In recent years the state has been taking land plots out of companies' ownership more and more often. This is connected with the active growth in the volume of design and construction in Moscow. How does one obtain fair compensation instead of a minimum value?
If the authorities want to take a land plot from a tenant who uses the land in breach of the established permitted use, or under a lease for an indefinite term, that tenant is left only to calculate the income hypothetically lost on leases terminated early. The reason is the possibility, given by law to the landlord, of terminating the lease unilaterally (Articles 610 and 619 of the Civil Code) without any need to follow a buyout procedure.
Owners and tenants with long-term leases, for their part, have a wider set of tools for protecting their rights and legitimate interests,
- clarifies Sergei Pivovarchik.
Why might the state take a company's land?
There are two methods of seizing land plots: the principal method (conditionally voluntary) and the additional method (compulsory). The first proceeds by agreement of the parties, without a court. That happens if the right-holder is satisfied with the terms on which his property rights come to an end and the property is transferred to a public-law entity. Under the second method the land plot is taken on the basis of a court decision, without the right-holder's consent.
The procedure for seizure is the same in both cases.
1. The state bodies register a decision to seize or buy out the land plot.
2. The owners and users of the land plots receive notice that their land plot will shortly be seized. This takes place no later than one year before the seizure.
As a rule, land is not taken for no reason. A weighty justification is required. Often this is connected with urban planning. Approved regulatory acts that set out plans for construction are published and are publicly available, so an owner can learn of a forthcoming seizure long before the seizure procedure itself begins to be carried out,
- clarifies Sergei Pivovarchik.
If the state body and the owner agree on the buyout price, an agreement is drawn up between the parties. It sets out in detail the procedure and the terms of the seizure. For example, particular duties to prepare the property for transfer to the state may be imposed on the right-holder. If the parties do not reach agreement, the state body that took the decision on seizure may bring a court claim for the buyout of the land plot.
How is the price of a land plot calculated?
When a land plot is seized, compensation may be claimed both by owners and by right-holders who hold land by right of lease, gratuitous use, permanent (perpetual) use, or lifetime (inheritable) possession (paragraph 3 of Article 56.8 of the Land Code).
The state must compensate not only the value of the plot, but also losses and lost profit. If, together with the land plot, a property located on it is taken from the company, the owner must also be compensated for its market value. The total amount of compensation must be determined 60 days before an agreement on the seizure of the real estate is sent to the right-holder of the land plot.
The buyout price is determined from the results of a valuation (under the rules of Federal Law No. 135-FZ of 29 July 1998). The final amount of compensation is determined taking account of an assessment of the right-holder's good faith. You will therefore not be compensated for:
- the value of properties erected in breach of the requirements of urban-planning zoning, land-use and development rules, the designated purpose, or the permitted use of the land plot;
- the value of properties erected in breach of the legislation in force, including urban-planning legislation;
- the value of inseparable improvements, buildings and structures erected after the owner learned, or ought to have learned, of the forthcoming seizure;
- losses incurred on transactions entered into after the owner learned, or ought to have learned, of the forthcoming seizure.
This approach is fully consistent with the principles of protecting good-faith participants in civil commerce and their legitimate expectations. At the same time, compensating a right-holder for the ending of ownership of properties he erected, and of transactions he entered into, after he had received information about the forthcoming seizure of the land plot is not consistent with those principles.
Previously, the value of immovable property with unapproved extensions and improvements on the plot being seized was not compensated. That also applied to properties whose construction began after notice of the seizure of that land plot, whatever the stage of construction.
Now, if an owner or another right-holder has no right to the land plot on which his real estate is located, compensation for the plot is determined as it would be for a lease for a term of 49 years (Article 26 of Law No. 499-FZ). And the reverse situation: if the plot being seized belongs to a citizen by right of ownership (or by another right), but he has no registered right to the real estate located on it, the market value of that real estate is included in the compensation (parts 3 and 5 of Article 26). That article made good shortcomings in land legislation on the protection of owners' rights, clarifies Sergei Pivovarchik.
If you do not agree with the price
Difficulties in determining the buyout price arise quite often. Practice shows that in most cases the amount of compensation calculated by the state bodies is significantly below an objective market value.
The situation looks like this. The plot passes into public ownership after the parties conclude an agreement on the seizure of the land plot, and only after that can the state body regularise the budget funding. But the public body is in no hurry to conclude such an agreement, offering a price that often does not suit the owner.
Dragging out the seizure procedure ultimately puts the owner to a choice: to accept the compensation on offer, because he is already losing actual possession and cannot use the plot in its original condition, or to dispute the matter with the state and at the same time to incur substantial costs in time and money. At the same time, the owner understands that he will not receive full compensation for the property and financial losses incurred while the dispute is under way. In that situation, careful preparation, an all-round analysis and a forecast of the likely results of the dispute are very important.
The most effective way to put the parties to a land conflict on an equal footing is for the owner himself to apply to the court. It is necessary to demand that the lawful procedure for seizure be observed, on terms of objective compensation,
- clarifies Sergei Pivovarchik.
Only the court procedure is especially exacting about the amount of compensation for the land plot being seized. Under the rules of the Land Code, the value of the plot must be assessed taking account of all the criteria and characteristics of the property being seized. And the value depends on size, location, category, distance from infrastructure, and so on.
It is also necessary to initiate the full seizure procedure through the courts. A claim limited to compensation for losses will not guarantee that all of the owner's interests are met, because the valuation work will not be carried out in full.
Protection of rights in land plots
There are known cases in which public bodies deliberately breach the established procedure for seizure. While the owner of a land plot uses the mechanisms provided by procedural legislation to defend himself, the authorities or organisations subordinate to them in fact occupy and use his plot. A considerable time will pass before he is able to establish his rights. Throughout that period, however, he has to pay for the use of the land. This is a plain infringement of the rights of the owner of land plots that have in fact been seized.
After the owner receives notice of the seizure of the land plot, he in fact loses the right to dispose of his property: he cannot let it, sell it, give it away or use it for construction. He continues to bear the tax burden, however, even if he is in litigation with the body carrying out the seizure. Unfortunately, as court practice shows, satisfaction of the public interest comes first. That is, the owner really does lose both the plot and the money.
Previously, under paragraph 7 of Article 23 of the Land Code, right-holders could require the authorised authorities to buy out their land plots. That was possible where public use of the plot made it impossible for the owner to go on using it. After Federal Law No. 499-FZ of 31 December 2014 was adopted, however, that possibility was abolished. Since August 2018 a right-holder may demand that his land plot be bought out at market value, or that his losses be compensated, only if the seizure has made use of the plot impossible or substantially more difficult.
The buyout procedure does not provide for right-holders to be compensated for all their property losses. That is, the right-holder will be compensated for losses after the event, and until then he continues to bear costs that are not made good.
Remember that a breach of even one of the requirements of the procedure is a ground for refusing to let the authorised body exercise, through the courts, its right to seize land plots (the Land Code of the Russian Federation, Chapter VII). An owner should bear this in mind when he sees that the actions of the authorised bodies are beginning to conflict with the law.
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