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"Letter of the Law": Legal persons will be able to buy land plots for 70% of cadastral value

21 Oct 2011

Edict of the President No.431 coming into force on January 1, 2012, shall specify the terms for transferring the land in ownership of entrepreneurs and legal entities. Who and on which terms will be able to obtain land in ownership after the New Year? What shall be the cost of land? Shall the owner be able to sell the land acquired from the state? In what cases shall the state be entitled to withdraw the land from the owner?
The above mentioned issues and some other questions have been discussed within the regular “Letter of the Law” edition, the author program of Denis Aleinikov, Senior Partner of Law Group Argument, with Andrey Gayev, Deputy Chairman of the State Property Committee of the Republic of Belarus.

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The legal basis for obtaining land in ownership of legal entities had already existed in the country prior to Edict No. 431. Before 2008 the solution of this issue was of the President’s exclusive competence. After 2008 the right to transfer the land plots in ownership of legal entities was granted to the executive committees, nevertheless the existence of the above procedure has not been widely covered since then. Most entrepreneurs are sure even now that it is impossible to obtain the ownership title to the land. Why hasn’t the procedure been covered publicly? Is it functioning today?

Indeed, the situation is quite interesting. The possibility of acquiring the land ownership has existed for quite a long time, but due to some reason the local authorities in the person of executive committees have failed to demonstrate the existence of such a possibility for legal entities. The State Property Committee represented by me has repeatedly initiated coverage of the issue with the executive committees and mass media. The executive committees are not able to give any explicit explanation why it happened this way.

What does the procedure of acquiring land in ownership imply today?

The procedure is quite simple. Edict of the President No.667 signed in 2007 and having been in effect since 2008 determined rather an explicit mechanism. Any person, including a legal entity willing to acquire a land plot in private ownership and having buildings on it in private ownership, shall apply the executive committee at place of the land plot’s location. Shall it be any district center one should apply the district executive committee. The reason for rejection may be an approved general layout according to which the future prospects imply a highway to pass through instead of the building or any other public use of the land plot. The land plots shall not be granted in private ownership in such a case. The list of such cases has been determined in the Land Code. If no reason for rejection of granting the land plot in ownership has been stipulated by the law, the executive committee shall charge the land management organization with preparing the entire materials required for making a decision.

Along with the same edict there is a possibility to make a walkthrough contractor’s agreement with the land management organization for performance of the whole package of works including applying for state registration in respect of already granted land plots after the decision has been made by the executive committee. Certainly, the legal entity as well as any citizen may collect all necessary documents on its own and apply for the state registration. There is such a legally determined possibility in the land management organization. Meanwhile the whole documents passing procedure in connection with land registration is planned for days ahead. The whole procedure takes a three month period in average.

What is the way to determine the price of the land plot subject to its acquisition purpose?

The price shall be determined in amount of its cadastral value. There are two grounds for the legal entities to acquire a land plot in private ownership: for the purpose of maintenance of the existing buildings being in private ownership, or acquiring empty undeveloped land plots by means of an auction hold by the executive committees. If the land plot has been granted in the result of an auction the cadastral value shall be regarded as initial. The final payment amount shall be determined by the results of the auction.

To which extent is the cadastral value of the land plot impartial? Will its revaluation take place taking into account the changed rate of the Belarusian Rubles?

Everything depends upon the actions of the local authorities. It is legally stated that such a revaluation shall be held at least once in five years. If the executive committee shall have any interest in it, it can order performance of this work even in a year after the previous results have been approved and get a more precise cadastral value of the land plots.

How many land plots have been acquired by legal entities today?

As of June there were about 20 registered land plots. As of October 10, 2011 28 legal entities have land plots in private ownership.

It’s the second half of the year when the process has significantly rallied, isn’t it...?

We have done some work in this regard. The State Property Committee sent some newsletters to the whole range of big legal entities this spring in order to find out the will of the legal entities, and to clarify them the possibility of acquiring the land plots in private ownership.

So, you have done the work of the executive committees.

Our goal was to bring this information to the knowledge of the community.

