Conservation of an unfinished construction object

Conservation of an unfinished construction project allows one to suspend the standard construction period, transfer the customer's rights to another person by alienating the object, etc.

The procedure for conservation of unfinished construction projects in Belarus is established in the following regulations:

• GK;
• Law of the Republic of Belarus dated 07.2004 No. 300-Z “On architectural, urban planning and construction activities in the Republic of Belarus” (hereinafter referred to as Law No. 300-Z);
• Law of the Republic of Belarus dated 07.2002 No. 133-Z “On state registration of real estate, rights to it and transactions with it” (hereinafter referred to as Law No. 133-Z);
• Decree of the President of the Republic of Belarus dated September 23, 2011 No. 431 “On some measures to improve relations in the field of seizure, provision and use of land plots” (hereinafter referred to as Decree No. 431);
• Resolution of the Council of Ministers of the Republic of Belarus dated February 17, 2012 No. 156 “On approval of a unified list of administrative procedures carried out by state bodies and other organizations in relation to legal entities and individual entrepreneurs”;
• Regulations on the procedure for sending notifications about construction and installation work, approved by Resolution of the Council of Ministers of the Republic of Belarus dated 05.2018 No. 343 (hereinafter referred to as Regulation No. 343);
• Rules for concluding and executing construction contracts, approved by Resolution of the Council of Ministers of the Republic of Belarus dated September 15, 1998 No. 1450 (hereinafter referred to as Rules 1450);
• Resolution of the State Property Committee of the Republic of Belarus dated 03.2015 No. 11 “On approval of the Instructions on the grounds for the appointment and procedure for technical inventory of real estate, as well as checking the characteristics of real estate when performing registration actions”;
• TKP 45-1.03-165-2009 “Preservation of objects under construction. Rules of conduct" (hereinafter referred to as TCP 45-1.03-165-2009).

Conservation is possible in relation to one of the following objects:

• one or more permanent structures (buildings, structures);
• their parts (including isolated rooms);
• engineering and transport communications, their parts;
• other real estate objects, the construction of which may include construction phases, launch complexes.

However, state registration of the creation of an unfinished mothballed construction project as a real estate object is carried out only in relation to an unfinished capital structure (building or structure) and when individual structural elements of the building (structure) have already been created or a separate stage of work has been completed (for example, there are buried (underground) structures, foundations have been partially or fully constructed, etc.).

The concepts of “suspension of construction” and “mothballing of a facility” are not identical

Voluntary suspension of construction (temporary cessation of construction work) is allowed for a period of up to 3 months by decision of the customer

(developer) or contractor, for example, due to non-payment by the customer for work performed, identification of deficiencies in the contractor’s work that may pose a threat to the safety and reliability of the facility, and for other circumstances, the list of which is given in paragraphs. 1 and 2 tbsp. 62 of Law No. 300-Z.

Conservation of an object is allowed for a period of more than 3 months to 3 years by decision of the customer (developer) when financing the construction from its own funds, the Council of Ministers or the executive committee - when financing from budgetary funds (clauses 3 and 5 of Article 62 of Law No. 300-Z). The contractor has no right to make such a decision.

An approximate list of reasons why conservation can be carried out is established in paragraph 5 of Art. 62 of Law No. 300-Z, for example, the lack of funds from the customer or developer for further financing of construction, the impossibility of providing construction with building materials and equipment within the time period established by the contract.

The procedure for conservation of an unfinished construction project

The decision on conservation can be made within one month after the expiration of a three-month period of suspension of construction or without suspension of construction upon the actual cessation of construction work, when the reasons (circumstances) for conservation have already arisen.

Requirements for the form of such a decision are not established, however, in accordance with paragraph 6 of Art.

62 of Law No. 300-Z must reflect:

• date of suspension of work, that is, actual cessation of work;
• sources of financing (own or raised funds, raised funds from an investor, equity holders, through credit/loan, etc.);
• deadlines for the development of documentation necessary for conservation (estimates, technical documentation for conservation developed by the design organization);
• measures to ensure the safety of construction materials and equipment, indicating the person responsible for their safety.

Within 10 working days after making a decision to mothball the facility, the customer (developer) or contractor is required to send a corresponding notification to the state construction supervision body (clause 5 of Regulation No. 343).

Within 14 calendar days from the date of the decision to mothball an unfinished construction project, the following are drawn up (Clause 7, Article 62 of Law No. 300-Z):

• act on conservation of an unfinished construction site;
• a list of works and costs necessary to ensure the safety of a mothballed object of unfinished construction or its structural elements (list of conservation works).

The forms of the conservation act, statements, as well as the list of conservation works are approved in Appendix A to TCP 45-1.03-165-2009.

The conservation act and the list of works and costs are drawn up by the customer (developer) or contractor. The conservation act must contain the estimated cost of the volumes of construction work performed up to the moment of conservation, as well as statements for unused building materials and uninstalled equipment (paragraph 2, paragraph 1, article 62 of Law No. 300-Z).

The above documents are signed by the head of the customer (developer) and the head of the contractor, and the list of conservation works is additionally signed by the head of the design organization.

Based on the list of conservation works, the developer of the project documentation draws up an estimate taking into account measures to ensure the safety of the unfinished construction project and technical documentation for its conservation.

For this purpose, the customer, on a contractual basis, transfers to the design organization the corresponding task, list of works and as-built documentation (clause 4.8 of TCP 45-1.03-165-2009).

The design organization develops this documentation within the time limits established in the decision on conservation.

Construction work for the conservation of an unfinished construction project, as provided for in the estimate, is carried out by the contractor under an additional agreement to the construction contract (clause 8 of Article 62 of Law No. 300-Z).

The additional agreement provides (clause 8 of article 62 of Law No. 300-Z):

• a list of construction works for conservation, provided for by the developed estimate and technical documentation, and the price of such work;
• deadlines for completing the work;
• deadlines for delivery to the customer of a mothballed unfinished construction project or its structural elements.

The transfer of a mothballed unfinished construction facility is formalized by signing a bilateral acceptance certificate.

The acceptance certificate must contain the information specified in clause 78 of the Rules

No. 1450, in particular, the volume and cost of construction work actually performed by the contractor, a list of as-built documentation transferred to the customer, etc.

Upon completion of the conservation measures, the customer reimburses the costs caused by the need to terminate the construction of the facility (construction work) and conservation of the facility, and the contract is terminated (clause 49 of Rules No. 1450).

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Author:  Maria Azarova, junior lawyer

Maxim Lashkevich, partner, director

LLC "GRATA International BW"