On privatisation of a land plot accommodating construction in progress.

20.02.2009

Legal Update No. 1.

Goltsblat BLP hereby advises of the adoption and enforcement of Resolution No. 8985/08 of the Presidium of the Supreme Arbitration Court of the Russian Federation, dated 23 December 2008 regarding privatisation of land accommodating construction in progress in consideration of the provisions of Article 36 of the Land Code of the Russian Federation.

 The judicial practice on this has been quite contradictory. In some cases, arbitration courts upheld privatisation of land by owners of construction in progress located thereon, while treating it as illegal in others.

 In its Resolution, the Presidium of the Supreme Arbitration Court of the Russian Federation noted that the position allowing the owner of construction in progress to buy out the underlying land does not take account of public and individual interests during erection of capital construction facilities. According to the Presidium, Article 36 of the Russian Land Code does not apply to construction in progress, because, unlike buildings, facilities and structures, such construction may not be used for its designated purpose until completed and commissioned.

In consideration of the opinion of the Presidium of the Supreme Arbitration Court of the Russian Federation, bodies authorised to dispose of land under state or municipal ownership might refuse privatisation of underlying land by owners of incomplete construction. There is, moreover, little chance that claims contesting such refusals would be upheld by a court. Should any decisions permitting privatisation still be made, there is a high risk of state registration of transfer of title under sale and purchase agreements being refused or said agreements being recognised as void under an interested party claim.

For further information, please contact:

Vitaly Mozharowski, Partner,
Real Estate and Construction, Goltsblat BLP;
Tel: +7 (495) 287 44 44,
Email: info@gblplaw.com

Elena Barinova, Partner,
Real Estate Investment and Finance, Goltsblat BLP;
Tel: +7 (495) 287 44 44,
Email: info@gblplaw.com

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