Criminal responsibility for fraud of shared construction participants is introduced

By the Federal Law as of 01.05.2016 №139-FZ the amendments in the Criminal Code of the RF and certain legislative acts were introduced. They relate to allocation of criminal responsibility for breach of legislation concerning participation in shared construction of multi dwelling units and real property items.

Such a dramatic strengthening of responsibility in the field of the shared participation of citizens in construction occurs due to violations of mass proportions. According to the Ministry of Construction, Housing and Utilities of the RF, more than 70 thousand people have become victims as a result of these violations. In the aggravating economic conditions, disappearance of cheap credits including in the field of construction, bankruptcy of real estate developers and delayed periods of construction became more frequent. 

In order to demonstrate the situation in the construction industry the data from Information and Analytical system Globas-i should be given with the results of selection analysis of construction companies, having submitted the accounting report for the last accounting 2014 year to the State statistics authorities. Thus 8% of the amount of these companies are in the process of being wound up, 27% don’t have profit or bear a net loss, 4% don’t have revenue from the operational activity, liquidity ratio (company’s assets adequacy for meeting the short-term liabilities) of 56% don’t stay within regulatory values and 19% have an unsatisfactory solvency index Globas-i. 

Inactivity or sharply decreased activity on the construction site, sale of residential space in partially constructed houses with big discounts, frequent change of general contractors, introduction of amendments into the planning documentation in the process of construction and ignorance of communication with customers – these are the main features of long term construction and pre-bankruptcy of developers.

Thus the adoption of severe measures may be considered quite appropriate. 

The new article 200.3 was introduced by the Federal Law into the Criminal Code of the RF. According to the article, the breach of legislation on participation in shared construction of multi dwelling units and real property items committed in major amounts, i.e. if the sum of money raised from the citizens exceeds 3 million RUB, subjects to a punishment of 360 hours’ compulsory community service, correctional or hard labor for a period from one to two years or up to two years’ imprisonment.    

The more severe punishment is to be carried for those who have committed the crime with aggravating circumstances, i.e. by a group of persons by previous concert or in grand amounts (the sum of raised money – more than 5 million RUB.) - up to 480 hours of compulsory community service, or correctional labor for up to two years or hard labor for up to five years or up to five years’ imprisonment.    

However the developer can be released from the responsibility in case of completion and fulfillment of obligations to the participants or compensation of losses in full to the injured.

The corresponding amendments were as well introduced into the Criminal Procedure Code of the RF, Code of Administrative Offences of the RF and the Federal Law as of 30.12.2004 №214-FZ “Concerning participation in the shared construction of multi dwelling units and other real property items and on amendments being made to certain legislative acts of the Russian Federation”.