Changes in regulations for using leased public land

25.02.2015

Legal update No 507, 7/7

Goltsblat BLP completes 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.

In this alert, we focus on changes in the regulations for using state-or municipally-owned land plots leased by individuals or legal entities.

Note, first of all, the broader application of maximum and minimum lease terms (paragraphs 8 and 9 of Article 39.8 of the Land Code of the Russian Federation). For instance, if a land plot is leased for construction or renovation of a building or structure without competitive bidding, the lease term will be three to ten years, at the tenant's discretion. For auction-based leases, however, the lease term will be at least double the statutory term to be established by the competent federal authority; until then, the lease will be concluded for five to forty-nine years, at the discretion of the authority managing the land plot.

In line with the position of the Supreme Commercial Court of the Russian Federation (Resolution No. 1756/13 of the Presidium of the RF SCC of 25 June 2013), it has been established that no changes may be made to a publicly-owned land plot lease concluded on the basis of an auction held (or recognised as not having taken place) to change the permitted use of the land plot (paragraph 17, Article 39.8 of the Land Code of the Russian Federation).

Also, as a general rule, tenants of public land plots will no longer enjoy the pre-emptive right to renew the lease thereto without competitive bidding (paragraph 15, Article 39.8 of the Land Code of the Russian Federation).

These developments are clearly indicative of a tougher approach to public land plot tenants, which, should they fail to construct the real estate property indicated in the lease, will no longer be able to change the permitted use of the land plot and assign the lease rights to a third party (as often happens at the moment).

We will be closely monitoring the practical application of FZ No. 171 and will keep you updated on any major developments.

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