On Privatization of Land under Buildings

 

On 12 December 2011 the President signed Federal Law No. 427-FZ amending the Federal Law “On the Enactment of the Russian Federation Land Code” and certain other legislative acts.

In particular, the Law amends the Federal Laws “On Direct Investment Activities in the Russian Federation”, “On the Enactment of the Russian Federation Forestry Code”, “On State Registration of Title to Immovable Property and Transactions Therewith”.

According to the amendments, the owners of buildings, facilities and structures located on state and municipal land plots may buy out these land plots for a reduced price until 1 July 2012 (before the amendments – until 1 January 2012). The amendments envisage that the owner of an unfinished construction project may lease the state or municipal land plot where such project is located without a tender if title to the project was registered before 1 January 2012. Among others, the amendments introduce share ownership of an investor and the state (or municipality) of an object of joint investment activities until the registration of title to such object.

The amendments stipulate that the state or municipal authorities may unilaterally early terminate a contract on the lease of a land plot made for the purpose of (re)construction of an immovable property before 1 January 2011, in particular, if: (i) the contractual obligations on (re)construction of a property are not performed when due or (re)construction of a property has been completed by less than 40%, (ii) a permit for (re)construction of an object has not been obtained after the expiration of five years from the day of the contract, or (iii) another contract on (re)construction of a property located on a leased land plot has been terminated and the parties to the lease contract proceeded from such (re)construction contract when making the lease contract.

These provisions apply to lease contracts for land plots in state or municipal ownership and located in Moscow and St. Petersburg.

The amendments: 1) on the extension of the period for buying out and leasing land plots entered into force on 14 December 2011, 2) on unilateral early termination of a lease contract will enter into force on 1 April 2012, and 3) on share ownership – on 1 February 2012.

For further information please contact Igor Ostapets or Irina Dmitrieva in the Moscow office of White & Case, tel + 7 495 787 3000 .

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