Federal Law No. 171-FZ of June 23, 2014 (“the Law”) has made significant amendments to the Russian Federation Land Code and other legislative acts of the Russian Federation. Below we provide a summary of what in our view are the most important of those. Most of the important amendments enter into force on March 1, 2015, with the exception of certain specific and transitional provisions that entered into force on June 24, 2014.

Amendments effective as of March 1, 2015

Definition of a land plot

The Law introduces a new, more detailed definition of the term land plot, identifying its mandatory features. A land plot, as a subject of property rights and other land rights under the Russian Federation Land Code (“RF LC”), is now defined as immovable property comprising a portion of the land’s surface and with characteristics permitting it to be identified as an individually defined object.

Formation of land plots from land or land plots in state or municipal ownership

The Law establishes special provisions of land law with respect to the procedure for formation of land plots from land or land plots in state or municipal ownership (“state

land”). In particular, such land plots are to be formed in accordance with one of the following documents:

An area demarcation plan (“proekt mezhevaniya territorii”, known

by the abbreviation “PMT”), approved in accordance with the Russian Federation Town-Planning Code (“RF TPC”);

Draft documentation on the site, boundaries, area, and other quantitative and qualitative

characteristics of forest sections;

An approved plan of the location of the land plot or land plots on the cadastral plan of the territory (“land plot location plan”).

The Law provides an exhaustive list of cases in which the formation of land plots requires an approved PMT. These cases include, in particular, the formation of land plots:

From a land plot allocated for complex development of a territory;

Within the boundaries of a planning structure element containing apartment buildings;

For siting federal, regional, or local linear facilities.

Other land plots may be formed from state land without an approved PMT, provided there is an approved land plot location plan.

The Law also adds new provisions regarding land plot location plans, which in the amended RF LC take a central position in the procedure for formation of land plots from state land. The land plot location plan is a depiction of the boundaries of the land plot or plots to be formed on the cadastral plan of the territory showing the area of each land plot, and if two or more land plots are

being formed, the conditional number. Depending on the purpose for which the land plot is being formed, the land plot location plan may be prepared by  a state authority, local authority, citizen, or legal entity. The form for the land plot location plan and the requirements as to its format and preparation are to be established by the federal executive authority authorized by the Russian Federation Government, and until they are approved land plot location plans are to be prepared in accordance

with the rules applicable prior to the effective date of the Law. The land plot location plan is approved by a decision of the state executive authority or local authority responsible for disposal of state or municipal land plots. A decision approving a land plot location plan is valid for 2 (two) years. This decision is grounds for state registration of the newly formed land plot.

The Law provides an exhaustive list of grounds for denying approval of a land plot location plan, in particular, if the land plot location chart does not conform to an approved PMT,

land development documentation, or specially-protected natural territory regulations, or if the location of the land plot to be formed is within the boundaries of a territory for which a PMT has already been approved.

The land plot is formed in accordance with the approved land plot location plan even if the boundaries of the land plot formed in accordance therewith cross the boundaries of another land plot or land plots formed according to a PMT approved after the land plot location plan’s approval and before the approval decision expired.

Allocation of land plots in state or municipal ownership

The Law completely overhauls the procedure for allocation of state and municipally owned land plots

to citizens and legal entities. The RF LC has set aside the preliminary site approval as a separate procedure for allocation of state land for construction. Also, all specific features of allocating land plots for housing construction and complex development of land for housing construction have been omitted.

The Law prohibits the sale of state and municipal land plots with a primary permitted use of construction of buildings and structures. The allocation of such land plots for construction should be primarily through lease to the future developer. An exhaustive list of exceptions is expressly provided in the RF LC (in particular, allocation of a land plot to a citizen for construction of a single-family dwelling).

Sale of state and municipal land plots must be solely by auction (tenders are no more applicable). It is only possible to sell land plots without an auction in cases expressly set forth

in the RF LC (mainly where the land plot is provided for personal, non- commercial, or agricultural purposes).

The lease of state and municipal land plots must also be solely by auction. An exhaustive list of exemptions to this rule is provided and concerns mainly land plots allocated for state use and socially beneficial purposes (for example, for performance of

RF international obligations). It is particularly worth noting two

exceptions to the above rule that may be relevant for businesses. A land plot may be allocated without an auction:

To the owner of a building, structure, or premises located on the land plot;

To the owner of unfinished buildings and structures located on the land plot. This may only

be done once, and only for completion of their construction.

