Legal Update: Changes to the system for acquisition of rights to public land

21.01.2015

Legal update No 494

Goltsblat BLP continues its series of alerts exploring the extensive amendments to the land legislation introduced by Federal Law No. 171-FZ of 23 June 2014 “On Amending the Land Code of the Russian Federation and Certain Legislative Acts of the Russian Federation” (hereinafter FZ No. 171) and due to come into force on 1 March 2015.

This alert focuses on the changes to the system for acquisition of rights to public land. As you might recall, within the existing system for acquisition of rights to public land for commercial development (which will remain in effect until 1 March 2015), such land can only be allocated into lease or ownership. The choice of title and acquisition procedure depends mainly on the determined permitted use of the land plot (through preliminary approval for facility location or on the basis of the urban development documentation).

For example, if public land plots are leased under preliminary approval for facility location, the law does not stipulate any competitive bidding. Recent court practice assumes, however, that once the public is informed of the potential land plot allocation, other claimants thereto might appear. In this case, the preliminary approval process must cease and the lease right will be awarded by bidding. This practice definitely has an extremely adverse effect on developers' plans and has resulted in multiple abuses on the part of authorities and greenmailers.

Under the new legislation, auction is recognised as the general rule for acquiring rights to public land for commercial real estate construction and the relevant procedures are subject to much more meticulous regulation. Acquisition of public land without bidding will only be possible in a limited number of cases described exhaustively in the Land Code of the Russian Federation (for example, in paragraph 2 of Article 39.6), in particular, in the case of large-scale investment projects meeting the federal and regional level criteria. Local and government authorities managing land in public ownership will lose the right to establish the list of cases when land plots may be allocated by bidding only (paragraphs 1.1. and 1.2. of Article 30 of the Land Code of the Russian Federation will remain in effect until 1 March 2015).

Importantly, two more options will now be available in addition to allocation for lease or ownership: execution of an easement agreement or use of the land plot without allocation or easement. The choice of how to acquire the right to use public land (for example, by concluding a lease or easement agreement) will primarily depend on the intended activity. Moreover, the concept of land reconfiguration, which is essentially new, provides private owners of land plots with additional opportunities for acquiring public land.

In a week, we will consider in more detail use of public land without allocation of land plots or easement.

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