Amendments to the RF Land Code or "Land Reform"

Federal Law of the Russian Federation No. 171-FZ on Amendments to the Russian Federation Land Code and Certain Legislative Acts of the Russian Federation ("171-FZ") of June 23, 2014 171-FZ makes substantial amendments to the RF Land Code and other RF legislative acts. The amendments are effective from March 1, 2015. We describe a number of the amendments below.

Allocation of state and municipal land plots

First, 171-FZ disallows the sale of state and municipal land plots for which the primary permitted use is construction of buildings and structures. Such land plots may be allocated for construction by transfer under lease to future developers. A specific list of exemptions is provided in the RF Land Code ("RF LC").

State and municipal land plots may be sold and leased solely on the basis of an auction (tenders have been eliminated). The ability to sell or lease land plots without an auction is provided in certain cases expressly listed in the RF Land Code: in particular, when land plots are subdivided from a land plot leased for complex development; if land plots underlie buildings and structures, then to the owners of such properties; by decree or order of the RF President; in accordance with an order by the head of an RF region, if the land is to be used as the site of social/cultural and utility facilities or for the implementation of large-scale investment projects; for the performance of the RF's international obligations, and to legal entities if the land is to be used as the site of electricity, heat, gas and water, telecommunications infrastructure, etc. or as the site of federal, regional, and local facilities. 

The lessees of state and municipal land plots do not have a preferential right to conclude, without an auction, a new lease agreement for the land plot they have leased. Exemptions to this rule are provided – and are practically identical to the grounds for leasing land plots without an auction.

Land plot location diagram on the territorial cadastral plan ("SRZU")

The SRZU, which is the basis for formation of a land plot, plays an important role in the procedure for allocating land plots in accordance with the RF LC as amended by 171-FZ. Its legal significance is different from that of the land plot location diagrams on the cadastral map or territorial cadastral plan provided for in the previous version of the RF LC.

The SRZU is issued only in cases where a territorial boundary plan (PMT) has not been adopted for the plot, and it cannot be contrary to the territorial land use plan (PPT), land development documentation, or regulations on especially protected natural territories. For the duration of an SRZU, new PMTs adopted must conform to the SRZU, and in the event of inconsistencies the land plot must be formed in accordance with the SRZU.

An SRZU may be prepared by the authorities responsible for allocating the formed land plots, or by persons interested in the holding of an auction or allocation of the land plot without an auction. The SRZU is generated in electronic form, except when the SRZU is prepared by an interested individual, who has the right to choose the form. Until 2020, preparation of an SRZU may be denied on the grounds provided in regional law, in addition to the grounds in the RF LC.

The form of the SRZU will be governed by applicable regional acts until approved at the federal level.

Establishment of easements over state and municipal land plots

171-FZ provides for the conclusion of agreements establishing easements over state and municipal land plots, including in the following cases:

  • placement of linear facilities, telecommunications structures, information signage and protective structures that do not prevent the permitted use of the land plot;
  • conducting surveying works;
  • conducting works involving subsoil usage.

171-FZ sets out that a fee is payable for such easements, and that the fee is determined in the agreement establishing the easement in the manner established by the RF Government or a regional or local authority, depending on the form of ownership of the land plot.

Newly introduced is the ability to conclude an agreement establishing an easement with respect to part of a state or municipal land plot for a term of up to three years by agreement of the parties, without performance of cadastral works with respect to the respective part of the land plot, without state cadastral registration of the respective part of the land plot, and without state registration of the encumbrance created by the establishment of the easement.

RF Government Resolution No. 1461 of December 23, 2014 approved the Rules on Determining the Fee for Agreements on the Establishment of Easements over Land Plots in Federal Ownership. The general rule is that the fee for an agreement establishing an easement is determined on the basis of the cadastral value of the land plot and is calculated as 0.01 percent of the cadastral value of the land plot for each year of the easement. A change of land plot rights holder is not grounds for review of the fee under the agreement establishing the easement.

"Permit" procedure for use of state and municipal land plots (without allocation or establishment of an easement)

171-FZ introduces a new legal institution: the use of state or municipal land or land plots without the allocation of land plots or establishment of an easement. This use is permitted with respect to land and land plots not allocated to citizens or legal entities and may be carried out in the following cases:

  •  engineering surveys;
  • capital repairs or maintenance of linear facilities;
  • construction of temporary or ancillary structures (fencing, amenities, canopies), storage of construction and other materials and construction equipment, renovation of federal, regional or local linear facilities;
  • geological subsoil studies;
  • activities for the purpose of preserving and developing traditional lifestyles, husbandry and crafts of the indigenous minorities of the North, Siberia and the Far East RF (except forest land and land plots).

