Ilya Volfson: ‘The case is not widespread, but far more devastating for those affected’

“The buyer is left with nothing”

State Duma deputies Sergey Kolunov and Ilya Volfson have put forward an initiative to combat fraud in real estate transactions, which primarily affects elderly citizens. This was reported by the Tatarstan parliamentarian on his Telegram channel.

A document containing the corresponding proposals has been sent to the Chairman of the Supreme Court, Igor Krasnov.

“People are increasingly reaching out to me and my colleagues in the State Duma who, after buying an apartment, suddenly find themselves without housing and without money. We are talking about situations in which sellers, after the transaction, go to court, secure a ruling recognising the contract as invalid, reclaim the apartment, and the bona fide buyer ends up with nothing,” Volfson writes.

In particular, lawmakers insist on two key changes:

• the introduction of mandatory notarisation for all real estate transactions
• mandatory insurance of transactions if the property is the seller’s only housing.

“The cynicism and lack of principles displayed by these people provoke enormous outrage”

As Volfson told Realnoe Vremya, more than 3,000 cases of fraud using this scheme are already known today. “This number, unfortunately, will continue to grow,” he is certain.

“I would not assess the urgency of the issue based on the number of cases alone. The story may not be widespread compared with, for instance, telephone fraud, but it is far more fatal for those affected. It is one thing to lose several tens of thousands of rubles; it is another to be left without housing and without the money paid for the apartment. Moreover, the cynicism and lack of principles displayed by people who involve elderly citizens in their schemes provoke enormous outrage,” the State Duma deputy from Tatarstan told the publication.

According to Volfson, real estate market experts express differing opinions on how to counter this scheme. However, in his view, the proposed measures will significantly reduce the opportunities for fraudsters.

“We will wait for the opinion of the Supreme Court and continue refining these tools if necessary. There are several additional approaches, but they are still being developed, and it is too early to speak about them publicly,” the deputy concluded.

Why the court’s decision does not guarantee the return of money

The key problem lies in the legal procedure applied when contesting such fraudulent transactions, Konstantin Yegorov, director of the company StroyСapitalConsulting, told Realnoe Vremya. When a court recognises a transaction as invalid because it was carried out under deception, so-called bilateral restitution is applied. This means that the apartment must be returned to the seller and the money paid for it to the buyer.

“Legally speaking, the court issues a decision requiring the return of the money. But, as a rule, this money is already gone — you simply cannot catch up with it. Typically, in such a transaction the payment does not ultimately go to the seller. The money either bypasses the seller or passes through him in transit, ending up in the accounts of shell companies or front individuals who are unable to settle these obligations,” Yegorov explained.

He clarified that the funds are transferred to accounts belonging to nominal holders with no real assets. As a result, even when the court orders recovery of the amount from the end beneficiary, the chances of actually getting the money back are practically zero.

“The effectiveness of enforcement proceedings in this case is zero. The beneficiary has no assets that could satisfy the creditor’s claim under the court’s decision,” the expert summarised.

Thus, the injured party finds itself in a legal vacuum. On the one hand, justice is formally restored — the apartment is returned to its rightful owner. On the other hand, the funds paid for it disappear into complex financial schemes.

“In the first stage, the victim is the seller. The court satisfies the claim to recognise the transaction as invalid because the seller was deceived. In the second stage, the victim becomes the buyer, who does not receive his money back after restitution,” the company’s director said.

The fraudster pressures the seller (most often a pensioner) with an invented emergency in which the asset must urgently be secured. This puts the victim into an altered state of mind, after which they agree to sell the property and conclude the transaction — but receive no money.

“The buyer, meanwhile, to protect himself, must know his seller in person and understand the conditions under which the transaction is carried out. He can independently take the seller to a notary and introduce deferred payments — that is, set up a multi-stage transaction,” the expert advised.