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Digest 15

We are glad to present you the fifteenth issue of the St. Petersburg International Legal Forum Digest.

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Cooperation between such countries, as Serbia and Russia, can always be enhanced and upgraded

Nikola Selaković

Minister of Justice of the Republic of Serbia

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1. To begin with, it is worth noting that Russia and Serbia share a lot of common traditions starting with ethnic identity and origins, Slavic languages we speak, and finishing with a common religious tradition. Speaking about the legal systems, can you say that the Russian legal system resembles the Serbian one? Do you think that nowadays Serbian lawyers face the same problems as their Russian colleagues?

Of course, as you have said, we have common ethnic origins, religious origins, cultural origins, but on the other hand, we also have many similarities in our political systems. As you know, after 1945 the both countries were members of the Eastern Bloc. In fact, former Yugoslavia used to differ much from the other socialist states, but in some aspects we were very similar.

If we are talking about the legal area, judicial area, there is a certain similarity mostly in criminal law and the cooperation between Russian and Serbian lawyers in this field still exists and is still really strong. As for the problems the lawyers are facing now and the common problems our countries currently resolve, they are mostly connected with the new political situation. Both Russia and Serbia are countries in transition. Obviously, all the countries with transition economies have more or less similar problems, and I would say they are the same in Serbia and Russia.

As an example, Serbia is now beginning the implementation of notarial service and I am quite sure that we are going to have the same problems that Russian lawyers were facing during the implementation of this system in your country.

2. How would you estimate the progress in cooperation between Russia and Serbia in legal area (or in cultural area as well)? What steps, in your opinion, could be taken in the future to make the interaction more intense?

First of all, I should say that the legal area is really a very wide one. We can build cooperation between solicitors, representatives of courts, between ministries on the governmental level, and also between institutions in the field of legal education, namely between faculties of universities or, may be, judicial academies, and thus, between people who are going to become lawyers, judges or public prosecutors. Of course, the cooperation does exist but between such countries, as Serbia and Russia, this interaction can always be enhanced and upgraded. This issue was one of the topics I have been discussing with my colleague, Minister of Justice of the Russian Federation Alexander Konovalov, and I can confirm that on both sides there is a strong wish to develop the mutual cooperation on a new better level.

If we talk about the cultural interaction, I think personally that there is plenty of ‘free space’, especially for Russians to learn more about the Serbian culture, as people are not too much aware of it, especially about the Serbian medieval culture. It should be pointed out that many Serbian scholars, monks and average people escaped from Serbia to Russia. For instance, in St Petersburg there is a tomb of a very well-known Serb, Count Sava Vladislavić-Raguzinsky1, who used to be one of the founders of the Russian Secret Service and is famous for having established the demarcation line between China and Russia.

I can say that, however, he is just on the top of the hill, and there are much more interesting things connecting Serbia and Russia. In Serbia there are a lot of Orthodox monasteries of the 9th-15th centuries, and the Church of Saint Sava is also one of the touchpoints between our two countries, because the Russian Government and the President of the Russian Federation Vladimir Putin himself expressed their interest in the project to cover all the walls of the Church of Saint Sava with mosaic, and it is going to be a huge contribution and a precious gift of Russia to Serbian people. Eventually, we maintain cooperation in many areas, and I am sure it’s going to become even larger in the future.

3. So, in the frameworks of the Russian-Serbian cooperation you have come to the IV St. Petersburg International Legal Forum. Is it your first visit to the Forum? Did the Forum meet your expectations?

Yes, this is my first visit and I believe not the last one. Even if I am not the Minister the next year, I am sure I will come again.

In general, I think the Forum is a unique event not only in Europe but worldwide. It gives a really good opportunity to exchange experiences, meet different people and different legal systems, may be, discover common problems and also try to find the solutions. The Forum allows meeting many people and doing much work in one place instead of going to several countries and arranging several different meetings. On June 19 I had meetings with my two colleagues, Ministers of Justice of Russia and Argentina, yesterday I had a meeting with the Minister of Justice of Armenia, and you can just imagine how much time I would spend travelling to all these countries and how much money my country would spend on this as well. I also had a good chance to inform the Serbian legal community about this event and encourage them to come to the V St. Petersburg International Legal Forum.

