The Constitutional Court on developers' penalties in favour of shared-construction buyers

What the case is about

Two shared-construction buyers from the Moscow Region, Viktor Strukalin and Aleksei Khlebnov, received flats in 2023 with defects and with delay. They sued the developers.

The court of first instance calculated everything under the old rules: the penalty equals 50% of the sum awarded (the standard penalty under the Law on the Protection of Consumer Rights for a refusal to meet a claim voluntarily).

The appeal and the cassation recalculated, and the penalty became 5%. Why? Because from 1 September 2024 amendments were made to Federal Law No. 214-FZ, and the maximum penalty for a developer was reduced from 50% to 5%. The judges applied the new rules to the old breaches automatically, without stopping to consider whether that could be done.

What the Constitutional Court said

The new regime (a penalty of 5%) applies to all contracts, but only for the future, from 1 September 2024. For breaches that occurred before that date, the old rules apply, and the penalty is 50%.

Why? Because a law has no retrospective effect unless it says so expressly. The amendments to Federal Law No. 214-FZ contain no such indication.

The buyer's right to the penalty arises at the moment the developer refuses to pay voluntarily. If that refusal took place before 1 September 2024, the old amount applies.

Unfortunately, we see in practice that the lower courts have stopped examining the law and the way it is applied, and that the Supreme Court has stopped performing its function. In this case the judges saw "a new penalty of 5%" and applied it automatically to every case, without looking at the dates. The Constitutional Court not only had to recall elementary points that every judge ought to know. It in effect had to perform the function of the Supreme Court.

And I fundamentally disagree with the approach of the Constitutional Court itself. In justifying the new rule, the Court said that "these are the times", and held the reduction of the penalty from 50% to 5% to be constitutional. But the law is not determined by the calendar. If "the times are bad" today, why should the buyer be the one to suffer, and not the developer? The logic of the Constitutional Court is dangerous: any worsening of citizens' rights can be justified by the phrase "we live in difficult times". And that is no longer justice. Sergei Pivovarchik, managing partner of Consul Group, comments.

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