In late January, it became known that from February 10, such payments will be made to the defrauded homebuyers of four residential complexes: Dom Romanov, Yantar, Amethyst and Vorontsovsky. They will be made by Bank DOM.RF. The bank promises that the money will be transferred to the account within 10 days after the application. Many homebuyers have the question: "How honestly will the payment be calculated?"
Evgeniya Shumeyko, head of the fund for the rights of participants in shared-equity construction, says that there is nothing to worry about: "In each specific case, the amount of payment will be calculated at the market value of a square meter in comparable objects on the primary market, but cannot be less than the one specified in a co-investment contract. The market value is determined in accordance with the report of an independent appraiser invited by the fund. For non-residential properties and car places the payment will correspond to the value of the effective agreement."
This autumn, the Krasnodar territory will not only elect a new governor but also deputies to the legislative bodies of six city districts: Anapa, Armavir, Goryachy Klyuch, Krasnodar, Novorossiysk and Sochi. The heads to the councils of 32 municipal areas and the heads of 18 rural settlements will be elected at the same time. Certainly, all election campaigns will be affected by the problem of squatter developments and defrauded homebuyers. Perhaps, in the most unexpected way.