For example, I hope to strengthen cooperation in the area of legal education, as there are not so many Serbian professors here. However, Serbia has a very strong tradition of legal studies. Our State University is 200 years old and the oldest faculty, as well as the oldest one in Russia, is the faculty of law. In Serbia there are six state universities and each of them has the law faculty, so spreading the idea of the Forum among them will also support Serbian academics in their decision to take part in some of the sessions of the Forum 2015.

4. Did you manage to visit the exhibition of the legal book at the Forum?

Yes, I have been there and really enjoyed it. I also met the Chief of the Library and we were talking about bringing this exhibition to Serbia. In Belgrade there is the oldest Russian cultural center in this part of Europe and it is also one of the best cultural centers in Belgrade. There is a big cultural programmes’ schedule for the whole year and, sure, it would be a good idea to arrange such an exhibition in Serbia, as the Russian libraries, including the Military Library of the General Staff that has organized this exhibition at the Forum, are really full of documents which can be interesting for Serbian lawyers and scientists. Moreover, it will be a good way to support cultural links between our countries.

5. Do you have such projects relating art and justice in Serbia?

There were not so many of them in the past, but on the Statehood Day2 we’ve organized the exhibition of Serbian Constitutions of the 19th-20th centuries. As I am originally a legal historian, I can say that we are interested in such projects and some of them are being prepared right now. Our main goal is to make this kind of legal culture more accessible to our people and to show them that we have a great legal history not only of the modern period but also of the middle ages. This history is more than 900 years and has innumerous legal artifacts, so there are many things we can show to the world and many projects are still to be organized, and I am sure it is going to be during my ministership.


1 Sava Vladislavić-Raguzinsky (1669 – 1738) was a Serbian diplomat in the employ of Peter the Great. His main achievement was the Treaty of Kiakhta delimiting the Russian-Chinese border and regulating relations between the Russian Empire and the Qing Empire until the mid-19th century.

2 Statehood Day (Serbian Дан државности, Dan državnosti) is a national holiday which is celebrated in Serbia on February 15.

Helpful hints for those who want to purchase a property in the UK

James Dodsworth

Partner, White & Case, London

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1. What costs in addition, to the purchase price, should be taken into account when purchasing a property in the UK?

Whether you are buying a freehold or leasehold property in England and Wales there are certain transactional costs which will need to be considered. Property transactions in Scotland, Northern Ireland and the Channel Islands are subject to separate laws and taxes and fall outside the scope of this summary.

The main transactional costs are as follows:

  • Stamp Duty: Stamp Duty Land Tax (SDLT) will be payable on most property transactions. The level of SDLT will vary depending on the value of the property. For commercial transactions valued at more than £500,000 the rate of SDLT is 4% of the purchase price.

  • Searches Costs and Land Registry Fees: As part of the due diligence process the buyer’s solicitors will usually put in hand various property searches in order to establish whether there are any issues with the property. The cost of the searches is fairly standard and will range from a few hundred to a few thousand pounds. Following completion of the transaction, an application will be submitted to the Land Registry in order to register the transfer of title to the buyer and any legal charges. The Land Registry application fees are standard and depend on the value of the transaction.

  • Value Added Tax (VAT): In some instances VAT at a rate of 20% will be payable on the purchase price. This cost should be recoverable if the buyer is registered for VAT. However this may create an initial funds flow issue for the buyer. SDLT will also be payable on any VAT. In certain circumstances (for example where the property is income producing pursuant to a rental business) the property may constitute a transfer of a going concern (“TOGC”) in which case no VAT will be payable provided that the parties take proper legal advice.

  • Valuation/ Survey Fees: The buyer will usually carry out a:

    • valuation report of the property in order to establish its market value; and a

    • survey of the property in order to identify any structural issues which may impact on the value of the property.

The cost of a survey and the valuation will vary depending on the type of property and also the provider.

  • Legal Fees: The buyer will need to engage solicitors to carry out the due diligence for the property and also to deal with the transactional paperwork. If funding is required, then the buyer will also need to take into account the cost of its lender’s solicitors’ fee.

