Russian law establishes two predominant forms of holding a land plot: on the basis of ownership, or on the basis of a lease. In Moscow, a lease is the most common. Rent for land plots that are in state or municipal ownership is set at an amount corresponding to the yield of the land plot, taking into account the category of land to which the plot is assigned and its permitted use (paragraph 2 of the Basic Principles for Determining Rent on the Lease of Land Plots in State or Municipal Ownership (approved by Resolution of the Government of the Russian Federation No. 582 of 16.07.2009)). The type of permitted use of the land plot also affects the determination of the cadastral value of the plot (the property), which is often one of the main figures used to calculate the rent under a lease concluded with the Moscow City Property Department (DGI of Moscow).
Article 7 of the Land Code of the Russian Federation requires a land user to use land plots in accordance with their designated purpose. That designated purpose may be:
- Principal;
- Ancillary;
- Conditionally permitted.
The types of permitted use, and the legal regime of land plots, are determined by the regulatory system of town-planning documents adopted in the constituent entity. However, the primary document containing town-planning information for any land user will be the local land-use and development rules. In Moscow such rules were adopted only in 2017.
Breaches of land use in the capital are detected in the course of municipal land control. That falls within the powers of the State Inspectorate for Control over Real Estate of the City of Moscow (the State Inspectorate).
If a breach of the land-use procedure is found, the State Inspectorate may bring the persons at fault to administrative liability (clause 4.2.1 of the Regulations on the State Inspectorate for Control over Real Estate of the City of Moscow, approved by Government Resolution No. 184-PP of 25.04.2012).
As a rule, however, administrative liability is followed by sanctions of another kind. This happens because executive authorities, in carrying out their efficiency plans, share information on breaches with one another.
For example, once the State Inspectorate has found a breach of the land-use procedure, it sends the information to DGI of Moscow, which may then apply a contractual penalty equal to a year's rent.
Recently DGI of Moscow has chosen a further way of protecting its rights, seeking to recover from the land user, as unjust enrichment, the money that the person saved by reason of the difference between the rent that ought to have been calculated and paid on the basis of the actual type of use of the land plot, which assumes a more expensive type of use, and the rent that the land user paid.
The courts support this method and regard it as justified. DGI of Moscow often fails to take into account that a land plot may be used otherwise than for the purposes provided for in the lease, yet still in accordance with the requirements of the town-planning documents in force, and that those documents take priority.
Land plots, besides the principal permitted use, also have ancillary uses, but of no more than 25%. Their basic principle is to provide functions of the property that are additional to the principal one. In other words, on a land plot with an industrial permitted use, ancillary codes should be established for use of the property as office infrastructure (so that the bodies managing the production can be housed) or for public catering (no organisation gets by without a place for people to eat).
Moscow has seen a wave of cases in the commercial courts concerning breaches of land-use regimes and of the terms of leases. The executive authorities approached the cases formally: they based their position solely on the terms of the lease in force and on the information entered in the Unified State Register of Real Estate (EGRN). That is, it was enough for the State Inspectorate and for DGI of Moscow to establish that the land user was carrying on any other activity on the land plot (or on part of it) different from the activity entered in the EGRN as the principal permitted use.
In 2022 the Judicial Chamber for Economic Disputes of the Supreme Court heard a number of appeals. The Court concluded that it is impermissible to ignore the regulatory legal acts in force that govern town-planning relations in the constituent entity.
For example, in case No. A40-285960/201 DGI of Moscow sued the company for 30 million roubles of unpaid rent as unjust enrichment. The State Inspectorate had earlier found that an additional office of VTB Bank was operating in one of the buildings on the plot, while the principal permitted use is the production of reinforced-concrete products for house-building and construction.
Remitting the case for a fresh hearing, the Judicial Chamber of the Supreme Court stated that the lower court must take into account: whether the legal regime of the disputed plot was breached; whether, having regard to the types of permitted use approved by the town-planning regulations (principal and ancillary), office (banking) activity may be carried on in premises of the building located on the disputed land plot; and whether the lease of the premises led to a change in the permitted use of the building and of the land plot.
The approach by which the Supreme Court points to the need to take town-planning documents into account can also be found in many other cases of 2022. That trend in the hearing of cases appears more reasonable and better justified, because it takes into account not only the formal side of the contractual relationship but also the town-planning regulations in force, in particular the land-use and development rules.
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