1) the RF constituent entities were granted the rights to organize and finance actions to prepare the documents required for cadastre registration of such land plots, while the rights of local self-government in this sphere were expanded;
2) the RF constituent entities were granted the right to set the maximum limits for prices, tariffs, rates, etc. for territorial land use planning and surveys with regards to the above mentioned land plots5.
According to the General Prosecutor’s Office, by the beginning of 2008 almost 50% of the RF constituent entities were not using their right to set the maximum limits for prices, tariffs, rates, etc. for territorial land use planning and surveys6.
According to Pavel Krasheninnikov, Chairman of the RF State Duma Committee for Civil, Criminal, Arbitration and Procedural Legislation, 2.5 mln of Russian citizens used the simplified procedure for registering their real estate titles by July 2009. Some experts believe, there are 20 mln more who still need the “dacha amnesty”7; however, General Prosecutor’s representatives in 2007 claimed there were 30 mln of such citizens.
3. Federal Law No.159-FZ “On Specifics of Divesting Real Property Being State Property of the RF Entities or Municipal Property Leased by Small and Medium-Size Businesses and on Amending Certain Legal Acts of the RF” was enacted in 2008.
The new law introduced the pre-emptive right for small and medium-size businesses to buy-out the leased real property with the possibility of payment by installment at the interest rate equal to 1/3 of the RF Central Bank financing rate for the period until July 1 2010 (later Federal Law “On Amendments to Separate Legislative Acts of the RF on the Issue of Simplification of Titles for Heirs and Other Citizens” No.268-FZ of November 23, 2007.
Land plots allocated for household farming, dacha farming and gardening, and for individual homes construction before October 30, 2001.
In the case of lack of title-confirming documents certificates of inheritance or another documents may be presented setting or evidencing of Article 25.2 of Federal Law “On State Registration of Real Property Rights and Transactions Therewith” and setting/evidencing the right of an individual – any previous owner of the respective building/facility for this particular land plot.
Federal Law “On Amendments to Separate Legislative Acts of the RF and Invalidation of Certain Legislative Acts (Clauses) in Relation with Enactment of the Federal Law on State Real Property Cadastre” No.66-FZ of May 13, 2008.
The period for exercising these powers was initially set until January 1, 2010, and then in July 2009 it was extended until March 1, 2015.
See Report by Yu. Ya. Chaika, General Prosecutor of the RF, at the meeting of the Council of Federation - http6//genproc.gov.ru.
T. Mikhailova “Dacha Amnesty Received a New Term”. – Rossiyskaya Gazetta, July 2, 2009.
Institutional Problems extended until July 1 2013)1. The process of land buy-out started under this law received the name of “minor privatization” – similar to the Eastern Europe countries, where such land privatization took place in 80-ies - 90-ies and was the first step in privatization of all the state assets.
In July 20092 amendments were introduced into this Federal Law allowing for expanding the circle of entities entitled to use the pre-emptive right for real property privatization. Thus, the lease term entitling for privatization was decreased from 3 to 2 years; also it became possible to settle the lease payment arrears and arrears in payment of fines imposed for untimely lease payments. Previously it was the fact of being in arrears on lease payments that impeded real property privatization for many small and medium-size businesses.
4. In July 2007 lower rates for land buy-out were set3, the maximum amount not to exceed 20% of the land plot cadastre value – for cities with population over 3 mln, and 2.5% of cadastre value – for land in other locations. These terms for land acquisition relate to commercial companies and individual entrepreneurs should they own buildings and facilities located in such territories (including those erected in the place of the destroyed or demolished ones or those re-constructed), should these buildings/facilities had been previously divested from state/municipal property (p. 2 of Article 2 of Federal Law No.137-FZ “On the RF Land Code Enactment” of October 25, 2001)4.
Actually mainly the industrial enterprises were meant here – those which had emerged during the privatization process, as well as entities having later acquired the title for real property of such enterprises. The regulations provide for quite a significant reduction of the buy-out price.
5. In 2010 the Government undertook some measures to resolve the outstanding issues in the sphere of cadastral valuation of land. According to the RF Chamber of Industries and Commerce, unlawful or unjustified valuation was identified in 10 regions of Russia.
In July 2010 amendments were made in land valuation regulations having increased the level of protection of the individual citizens’ and legal entities’ rights in the sphere of cadastral valuation of land.1) Mandatory insurance was introduced against the liability for causing damage subject to a certain level of cadastral value – in the amount of no less than RUR 30 mln;
The refinancing rate of the Central Bank as of the date of publishing the leased property sale notification.
Federal Law No.149-FZ “ îò 17.07.09 ã. “On Amendments to the Federal Law “On Specifics of Divesting Real Property Being State Property of the RF Entities or Municipal Property Leased by Small and Medium-Size Businesses and on Amending Certain Legal Acts of the RF” and to certain legal acts of the Russian Federation” of July 17, 2009.
Federal Law No.212-FZ “On Amending Legal Acts of the RF with Regards to Clarification of the Terms and Procedure for Acquisition of Titles for Land Plots Being in State or Municipal Property” of July 24, 2007.
In addition to that Federal Law No.212-FZ “On Specifics of Divesting Real Property Being State Property of the RF Entities or Municipal Property Leased by Small and Medium-Size Businesses and on Amending Certain Legal Acts of the RF” introduce into the RF Land Code (p. 1.2. Article 36) the clause that the sales price for land plots being state or municipal property if bought-out by the owners of buildings and facilities located in the territory of such plots cannot exceed their cadastre value. In addition it was stated that the procedure for defining the price for such land plots and for payment shall be set by the RF Government for the land plots being in federal property, by the RF entities power bodies – for the land plots being the property of the regional government or for which the share has not been set; and by local self-government bodies for lands being in municipal property (p. 1.1 Article 36 of the RF Land Code as amended by Federal Law No.212-FZ of July 24, 2007).