In addition to the initial transactional costs you should also take into account management costs:

  • Building Insurance: As the owner of a property, the buyer will usually be required to insure the property. Again the level of the insurance premium will vary depending on the value of the property. If the property is occupied, then it may be possible to recover the cost of the insurance premium from the tenants through the service charge.

  • Business rate and other outgoings: If the property is tenanted then most outgoings will be payable by the tenant. If the property is vacant or to be occupied by the buyer then the buyer will be liable for such costs. An estimate of such costs can be identified as part of the due diligence process.

  • Service Charge Voids: If the property is fully occupied the buyer will want to know that all costs are recoverable from the tenant. Any voids in the service charge may be payable by the buyer.

  • Managing Agent Fees: In certain circumstance the buyer may want to appoint a managing agent to deal with the day to day management of the property. The managing agent will usually charge a fee for providing such service. This cost maybe recoverable from the occupational tenants through the service charge.

2. What documents will usually be entered into on a transaction? What are the main difficulties of a real estate transaction and what procedures are in place to prevent fraud and money laundering?

There will be a set of documents which the buyer will need to enter into when acquiring a property:

  • Sale Contract: The contract will set out all the agreed terms and not just the main terms. The parties to a sale contract are legally bound once they have formally entered into the contract. A sale contract can be made subject to conditions (for example, subject to obtaining the consent of the landlord in the case of the sale of a leasehold interest). If the conditions are not satisfied (or waived) the contract is usually terminable. Until a formal sale contract is agreed and signed neither party is legally bound and so there is flexibility to conduct negotiations without the concern that binding legal commitments may arise unintentionally. Normally the buyer and seller (or their agents) agree heads of terms, recording the principal commercial terms for the transaction, before referring the matter to lawyers to negotiate the formal contract.

  • Transfer: The transfer of the property from the seller to the buyer is completed on the date specified in the sale contract for completion by a separate instrument, called a transfer, which the buyer then submits to the Land Registry for registration. As between seller and buyer, title to the property passes on completion of the transfer but the buyer does not become the legal owner of the interest transferred until it becomes registered as the proprietor of that interest at the Land Registry.

  • Financing Documents: If financing is required to purchase the property then the buyer will need to enter into a facility agreement which will set out the terms of the loan. The buyer will also need to enter into a debenture or legal charge which will document the security over which the loan is charged.

  • Additional Documents: There may be additional documentation that will need to be entered into depending on the complexity of the transaction such as asset management agreements, rent deposit deeds and other ancillary documentation relating to English real estate.

The seller’s solicitor will need to prepare a title pack which will contain all the property documents including any lease documents and property management information. All freehold transfers will be subject to registration at a central register which is supported by the British Government.

Most difficulties arise when title defects relating to the ownership or restricting the use of the property are identified as part of the due diligence. Depending on the type of defect it may possible to put insurance in place to protect against the risk of any claim. It may however be that insurance will not be suitable and the defect may impact on the value of the property and negotiations will need to be carried out to adjust the purchase price accordingly.

All solicitors in the UK are under a legal obligation to identify and verify their client by independent means, identify, on a risk sensitive approach, any beneficial owners and obtain information on the purpose of the transaction and intended nature of the business relationship in order to prevent fraud.

A buyer can take simple steps to protect their property interest and safeguard their rights as legitimate property owners such as ensuring that the information contained in the title register for the property are correct including the address for service.

3. Does the real estate tenure guarantee visa receiving to the country where it was purchased?

There are no restrictions on foreign individuals investing in UK real estate and this flexibility is often cited as one of the great attractions to investing in London and the wider UK market. However there is currently no link between the British Government migration policy and property ownership.

4. Are there any statistics showing the number of transactions during the year 2013 (or earlier) and /or quantitative indicators of growth /decline of the number of transactions?

The above charts illustrate the number of residential and commercial real estate transactions that completed during April 2005 to December 2013. The general trend has been that the number of commercial and residential transactions has steadily increased during this time frame. The decrease in the number of transactions in 2008 was triggered by the credit crunch but the market has since seen a slow and steady increase.