The basis for the use of state and municipal land and land plots is a permit from the competent authorities, issued in accordance with the procedure established by the RF Government and valid until the land plot is assigned to a citizen or legal entity.

RF Government Resolution No. 1244 of November 27, 2014 approved the rules on issuance of permits to use land or land plots in state or municipal ownership: a permit application is filed with the state executive authority, regional or local authority competent to allocate state or municipal land plots. The state authority adopts a decision to issue or deny the permit within 25 days of receiving the application.

RF Government Resolution No. 1300 of December 3, 2014 determines a list of facilities that may be located on state or municipal property without the allocation of the land plot or establishment of easements. These facilities include, among others, the following for which a construction permit is not required: buried linear structures (and their surface elements), water pipelines and drains, and sewage linear facilities.

Particulars of allocating land plots under lease and terminating lease rights to land plots underlying unfinished buildings

171-FZ establishes that the allocation of rights to a state or municipal land plot for the completion of an unfinished building standing on such land plot is permitted without an auction, but only once. Land plots may be allocated in this manner to the following persons:

1) the owner of the unfinished building who acquired ownership through a public auction of the said property seized from the previous owner in connection with the termination of the land plot lease agreement; or

2) the owner of the unfinished building, if:

  • the competent authority does not submit a demand for seizure of the said facility by sale at public auction to a court within six months of the expiration of the lease; or
  • a court denies such a demand, or the facility is not sold at auction due to a lack of bidders. Allocation of a land plot under lease without an auction is permitted in this case provided that the land plot is not allocated for the completion of construction of the building to any of the previous owners of the property.

In the event of the termination of the lease agreement for a state land plot allocated at auction, the unfinished building standing on such a land plot may be seized from the owner on the basis of a court decision by means of sale at public auction. It remains an open question whether the unfinished building should be registered as real estate, or whether the property to be sold may take the form of the "package" of construction materials on the land plot. 171-FZ does not provide a clear answer to this question. RF Government Ruling No. 1299 of December 3, 2014, which approved the procedure for such auctions, does not clarify this issue.

The auction organizer transfers the proceeds of sale of the unfinished property at auction to the former owner of the unfinished building within 10 days of state registration of the auction winner's title to the unfinished property (less the cost of preparing and conducting the auction).

A demand for sale of an unfinished building cannot be granted if the owner shows that the breach of the construction schedule was caused by the action/inaction of state authorities, local authorities, or entities operating utilities systems to which the property is to be connected.

In addition to the above amendments, 171-FZ also makes extensive changes to the provisions of the Land Code governing the formation, allocation, and exchange of state and municipal land plots, and the regulations on complex development of territories.

Regional and local town planning standards

Federal Law No. 131-FZ on Amendments to the Russian Federation Town-Planning Code of May 5, 2014

Amendments to the RF Town-Planning Code establishing new provisions on town-planning design standards and their contents entered into force on May 5, 2014. The town-planning design standards are intended to ensure favorable living conditions by establishing minimum levels of provision for regional facilities (in particular, transportation, regional and intercity roads, intermunicipal and regional emergency facilities) and local facilities (in particular, education institutions, transportation organizations, green spaces) facilities. Regional town-planning design standards are approved by a regulatory legal act of a regional state executive authority in accordance with regional law;  local standards are approved by a decision of the representative body of the local government in the manner established by local legal acts.

It is established that regional town-planning design standards must be taken into consideration when preparing the territorial land use plans for an RF region. The general plans of Moscow and St. Petersburg (and corresponding amendments to the general plans) must be made subject to the town-planning design standards of Moscow and St. Petersburg.

The transitional provisions of Federal Law No. 131-FZ provide that previously approved town-planning design standards must be brought into conformity with the new provisions of the RF Town-Planning Code by January 1, 2015. Until town-planning design standards prepared in accordance with the new provisions of the code are prepared, or until existing standards are amended, regional and municipal territorial land use planning documents, and territorial planning documentation, are to be generated on the basis of previously approved standards.