As far as it is known today there is a certain handing-over procedure of land plots in private ownership. The work performed by you has resulted in a certain revival among the purchasers… Then what shall be the novel of Edict No.431? What shall be changed in the procedure and the number of grounds for acquiring the land plots?

The procedure itself shall remain invariable. It has been prescribed day by day; all issues related to the land plot registration have been stipulated. A number of procedural issues pointed out due to the practice shall be changed. There is a possibility to refuse some of the documents, approvals, but the procedure in general shall be the same. “One stop” principle shall also remain.

The list of cases allowing the legal entities to acquire land plots in private ownership shall be expanded. Apart from those two mentioned above, two more cases are likely to come into view. While acquiring any real property facilities such as buildings and structures being in state ownership, according to the effective legislation, their sale shall be conducted together with the right of making a land lease agreement. There will be a possibility to sell the land plot in private ownership right away.

If a legal entity is willing to get the land plot out of the rural community or in a town with population less than 50 thousand people for the purpose connected with rendering services, performing works, the legal entity shall have right to get this land plot in private ownership without an auction, i.e. for its cadastral value starting from January 1, 2012.

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Are there any other cases to be mentioned proceeding from Clause 6 of Edict No.667?

For instance, there is a case with the land plot needing some reconstruction of the existing facilities on it, which in its turn requires additional land plot in the course of its reconstruction. There are certain restrictions in acquiring the land plots without holding an auction in such a situation today. The land plot was acquired without an auction if the purpose of the construction has not been changed in the course of reconstruction. The approach will be different from January 1. Even if the purpose shall be changed it will be possible to get land plots in private ownership without an auction.

How will the land plot prices be affected after the New Year, in case the land plot has been acquired by the owner of the real property item already located on that land plot?

The rule of acquiring for 70% of the cadastral value shall be effective. This regulation shall be introduced in the legislation for the first time. In such a case the costs supported by the documentary proof borne while creating infrastructure for the structures located on the land plot shall be taken into consideration.

All costs?

Yes, apart from those when the legal entity possessed the land plot upon leasehold and made payment for the right of making the lease agreement, then the mentioned payment shall be included into the land plot cost when buying the latter. For example, if the land plot was acquired in the result of the auction, it may happen that it will be re-registered in private ownership free of charge.

A forum user has asked us a question: “What changes are to take place in the procedure of decision making by the Free Economic Zone Administration in regard to the allotment and withdrawal of the land plots for FEZ residents”? Will FEZ residents be able to get the land plots in private ownership without an auction?

In connection with adoption of Edict No.431 other legislative regulations shall be respectively adjusted. The legislative regulations stipulating activity of free economic zone administrations determine that they shall be entitled to allot land plots for lease purpose. So, the issue connected with the ownership shall be subject to discussion during the stage of adjustment of the regulations in accordance with the provisions of Edict No.431.

The persons who have concluded investment agreements with the Republic of Belarus by today shall have right to get the land plot for lease purpose without an auction and without respective payment. Will it make them able to get the land in private ownership upon the investment agreements after the amendments have been introduced?

This regulation on getting the land on lease by the persons concluding investment agreements has been provided for by Decree No.10 of the Head of the State. The land plots shall be allotted upon this ground on lease right, but not in private ownership at present moment. Therefore, Decree No.10 stipulates a special procedure of land plots allotment: if you get a land plot you shall start with construction works immediately. Execution of documents for the land shall be done simultaneously with performance of construction works. What if the person is willing to conclude an investment agreement and get the land plot in private ownership? The legislation does not contain any prohibition to include into the provisions of the investment agreement a condition on getting the land plot upon preferential basis stipulated by Decree No.10. Then it is possible to ask for the land plot allotment in private ownership upon the grounds provided by Edict No.667.

It is possible to appeal to Edict No.667 saying that the investment agreement has been concluded and ask for getting the land plot in private ownership without an auction?

It shall be examined whether the activity corresponds to clause 6 of Edict No.667 and granting land plots without holding an auction and getting a land plot in private ownership is allowed.

