In-Depth: Land: The Give and the Take

Competitor Wars

The official reason for such controversial decisions is that the order in question was issued in violation of the current legislation on land use and town-planning.

However, in practice, the real reason often has something to do with a redistribution of spheres of influence in a city, or the ongoing changes within the government bodies, or is connected to the actions of unscrupulous competitors who have set out to defeat a certain business with the local government’s support.

Unfortunately, rival businesses often resort to means that are incompatible with the rules of healthy competition. The time-honored method of enlisting government support in exerting pressure on a rival is just one such example. The biggest blow to a rival is stripping him of a secured building plot, which inevitably results in large investment losses.

If we are to believe that government officials are innocent, then the situation becomes downright ridiculous, as it transpires that the civil servants invested with the authority to issue legal acts are poorly versed in the laws of the land. How else is it possible to explain the fact that the administration issues acts only to find out afterwards that those acts are at odds with the provisions of the Land Code?

After an order allotting a building plot is invalidated the businessman involved has his right for development revoked, his project is no longer subject to approval, and so on.

The tenancy deal is then pronounced invalid, or a dispute over the freehold title arises. Sometimes such claims are satisfied by the courts at the same time as an invalidation of the previous order allotting a building plot, at the request of the administration that had issued it.

For most entrepreneurs, fighting all the bodies of local self-government at once, is a very difficult task.

A Pretext Is Easy To Find

The procedure for the distribution of building plots is intricate and, at times, controversial. Sometimes, the administration decides against delays and simply issues an order allocating the desired building plot, and everything seems to be fine.

In truth, however, the failure to comply with the legally established procedure for the distribution of land plots is reason enough to invalidate such orders in court, as running counter to the land use legislation. But what can be done if observing those rules is practically impossible without involving connections, or the so-called administrative resources?

The procedure for allocating building plots in Voronezh proves how difficult it is for entrepreneurs to secure permission for development.

To begin with, the chief architect’s office decides on the preparation of a set of documents authorizing the use of a plot, including a plot selection report. As the plot selection report requires the approval of various agencies, a special inter-governmental commission is established for the purpose.

The commission is authorized to request additional data and feasibility studies. A set of papers to be attached to the plot selection report includes a plan of the district where the plot is located, a short description of the planned facility, conditions of land use, the decision of the chief architect’s office, etc.

Afterwards, the city committee for town-planning policy sets up a commission for issuing engineering specifications for the development. That commission prepares a report on the engineering specifications for the facility.

If the plot selection report is approved by all the members of the inter-governmental commission and the engineering specifications and terms of land use are approved, the head of the department for town-planning and land use approves the plot selection report.

All the above-stated rules govern only the process of securing approval for the plot selection report. In other words, this is just the initial phase of the whole process.

The major and most frequent violations that can be used as grounds for invalidating an order [on the allocation of a building plot] in court include violations committed during a tender (or allocation of a plot without a tender), or in the course of the preliminary negotiations on the location of the future facility.

Both procedures are expressly described in law and the main reason for an invalidation is the violation of those procedures or a lack of the necessary paperwork.

Head to Head

Perhaps the best way to protect one’s rights and to be able to exercise them in future is to file a claim in court with a request to invalidate the order of the administration.

Then, the entrepreneur is required to prove only that his rights have been violated and the controversial order is at variance with certain rules of law.

Proving the former is much easier because the administration’s move to cancel its previous order entails disruption of development and loss of investment confirmed by something like a valuation report.

Far more difficult is to prove that the disputed order runs counter to a certain provision of the law, as legal acts issued by municipal bodies can be cancelled by them. Therefore, by law the administration is fully authorized to reverse its own decisions.

Now a few words on how exactly the disputed order can be in conflict with the provisions of the law.

Firstly, it may fail to satisfy legally established requirements.

Secondly, it may be signed by a person unauthorized to do so. Finally, its content may be at odds with current legislation. Usually the content is the only catch that can invalidate the document.

The burden of proof of the disputed order’s conformity to the law or of the fact that the signatory had sufficient authority to sign it rests with the government body or the official who issued the document. The defendant is also required to provide the reasons for the issuing of the order.

All the plaintiff is required to do is to cite the provisions of the law violated by the order.

However, where such disputes are heard in court, the courts often warn plaintiffs against abusing their right to litigation.

In this case the court draws the parties’ attention to the actions of the entrepreneur after the disputed order was reversed, whether he filed a new application, or requested approval of project documentation, etc.

Also, the court looks to the actions of the administration, what the administration did after it severed all the previously established contacts. Did it resume contact with the entrepreneur or did it put up the plot in question for sale again, etc.? In short, the court offers the parties an opportunity to reach a compromise. But experience shows that such an approach rarely succeeds.

Preventive Measures

The main preventive measure is the official registration of the lease of a freehold, which is prerequisite to the lawful use of land.

Though courts may vary in their judgments, once a title is registered it constitutes a strong foothold in a dispute with the administration, as the cancellation of an order allocating a plot does not strip the person of a registered title.

But registering the deal after the order is released is extremely difficult. Because there is no effective order on the allocation of the building plot, there are no lawful grounds for registration.

It is also worth noting the cases where the administration has to register tenancies (freeholds). If this is the case, such a provision must be expressly stated in the tenancy (sale) agreement.

In practice, everything is the other way around. When issuing the order on the allocation of a plot, the administration specifies that the future tenant (landlord) is required to have the deal officially registered. There is nothing the other party can do about that, as the allocation of a plot is the prerogative of a government body which is free to impose its conditions on the entrepreneur.

Also, to safeguard himself the entrepreneur should register the unfinished development with the authorities. This is particularly critical if the plot is held under a tenancy deal.

The registered tenancy agreement confirms the tenant’s right to the plot, and the Land Code clearly states the grounds for the termination of tenancy, while a freehold title is more difficult to dispute as the landlord can only be stripped of his rights by a court ruling.

But in this case it should be noted that in order to register one’s title for an incomplete development, the applicant must produce a copy of the order on the allocation of the building plot and the tenancy agreement duly registered with the government bodies.

In other words, such a move will work only as a preventive measure; doing it will not be possible after the order on plot allocation is cancelled. Also, to register a title to an unfinished development the applicant has to prove that at that moment all his agreements with the contractors hired for the construction of the facility have been terminated. In other words, construction work on the site must be effectively stopped.

Aleksandr Orlov is a lawyer at the Legas law firm.