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Real estate market becomes more stable as notary’s insurance grows

02nd September 2016  
In late August, Russia’s major media looked again to the development of notarial activity in the country. It comes to the increase of the minimum value of the notary’s professional activity personal insurance. The public resonance was justified – indeed, notaries represent the only institution, where each member bears full financial responsibility for their professional activities, with the Institute of notaries providing collective guarantees of this responsibility. This is even more important when the real estate market is involved, and in this regard the increase in the amount of insurance is intended to further strengthen the protection of citizens.

Today, every notary engaged in certifying real estate transactions must have insurance of at least 5 million rubles. This provision of the law on notaries has been established by the Federal law No. 360-FZ signed by the President of Russia on July 3. This amount is the first level of compensation of the damage to citizens or legal persons, if the damage results from notary’s fault. If these funds prove to be not sufficient, the missing money will be paid out from the collective insurance of the regional Chamber of notaries. The third level to provide the guarantee of the damage indemnity is the personal property of the notary, and the final one is assured by the Compensation Fund of the Federal Chamber of Notaries covering any size of the hypothetical damage.

Any professional in the real estate market can make mistakes as there is the human factor, but if the damage is fully refunded, no one gets hurt - in such conditions the market can be deemed really stable. It’s the notary that is the link to guarantee the rights of parties in real estate transactions. Assuring the legal side of transactions the notary is responsible for their work. High qualification of the lawyers coupled with the responsibility inherent for the notary profession make the rate of mistakes fairly insignificant, with only a few cases a year across the country - but still they occur. Payments on the insurance cases which took place do confirm the effectiveness of the notary’s responsibility. Here are some examples:

An acting notary certified the power of attorney granted by the owner to a third party for the sale of apartment, on the basis of the power of attorney the apartment was sold. The owner wasn’t aware his apartment had changed hands and as a result the courts of all instances recognized the power of attorney as void. Previous sellers disappeared and once the owner regained his title, the final buyer brought a claim against the notary. Eventually the insurance company compensated the apartment value. The interests of legal entities are also protected. It recently happened in the Republic of Adygea - in the wake of a technical mistake by a notary who didn’t read aloud to the parties the final version of the preliminary contract of purchase and sale, a legal entity sold properties to another entity at a price 4 million rubles lower than the initial value, which had been previously stipulated by the parties. As the buyer refused to sign the contract once again, the properties sold at price 4 million rubles lower than it was originally agreed. The notary reimbursed the losses.

For regions, the new minimum size of the notary’s personal insurance is sufficient to compensate possible losses. As for Moscow, where real estate prices are much higher than in other regions, many notaries are insured in a larger scale. But the collective insurance of the Moscow City Chamber of notaries would guarantee to pay the damage resulting from an error even on a very expensive property.

Reporters of the "Russian newspaper", "First channel" and other country’s leading media, when discussing this news, not only stressed the importance of going to the notary in order to certify a real estate deal, but also payed attention to notarial fees. Like most citizens, they wondered if notary’s fees, which had been cut not long ago, would grow with the increase in insurance rates. The Federal Chamber of Notaries responsibly assures – the new insurance rates will not affect notarial fees.

So, when going to the notary, a citizen may be sure to get not only legal purity of the transaction, but also safety of the funds spent on probably one of the most important purchases in their life which is the real estate property. The procedure of applying to the notary is as highly convenient as possible: modern notary works in a "one window" mode: he obtains all necessary data from public registers, makes a project of agreement, sends certified e-documents to Rosreestr, which registers the title of ownership in just one day. And it’s the notary who provides the possibility of using notary's deposit as a reliable, convenient and safe tool for striking a deal.