A surge in demand for apartment shares by Russians continued into 2024, with a notable rise in interest for fractional ownership. Legal expert Irina Nigmatullina spoke to socialbites.ca, highlighting two key risks tied to these transactions.
Industry observers note that pool deals attract buyers who plan to profit from the asset, either by renting it out or reselling it for a quick gain. This kind of intent shapes how the deals are structured and taxed, especially when the buyer aims to operate the property as a business. The strategy becomes more financially efficient when the buyer registers as an individual entrepreneur, because overall sales taxes can be lower than for ordinary individuals, which is a practical consideration for investors pursuing rapid turnover. Yet the most immediate risk in purchasing shares of an apartment is the potential for disputes with the co-owners or other counterparties. This is a concern Nigmatullina stresses for anyone entering a multi-owner purchase.
Before proceeding, it is crucial to verify the reliability of the party from whom the investor plans to acquire a stake. If a dispute arises over a share purchase, the party inclined to sell at a higher price may seek to repurchase at a lower price. The lawyer advised that all transaction possibilities should be discussed upfront with the partner and a clear record created outlining which participant holds which share. This helps prevent later arguments about ownership proportions or the values assigned to each stake.
She shared a practical illustration from practice. A family sought to acquire a three-room apartment using a housing document and did so in cooperation with an uncle, with each person holding an equal stake. A year later, family members faced friction during a separation, and both sides pressed for a larger living space. That example underscores how quickly plans can shift when personal relationships intersect with real estate holdings.
In any agreement to purchase an apartment by several owners, it is essential to spell out who will buy which shares, the price for those shares, and all exit terms. This includes how the cost of each stake will be calculated and what happens if a party wants to exit the deal. Clarity up front minimizes the risk of later disagreements and ensures a smoother transition if circumstances change.
Nigmatullina also pointed to another potential pitfall involving the spouses of the buyers. When property is purchased within a partnership, both partners typically secure a legal right to the asset. In a dispute, a spouse may object to the sale or transfer of the property, which can derail even well-structured agreements. To avoid this, it is prudent to obtain formal consent from all spouses involved in the planned real estate transaction. This preemptive step helps preserve these arrangements when personal or financial disagreements arise.
Historically, there has been caution around taking on mortgage property and how these arrangements are navigated in family-owned or multi-owner setups. The broader lesson for investors in any market is clear: ensure robust documentation, verify counterparties, and align expectations across all owners before committing capital to a share-based purchase. With careful planning and transparent terms, buyers can pursue opportunities while reducing the risk of internal conflicts and unintended tax consequences.