Is the company which has been fully established upon foreign capital able to acquire the land plot in private ownership, including upon the investment agreement?

No matter, there are no any restrictions in that case. What is important is that the legal entity is the resident of the Republic of Belarus. There is a rule stipulating allotment of land plots in private ownership to the non-state legal entities of the Republic of Belarus. No matter, whether the company has been established upon the national or upon foreign capital – there are no any restrictions.

If a person has bought the land for the purpose of construction but failed to do so, will it be able to sell it?

No, if the land plot has been allotted for the purpose connected with construction. Clause 11 Edict No.667 as amended, imposes a ban to sell the undeveloped land plot for any construction purposes, except cases of alienation of these land plots acquired in the result of the auction. No matter which person, a legal entity or a natural person, it shall proceed from the assumption that land is considered to be the national treasure, a restricted resource, so the laws explicitly stipulate the principle of using the land plots for intended purpose only as one of land relations principles. Default on this obligation shall result in responsibility, and the land plots may be withdrawn from the persons using them beyond the intended purpose.

Let’s have a look at this particular issue in detail. It turns out that the person is able to acquire the land plot in private ownership, say, for construction of any facility. Then he fails to make any construction due to some financial or any other objective reasons, or may be due to some nonobjective reason. Is it possible to take this land plot away from this person?

It is possible to take it away, provided that the legally stipulated procedure has been observed. First of all, the legal entity shall start developing the land plot during 6 months after the rights to it have been duly registered. If the stipulated term has passed and nothing happens, the land plot has not been used, so the executive committee, considering the requirements of clause 8 of Edict No.667 shall apply to the court which is to settle all issues in connection with the validity of termination of ownership title to the land plot. Termination of ownership right shall be carried out into practice not upon the decision of the regulatory body but upon the court’s decision. Shall the court admit the reason of omission of the time limit as reasonable excuse and dismiss the claim on termination of the ownership right the legal entity will be able to conduct the activity upon which the land plot was allotted to it. Anyway taking land plots as a reserve is hardly an admissible luxury: the land plots shall be used. The laws make everything possible to make the statement true.

Shall the land plot be withdrawn, what compensation is the legal entity supposed to receive?

There are two grounds for withdrawal of the land plots according to the laws: for the state needs and in connection with nonuse or improper use of the land plot. Compensation payment for losses has been provided only in case of the land plot withdrawal for state needs. There is no obligation to pay compensation in connection with the land plot withdrawal if it was not used or was used improperly.

There are some people getting the land plots as the needy and selling them afterwards. The legal entities may also acquire the “sweet” land plots for the subsequent resale. What are the plans to deal with the problem after Edict No.431 comes into force?

As to legal entities and citizens which have acquired their land plots in the result of an auction we do not see any great tragedy. The state has received payment for the land. So, if you want you may sell it. There was a demand, there was a bidding, the winner was determined. But the persons who have got the land in accordance with clause 6 Edict 667, shall use their land plots for the purposes they were granted for. We did our best to solve the problems we were aware of at the moment in order to prevent any grey schemes of land plots alienation. This question has been repeatedly raised by the General Prosecutor’s Office when conducting legislation observation inspections and by the State Control Committee. Indeed, there have been some cases when people were not afraid of investing their money in dubious schemes of getting the land plots upon sham transactions.

Staring from the New Year a new rule will be introduced providing that if the land plot has been acquired by the person needy in housing improvement, the facility can be alienated only taken together with the land plot and the building located on it upon expiry of 8 years after the registration date of the right to the capital construction facility. If the land plot has been acquired in any other case apart from the housing improvement need, the rules determined today shall come into effect. It will be possible to sell it together with the constructed facility or with the conservation structure. Empty land plots may be sold by the executive committees or given as a present to the immediate relatives.

However, I would like to repeat it again that it refers only to the land plots which were allotted to the persons not needy in housing improvement. For example, there is a village with a small number of residents. Most of them have left the village and there is some free land. There are no any queues, no demand for the land plots. Someone wishing has come and got the land plot without an auction. The last rules I was talking about shall be effective in this regard to the similar land plots.





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