Together with experts, we understand what restrictions exist for military, civil servants and mortgage borrowers when renting out real estate
For some categories of citizens in Russia, there are restrictions on doing business, as well as renting out housing and running a rental business. Together with experts, we are looking into who and in what cases will face difficulties when renting out housing because of their responsibilities to the state.
Restrictions for military personnel
For employees in the armed forces, Russian legislation has the strictest restrictions on renting real estate. Obtaining income from renting out housing can be considered as another paid activity that is prohibited for this category of citizens. Military personnel, due to the special nature of their activities, have the right to engage only in scientific, creative and pedagogical activities (paragraph 7, Article 10 No. 76-FZ), explains Yulia Shchiptsova, a lawyer at the practice of legal support for entrepreneurship of the MGKA Bureau of Lawyers De Jure.
Financial Director, owner of the consulting center “Grand” Asya Alekseenko notes that the military can be classified as civil servants, since they are subordinate to the Ministry of Defense, which is part of the executive authorities. And confirms that No. 76-FZ unequivocally prohibits receiving income from renting an apartment.
Officials have the right to rent housing as an individual
The legislation has restrictions on renting housing for officials and other government employees. These include:
Experts explain that in cases with officials and civil servants, everything depends on the purpose for which the property was purchased and whether there are signs of entrepreneurial activity in the actions of the owner.
In which cases does the court recognize the activity of a civil servant as entrepreneurial
The letter from the Ministry of Taxes and Duties clarifies that renting out housing by an individual is not considered an entrepreneurial activity. Therefore, an official or other civil servant has the right to rent an apartment as an individual, while concluding a rental agreement with the tenant and paying personal income tax on the income received. But it is impossible to do this as an individual entrepreneur, it will already be a prohibited type of activity for a civil servant, explains Asya Alekseenko.
An official or other civil servant has the right to rent an apartment as an individual, having concluded a rental agreement with the tenant and paying personal income tax from the income received (Photo: Semyon Likhodeev / TASS)
In modern judicial practice, the following approach has been formed: if the civil servant himself or his family members previously lived in the rented premises, or the apartment was inherited or donated, then there are no signs of entrepreneurial activity in this, explains Yulia Shchiptsova.
In case of violation, a civil servant may be dismissed due to loss of trust (No. 79-FZ). There is also an option of criminal prosecution. But this, according to Article 289 of the Criminal Code, is “illegal participation in entrepreneurial activity” and is possible only in cases when a civil servant has established an organization engaged in entrepreneurial activity, or participates personally or through a proxy in the management of such an organization, explains Yulia Shchiptsova.
Restrictions for mortgagees
For those who have purchased housing with the help of a mortgage loan, there are usually no restrictions on renting it out. However, there are cases when, at the initiative of the lender, a clause is included in the mortgage agreement stating that the owner has the right to transfer the collateral object to third parties solely in agreement with the bank, says Asya Alekseenko.
If the bank has agreed, then the borrower is obliged to rent an apartment only on the basis of an official agreement from which the tax is paid, adds Yulia Shchiptsova.
In the case when there are no special conditions and restrictions on renting in the mortgage agreement, it is better to get the official consent of the mortgagee when renting an apartment, lawyers recommend. Experts also draw attention to the fact that the bank, without the consent of the mortgagee, has the right to check the condition of the collateral, including for its rental.
Asya Alekseenko, Financial Director, owner of the consulting center “Grand”:
— All citizens should carefully monitor the legislation and the terms of their employment or mortgage agreement before starting to rent housing in order to avoid possible negative consequences.
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