The above charts have been obtained from HM Revenue & Customs Annual UK Property Transaction Statistics dated 28 June 2013.

5. Please indicate the main points of checking a transaction and assuring its safety?

The buyer’s solicitor will carry out full due diligence of the property in order to identify any issues with the property and will report such issues with its client.

A vauler will assess the market value of the property to ensure the purchase price reflects the market value.

A surveyor will inspect the property in order to establish if there are any structural defects which may impact on the value of the property.

The buyer’s solicitor will prepare a report on title in relation to the main issues relating to the property.

Interview: Real Estate Acquisition in Germany

Thomas Kaspelherr

Counsel, Dentons

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1. What, excluding the price, should we pay attention to when choosing a real estate unit: taxation of property owners, terms and conditions of payment for utility services, leasing opportunities, etc.?

Investors should know that Germany has strict laws protecting the interests of tenants. Therefore any existing lease agreements should be reviewed regarding the obligations of the parties. Lease agreements with a fixed term of more than one year should further comply with the written form requirements pursuant to German law, otherwise they can be terminated even before the expiry of the fixed lease period. The purchaser would have to pay property transfer tax in the amount of at least 3.5 % up to 6.5 % of the purchase price depending on the federal state where the property is located. Keeping real estate in Germany is also subject to ongoing taxation in the form of property tax and – if earnings are received from the real estate – income tax.

2. What should we pay attention to when signing a deal? What documents should the future owner have and ask for? What are the main difficulties of such transactions? How can one avoid falling into the hands of robbers?

The purchaser should inspect the property (together with an architect or property surveyor) before offering a purchase price. In addition, most purchasers will request the current property owner to provide him with property related documents to ascertain the condition of the property and the legal issues involved. To conduct a proper legal due diligence at least the following documents should be obtained from the seller of the property: land register excerpts, lease agreements, service and supply contracts, insurance policies, building permits and zoning plans.

3. Does the real estate tenure guarantee receipt of a visa to the country where it was purchased?

There is no direct connection between real estate investments and citizenship or visa advantages in Germany. In Germany, as a matter of principle the acquisition of property by foreigners (including non-EU citizens) is possible without any restrictions.

This applies to natural persons as well as to foreign companies, as far as they have legal capacity. For non-EU citizens, however, it is important to note that by purchasing property in Germany, a resident permit status will not automatically be gained.

4. Are there any statistics showing the volume of transactions during 2013 (or earlier) and /or quantitative indicators of growth /decline of the number of transactions?

In retrospect, 2013 performed better in economic terms than many had expected. Germany has already compensated for its stagnant development in 2009, and its total economic output exceeded pre-crisis levels three years ago. Commercial real estate alone reached a top volume of more than EUR 30 billion. This has been the annual strongest result since 2007. We expect that sales of real estate in Germany will also remain at a high level in 2014 as many German and foreign investors have appreciated the safety of the German real estate market over the last few years.

5 safety tips”: please indicate the main points to check during a transaction to assure its safety.

1. Investigate the real estate market thoroughly

2. Obtain professional purchase assistance – a professional real estate agent can provide useful guidance that can help to avoid many pitfalls

3. Mandate a German lawyer at an early stage – it is important to have a professional attorney who will identify potential legal problems

4. Translation of key documents – a purchaser should always strive to fully understand the documents to be signed

5. Demand for warranties – for example: transfer of the property without defects; compliance with construction permits; guaranteed rental income

5 steps to achieving real estate tenure in a foreign country” – please indicate the main points of the purchase process.

1. Site inspection of the property/ preliminary discussions and negotiation with the seller

2. Legal due diligence in relation to the property to be acquired / dealing with financing banks regarding debt financing structure

3. Drafting and negotiation of a property purchase agreement/notarization by a German notary public

4. Payment of the purchase price for the property after the notary has confirmed the fulfillment of all conditions precedent for the maturity of the purchase price

5. Hand-over of the property to the purchaser, registration of the purchaser as new owner in the land register

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Coming in the next issue:

In the next issue of the Digest on September 3 we will present you the interviews with leading experts of the legal market, as well as the article on leadership and law firm management.