Top five amendments to the land code

Top 5 Amendments to the Russian Land Code

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Alexander Maslov Associate, PwC Legal 28 May 2015

PwC Legal

Reform of the Land Code in figures

10 Federal Laws were adopted

within the reform of 2014-2015

20 articles have been excluded from the Land Code

More than 45 new articles have been included to the Land Code

More than 40 articles have been amended

10 new chapters have been included to the Land Code

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4. 3.

5. 2.

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Top five amendments to the Russian Land Code

PwC Legal

Seizure of the Facility Under Construction

Any facility under construction on a publicly owned land plot may be seized from the developer if the construction was not completed within the lease term.

When a lease term expires, the authorities are entitled at their sole discretion to:

• seize the building under construction by obtaining a court order and put it up for sale at public auction; or

• renew the lease to give the developer additional time to complete the construction.

Note

A facility under construction may not be seized from the developer if the latter can prove that it failed to meet the construction deadline as a result of the actions (or omissions) of the relevant authorities or the owners of utilities networks.

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Seizure of the Facility Under Construction

Solution

The developer should document all relevant actions (or omissions) of the authorities and utilities providers.

Outstanding issues

• The Land Code does not clarify whether, if a building under construction is seized, title of ownership to the building should be registered prior to the public auction.

• The exact lease term for a new lease provided to finalise a construction project is not specified.

• The Land Code does not clarify how an unfinished building could be finalised if the new owner fails to complete construction within the new lease term.

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New regulation of development rights

Usage of state and municipal lands

without allocation

Lease and ownership

Easement

Development rights


Slide 5

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Lease of Public Lands For Construction Purposes

• As a general rule a public land plot, for which the main type of permitted use is construction, may be granted for development only through a lease.

• Public land plots may be sold and leased solely on the basis of an auction.

• The practice of obtaining a leasehold title through preliminary approval of the location of a building to be constructed is no longer permitted.

• The Land Code contains a list of exemptions when land leases may be provided without holding an auction (e.g. for the implementation of large-scale investment projects).

• As a general rule, tenants on public lands are not entitled to renew a lease agreement for a new term without having to go through a new auction process.

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Lease of Public Lands For Construction Purposes

Lease terms

Maximum lease terms have been established for various situations.

As a general rule, when a public land plot is granted for construction purposes, the lease term should be from three years up to ten years.

The Land Code also stipulates that the amount of rent is now a material condition of a land plot lease agreement.

If the parties to an agreement fail to specify the rent, the lease agreement may be deemed null and void.

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Construction Easements

Construction easements represent a new development right, which is an alternative to a construction lease.

Purpose:

• placement of linear facilities, telecommunications structures, information signs and protective structures, which do not restrict the permitted use of the land plot;

• conducting surveying work; or

• conducting work involving subsoil usage.

If a federal, regional or municipal land plot was allocated for a term of more than one year, an easement agreement for the given land plot must be concluded with the titleholder (land user, landholder or tenant) of the land plot.

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Construction Easements

State registration of a construction easement

• The Land Code states that it is not required to delineate in the state cadastre that portion of the land plot that will be used for construction easement purposes.

• Furthermore, it is possible to conclude an agreement establishing an easement with respect to a designated portion of a federal, regional or municipal land plot for a term of up to three years without state cadastral registration of the given portion of the land plot and state registration of the easement as an encumbrance over the land plot.

• Please note, however, that such construction easement may not be discovered by means of standard legal due diligence.

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Use of public lands without lease or easement

Public lands may be used without allocation or establishment of an easement in the following cases:

• engineering surveys;

• capital or current repairs of linear facilities;

• construction of temporary or associated structures, storage of construction and other materials and construction equipment, reconstruction of federal, regional or municipal linear facilities;

• geological study of the subsoil;

• activities aimed at preserving and developing the traditional lifestyles;

• placement of non-permanent retail facilities, advertising structures and other facilities.

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Use of the public lands without lease or easement

RF Government Resolution No. 1300 of 3 December 2014 establishes an exhaustive list of those facilities that may be located on public lands without the allocation of the land plot or establishment of easements.

The list includes, among other things:

• underground linear structures (together with their surface elements);

• water pipelines; and

• linear sewage facilities.

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Seizure of lands for state or municipal needs

• The seizure of private land plots for allocation to public use is permitted only if such allocation is prescribed in a PPT and within three years after the PPT was adopted.

• A procedure for identifying titleholders of seized real estate objects has been introduced.

• The rules for establishing the value of seized property has been systematised and clarified.

• Under the new amendments, certain companies may now request land seizures. The RF Government adopted an official list of such companies on 6 May 2015.

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Future Prospects

Some of the changes are quite favourable and will help create an investment-friendly environment. However the recent reforms have left a number of critical issues unresolved

• The major trend in these reforms has been to bring land use legislation into closer accordance with urban planning regulations, and the two bodies of law are likely to be brought even closer in line.

• A number of amendments to the Land Code have been introduced to promote the creation of comprehensive urban planning regulations.

• It is still unclear how closely the new Land Code amendments will correspond to proposed amendments to the Civil Code related to superficies.


Slide 13

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