Redistribution of powers between regional and local authorities

Federal Law No. 136-FZ on Amendments to Article 26.3 of the Federal Law on the General Principles of the Organization of Legislative (Representative) and Executive Bodies of State Authorities of the Constituent Members of the Russian Federation of May 27, 2014

This federal law, effective upon publication, allows RF regional state authorities to unilaterally redistribute the powers of local authorities between local and regional authorities. In particular, powers to approve town-planning documentation and issue construction and commissioning permits may be reassigned. No time limit on the redistribution of powers is established.

A number of regional laws have been adopted in the corresponding RF regions pursuant to this federal law. For instance, Leningradskaya Oblast Law No. 45-oz on the Redistribution of Powers in the Area of Town-Planning Activity between the State Authorities of Leningradskaya Oblast and Local Authorities of Leningradskaya Oblast of July 7, 2014 takes effect from January 1, 2015, providing that the powers of Leningradskaya Oblast include approval and amendment of general plans of municipal districts and towns, while other executive authorities have the power to approve land use and development rules for municipal districts and towns, approve town-planning plans of land plots, and issue construction and commissioning permits for properties whose design documentation is subject to expert examination.

Before the entry into force of this regional law, all the said powers were exercised by local authorities. Town-planning acts adopted by local authorities remain in force until they are duly amended or set aside, or until they expire.

Exhaustive list of procedures in housing construction

RF Government Resolution No. 403 on the Exhaustive List of Procedures in the Area of Housing Construction of April 30, 2014

An exhaustive list of procedures in the area of housing construction has been approved. The list comprises 134 procedures covering all phases of construction projects, from the allocation of rights to land plots with the permitted use of "housing construction" to the commissioning of the housing and registration of title.

A large number of additional procedures not provided for in federal law were previously established at local and regional levels. The total number of mandatory procedures now depends on the type of property, and state and municipal authorities do not have the right to compel developers to undergo procedures not included in this list. These authorities must either eliminate all procedures not in the list from the regulatory base or prepare and present proposals that they be added to the list.

Classifier of forms of permitted use

RF Ministry of Economic Development Decree No. 540 on Approval of the Classifier of Forms of Permitted Use of Land Plots of September 1, 2014

An exhaustive list of the forms of permitted use of land plots has been introduced. Previously, public law bodies independently determined the description and scope of forms of permitted use, which resulted in excessive variety. Local authorities have until January 1, 2020 to bring town-planning rules contained in land use and development rules into conformity with the forms of permitted use established in the classifier. Public hearings are not required.

Rights holders have the right (but no obligation) to file an application with the respective local authority to bring the permitted uses of their land plots into conformity with the classifier. In this case, the decision of the said authority will serve as the basis for amendment of the information in the state cadaster of real estate. At the same time, in the event of any changes to the land plot relating to cadastral registration (division, subdivision, amalgamation, or simply clarification of boundaries), the permitted use of the land plot must be brought into conformity with the classifier.

Determination of the rent for leases of state and municipal land

RF Government Resolution No. 1120 on Amendments to RF Government Resolution of July 16, 2009 No. 582 of October 30, 2014

A new condition has been added to the principle of "no unjustified preferences" used when determining regulated rates of rent: the procedure by which rent is calculated for use of land plots owned by the same public law body cannot be different.

In accordance with the new provisions of the RF LC, in the cases where a land plot can be allocated without an auction, the rent is determined on the basis of cadastral value (0.01%, 0.6%, 1.5% or 2% of cadastral value annually, depending on the purpose of allocation, but generally 2%). It has been clarified that market value can be used for the purpose of calculating rent only if buildings, structures, or unfinished buildings are on the land plot.

It is also provided that the rent is to be adjusted upon revision of the conditions on which rent for a land plot is determined, but not more than once per year.

Social rental housing and economy-class housing

Federal Law No. 217-FZ on Amendments to the Russian Federation Housing Code and Certain Legislative Acts of the Russian Federation with Respect to Legislative Regulation of Relations in the Rental of Residential Premises in the Social Housing Fund of July 21, 2014 and Federal Law No. 224-FZ on Amendments to the Town-Planning Code of the Russian Federation and Certain Legislative Acts of the Russian Federation of July 21, 2014

A new form of lease agreement for publicly owned land plots has been introduced: the agreement on territorial development for construction and use of social or commercial rental housing. The procedure for conducting auctions with respect to such land plots and the obligations of the land plot tenant to use the completed real estate strictly in accordance with the designated purpose of "rental housing" has been regulated.

For the first time, state registration of the rental of residential premises for a period of more than one year as an encumbrance on title has been introduced. In the event of registration of such an encumbrance over all premises in an apartment building, "rental housing" will be recorded in the Unified State Registry of Rights (EGRP) as the purpose of use of the building, irrespective of whether it was built as a result of the development of territory for the purpose of construction and operation of rental housing.