Federal Law No.167-FZ “On Amendments to the RF Law “On Valuation Activities in the Russian Federation and Certain Legal Acts”” of July 22, 2010.
RUSSIAN ECONOMY IN trends and outlooks 2) Mandatory expert evaluation of the cadastral valuation report by a self-regulating organization was introduced;
3) Mandatory publishing of cadastral valuation reports was introduced;
4) Individuals and legal entities were granted the right to challenge the identified cadastral value – either in court or in the especially established Commission. With that the individuals/entities disagreeing with the identified cadastral value shall have the right for independent market-based real property valuation.
These changes were long expected and targeted at decreasing the level of arbitrary valuation on behalf of governors and unjustified valuations on behalf of specialized assessors.
The weakest element in all the above novations is the prescribed membership of the Commission for settlement of disputes about the cadastral value: it is dominated by regional officials which significantly increases the risk of unjustified arbitrary decisions. Introducing third-party experts into these Commissions membership could have significantly improved the situation.
The respective similar clause was also introduced into Article 66 of the RF Land Code.
Improving the transparency of all data about state and municipal lands sales and leasing could become an additional safeguard against abuse in land valuation sphere (the best option would be to create a centralized Internet site).
6. The most valuable amendments to legislation on agricultural land turnover were enacted in December 2010.1 With some minor exceptions they are coming into effect starting from July 1, 2011.
The law provides detailed regulation of the procedure for withdrawal of agricultural land and plots allocated for construction subject to them not being used for the prescribed purposes. Land may be withdrawn from the title holder or from the tenant in case it has not been used for the prescribed purposes during the 3-year period (without account of time required for this land development – up to 2 years, and time falling under the natural calamities period). With regards to plots allocated for construction such period of non-use shall make years.
As for the privately owned land – only court may withdraw it from the title holder. Same may be done by an authorized agency with regards to state-owned and municipally-owned land. Land withdrawal from the title holder may be reinforced in case violations are not eliminated after administrative sanctions. The withdrawn privately owned land plot shall be sold via public auctions. The ex-owner shall be entitled to the proceeds less the auction organization expenses and cadastral activities costs.
The criteria for recognizing the land as not being used for the prescribed purposes should be approved by the Government. According to some experts2, almost 50% of agricultural land in Russia has been withdrawn from the turnover, and about half of it is land bought out by investors with speculative purposes. It is the most fertile, conveniently located land with capitalization growth rate of 30–40% per annum.
In addition, the new Law Federal Law No. “On Amendments into Certain RF Legal Acts to Improve Agricultural Land Turnover” of December 29, 2010.
Sergei Lisovsky, Senator, co-owner of Mosselprom Group: “Dmitry Medvedev urged us to work on the draft legislation providing for withdrawal privately owned agricultural land not being in use”, November 26, 2010 – http // www.n-s-k.net.
Institutional Problems A) Significantly strengthens administrative liability for non-using agricultural land in the prescribed purposes;
B) Approves the mechanism of recognizing land / shares in land as unclaimed, introduces the procedure for their hand-over to the state by way of judicial procedure;
C) Introduces the procedure for the general meeting of the owners of shares in land;
D) Obliges local self-government bodies to organize such general meetings before July 1, 2013, should they not do it on their own initiative prior to July 1, 2012. Such general meetings shall be authorized to approve the land survey draft, list of title holders, size of shares in land, to provide for cadastral activities for forming land plots and to make decisions on other significant matters;
E) Changes the process of forming Land Re-Distribution Fund;
F) Introduces a series of other changes.
6.3.6. Outcomes and Key Areas of Land Relations Development Here are the key outcomes of 20 years from the start of land market development in the post-Soviet Russia:
- Land market development started;
- Legal framework created for land titles acquisition;
- Benefits were provided for acquisition of land plots into private ownership (prices decreased for land plots occupied by industrial enterprises; benefits for land buy-out by small and medium-size businesses) and their recording n documentation (“dacha amnesty”);
- Mechanisms improved for implementation of the procedure of land title acquisition – mandatory land auctions;
- Land cadastre and cadastral valuation system formation started, as well as delineation of property rights between the level of governments;
- Some other measures were undertaken.
Nevertheless, a great many problems remain outstanding. A number of systemic factors are acting in Russia, and they are the barriers for unhampered land turnover and are significantly decreasing the effective demand for land and the efficiency of using private property. They are:
1. Property rights are not sufficiently protected by the state by the state due to lack of court independency from the executive power, corruption, poor performance of municipalities, nationalization campaign (including special laws about Sochi Olympics and Asian-Pacific Economic Cooperation Forum);
2. The majority of Russia territory and infrastructure is poorly developed, which really excludes efficient land use and leads to manifold decrease of land use efficiency. 18% of the land value is spread across 98.1% of the country territory. Mainly all the most valuable land is concentrated in populated boroughs;
3. Local self-government and power bodies of the RF entities are poorly developed, they do not provide for efficient decision-making and regulation of land allotment and withdrawal, tax assessment and use of land;
4. The mechanisms of land sale and hand-over into state property are non-transparent due to both corruption and lack of budget funds for preparing land plots for sale; land relations regulation at municipal level is at a very low level;
RUSSIAN ECONOMY IN trends and outlooks 5. Quasi-property exists in Russia: false legal regime for ownership regulation for the sites which are not real property due to significant limitations of their use and disposal (e.g., shares in land);
6. The institutions providing for land turnover are at the very early stage of their development, which explains the poor quality of government services in the land use sphere and high cost incurred by owners and title holders (land cadastre, cadastral valuation of land, selfregulating organizations of assessors, etc.).
The most dangerous or the most negative factors are as follows: