Compulsory Acquisition Compensation

Compensation for acquired premises is determined by a valuer engaged by the city, and the amount offered is often below market value.

When a residential building is included in the renovation programme or a plot of land is needed for a road, metro station or another urban project, the Moscow City Department of City Property acquires non-residential premises located there and offers compensation to their owners. The proposed amount is determined by a valuer engaged by the city and is often significantly below the premises’ actual market value. The owner’s losses caused by the acquisition are frequently not taken into account at all. We challenge the amount of compensation; in several of our cases, the final amount doubled compared with the department’s initial offer.

Check the proposed amount before signing the agreement

Once an acquisition decision has been made, the department sends the owner a draft agreement stating the amount of compensation. If the agreement is not signed within 90 days, the city brings a claim for compulsory acquisition, and the court determines the final amount of compensation, usually on the basis of a court-appointed valuation expert report.

Why compensation is often undervalued

Undervaluation is most often caused by the city’s valuer selecting comparable properties that are inferior to the premises being acquired in terms of location or condition, while failing to account for the premises’ advantages. These may include a ground-floor and first-line location, a separate entrance and high pedestrian traffic. The calculation may also omit rental income and market growth since the valuation date, while limiting compensation to the value of the floor area and disregarding the owner’s losses.

Compensation the law provides for

Under Article 56.8 of the Russian Land Code and Article 281 of the Russian Civil Code, compensation includes not only the market value of the premises being acquired, but also losses caused by the acquisition. These include:

• the costs of moving, finding and fitting out replacement premises;
• losses caused by early termination of contracts with third parties, including tenants;
• loss of profit, in particular lost rental income.

In practice, the department’s offer often does not account for these components at all.

How we work

1. Review of the department’s offer. We review the draft agreement and the city valuer’s report and estimate the compensation you may be entitled to receive.
2. Independent valuation and loss calculation. We engage an independent valuer to determine the premises’ market value and calculate the losses to be compensated.
3. Pre-court position. We send the department reasoned objections and calculations. If the city is willing to settle, we seek to secure the most favourable terms for you.
4. Court proceedings. We prepare a defence to the claim, seek a court-appointed valuation expert, formulate questions for the expert, propose expert organisations and, where necessary, ask for the expert to be questioned at the hearing.
5. Appeal. If the first-instance judgment does not serve your interests, we challenge it on appeal and, where appropriate, in cassation.
6. Enforcement. We monitor payment of compensation before ownership of the premises passes to the city.

Who we represent

We represent owners of non-residential premises on the ground floors of buildings included in the renovation programme; owners of buildings, premises and land acquired for transport and other urban infrastructure; and owners who lease out their premises and lose that rental income as a result of the acquisition.

Frequently asked questions