Another new form of land plot lease agreement for publicly owned land is the agreement on complex development of a territory for economy-class housing. The procedure for auctions of such land plots has been regulated, including a requirement for setting the maximum price at which the housing can be sold to consumers under auction conditions.

The developer must conclude sale-purchase agreements for premises not sold under construction co-financing agreements with any interested citizens entitled to purchase economy-class housing within six months of the housing being commissioned. The developer may then sell the remaining premises freely, without restrictions on price or category of citizens.

Changes to the frequency and procedure for challenging the results of cadastral appraisals

Federal Law No. 225-FZ on Amendments to the Federal Law on Appraisal Activities in the Russian Federation of July 21, 2014

State cadastral appraisal is performed no more than once every three years, or once every two years in Moscow and St. Petersburg. A cadastral value entered in the state cadaster of real estate as a result of a challenge is valid (including for tax purposes) from January 1 of the year in which the challenge was filed.

Legal entities challenging a cadastral appraisal must now follow a mandatory pre-court procedure – that is, apply to a commission for consideration of disputes concerning cadastral valuations – within five years of the date the results of the cadastral valuation are entered in the state cadaster of real estate. The commission considers applications within a month of filing. The language establishing the venue for disputes concerning cadastral valuations has also been amended: the amended clause 1 of art. 26 of the Russian Federation Civil Procedure Code (RF CPC) and the provisions of the explanatory note to the draft of Federal Law No. 225-FZ provide that the respective disputes are considered by courts of general jurisdiction irrespective of the parties.

Recognition of title to an unauthorized building

Survey of Judicial Practice in Cases Relating to Unauthorized Construction, approved by the RF Supreme Court Presidium on March 19, 2014; RF SAC Ruling of June 20, 2014 No. VAS-2395/14 in case No. А65-6880/2013 and RF SC Judicial Panel for Economic Disputes Ruling of September 25, 2014 in case No. 306-ES14-1218. In this survey the RF SC stated the following legal positions, which are especially important in light of the merger of the RF SC and RF SAC:

  • Acquisitive prescription does not apply to unauthorized buildings standing on an unlawfully occupied land plot.
  • The obligation to demolish an unauthorized building is a penalty. The obligation to demolish a building may be imposed on the builder (person at whose expense it was built), subject to the builder being at fault.
  • For the recognition of title to an unauthorized building it is necessary to prove that retaining the building will not infringe third-party rights (including those of neighboring land users), and also that it conforms to the purpose, town-planning rules, and permitted use of the land plot.
  • Only substantive and incurable violations of town-planning standards and rules, and not simply any violation, prevent recognition of title to an unauthorized building.
  • Title to a portion of an unauthorized building cannot be recognized.
  • If there is an encumbrance on title to a land plot in the form of a ban on new construction, a built property may be deemed unlawful and demolished.
  • The title of a land plot tenant to an unauthorized building may be recognized.

Consequently, shortly before it was abolished, the RF SAC confirmed that the legal position of the RF Supreme Court Presidium expressed in the Survey of Judicial Practice applies to legal relations involving legal entities, since civil law is based on equality of the participants in the relations governed thereby.

The RF SAC also noted that in resolving this category of dispute, the conditions of a lease agreement should be considered in addition to the requirements established with respect to the legalization of unauthorized construction in art. 222.3 of the RF Civil Code. If the land plot is leased for the purpose of erecting temporary structures or easily erected structures, there are no grounds for acknowledging title to capital structures actually erected. When a lease agreement is concluded, the owner must clearly express its intention to provide the land plot under lease for the erection of a specific kind of structure.

The RF SC Judicial Panel for Economic Disputes subsequently confirmed the position of the RF SAC, stating that title to an unauthorized structure cannot be recognized for the tenant of a land plot if the land plot was leased for the operation of existing buildings, rather than the construction of new ones.

No change to permitted use of agricultural land in the agricultural land category

RF Supreme Court Survey of Judicial Practice in the First Quarter 2013, approved by the RF Supreme Court Presidium on June 4, 2014

In this survey, the RF SC sets out the legal position that until special legislation on the zoning of agricultural land is adopted it is not possible to change the permitted use of land plots in agricultural land. Allocation of a land plot from agricultural land for construction (including dacha construction) requires a change of land plot category, in particular by inclusion within the boundaries of population centers.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.