Allocation of land plots under the new legislation

11.02.2015

Legal update No 503, Issue No. 5/7

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 allocation of state- or municipally-owned land plots for lease or ownership by legal entities. Judging from FZ No. 171, we may conclude that the legislator has, for the foreseeable future, abandoned its idea of introducing land plot development rights and other concepts envisaged by draft Federal Law No. 47538-6 “On Amending Parts One, Two, Three and Four of the Russian Civil Code and Certain Legislative Acts of the Russian Federation” (passed in the first reading in April 2012).

As previously mentioned, the new legislation recognises auction 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), specifically, in the case of large-scale investment projects meeting the federal and regional level criteria, and linear facilities.

The Law formally excludes the notion of land plot selection and preliminary approval for facility location, though, in fact, a curtailed version of this is preserved within the scope of preparation of the land plot layout on the cadastral plan of the territory and the decision on preliminary approval of land plot allocation. Preparation and approval of such layouts will be subject to much more meticulous federal regulation than currently (Article 11.10. of the Land Code of the Russian Federation).

As regards allocation of land plots by competitive bidding, it should be noted, first of all, that the new legislation prohibits, with certain exceptions, sale of land plots for construction by bidding; such lands plots will be for lease only. The move is evidently aimed at tightening control over construction timelines and adherence to land plot intended use.

The most significant developments regarding allocation of land plots by bidding include:

  • The rules for holding auctions for land plots for residential and non-residential construction have been unified.
  • Competitive bidding for public land plots may no longer be held in the form of a tender.
  • The possibility of holding auctions by private initiative has been translated into law; this does not apply, however, to territories of population centres and cities of federal significance.
  • A register will be introduced for recording bad faith auction participants that win an auction (its sole participants) but fail to sign the lease or sale and purchase agreement.
  • Provisions are introduced for holding electronic auctions as a general rule; these will take effect once the relevant federal law is adopted.

Given the sweeping scale of the changes, we would recommend focusing particularly on the transitional provisions (Article 34 of FZ No. 171). The Law establishes, in particular, that if a decision on preliminary approval for facility location is made before 1 March 2015, the land plot in question may be allocated without bidding until 1 March 2018.

In a week, we will consider in more detail the new opportunities that arise owing to land plot reconfiguration.

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