Particularly notable are cases in which tenants of state and municipal land plots conclude new lease agreements for such land plots. The Law emphasizes that such tenants do not have preferential rights to enter into a new land plot lease agreement without an auction. There are exceptions to this rule (these are practically identical to those in which a land plot can be leased without an auction), as well as a set of requirements to be met by the tenants willing to rely on such exceptions.

The Law provides a detailed procedure for preparing, organizing, holding, and determining the results of auctions for the sale of state and municipal land plots and the rights to conclude lease agreements for such land plots. This procedure is the same for all cases of allocation of land plots, whether for construction or for other purposes.

The Law also establishes that an auction, as well as the formation of a land plot for sale or allocation into lease by auction, may occur at the initiative of interested parties (individuals or legal entities). In this case, the first stage of formation of the land plot

and preparation for the auction is the preparation of a land plot location plan by the interested party if the land plot has not been formed and no PMT has been approved that includes the land plot. However, interested parties are prohibited from preparing land plot location plans for land plots

in Moscow, St. Petersburg, and Sevastopol, or within the boundaries of population centers. In these cases the land plot location plan is prepared by the respective authority.

Permit procedure for use of land plots in state or municipal ownership (without allocation)

The Law introduces a new legal

institution – the use of land or land plots in state or municipal ownership without allocation of the land plot or establishment of an easement. Such use is envisaged for land and land plots not allocated to citizens or legal entities, and is permitted in the following cases:

For conducting engineering surveys;

For major repairs or maintenance of a linear facility;

For construction of temporary or ancillary structures (fences, temporary amenities, awnings) and storage of construction and other materials and equipment for construction or renovation of federal, regional, or local linear facilities;

For conducting geological subsoil studies;

For activities aimed at maintaining and supporting the growth of traditional lifestyles, economies, and industries of minority peoples of the North, Siberia, and Far

East of the RF (except for land and land plots in the category of forestry land).

This use is only possible with a permit issued in accordance with the procedure established by the RF Government and valid until the land plot is allocated to a citizen or legal entity.

The Law also specifically mentions one other case in which state and municipal land and land plots can be

used without allocation of the land plot or the establishment of an easement

– as the site of non-stationary retail outlets, advertising structures, and other objects as established by the RF Government. The siting, installation, and operation of non-stationary retail outlets and advertising structures must be governed by the respective

federal laws, and for the other items determined by the RF Government, by the regulatory acts of the RF regions.

Specifics of leasing and terminating lease rights for land plots occupied by unfinished buildings

Allocation into lease

The Law establishes that the rights to a land plot in state or municipal ownership may be granted  without an auction for completing construction of an unfinished

building thereon, but only once. Only the following persons are eligible for acquiring a land plot in this manner:

1)  the owner of the unfinished building, having acquired the title of the said building at public auction after it was seized from

the previous owner in connection with termination of the land plot lease agreement; or

the owner of the unfinished building, if:

within six months of the expiration of the previously concluded lease agreement for the land plot on which the property is situated

the competent authority has not filed a claim in court for seizure and sale at public auction of the property; or

a court has refused to grant such a claim or the property was not sold at public auction due to lack of bidders. Leasing the land plot without an auction is permitted in

this case, provided the land plot was not allocated to a previous owner

of the property for the purpose of completing construction.

In all other cases, the land plot (or rights thereto) must be sold at auction.

The general rule is that land plots will be allocated for a term of up to three years for the purpose of completing an unfinished building.

The Law also establishes a special rule: if the title to the unfinished building was registered before  March 1, 2015 or the respective state or municipally owned land plot was leased before March 1, 2015, the owner of the unfinished property has the right to lease the respective land plot without an auction once, for a period of up to three years for the purpose of completing construction. This rule does not apply if the land plot was previously allocated to any of the previous owners on the terms specified above.

Compulsory alienation of an unfinished building

The Law adds new grounds to the grounds for termination of title provided in art. 235 of the Russian Federation Civil Code (“RF CC”). It permits compulsory alienation of unfinished buildings if a lease

agreement for the land plot in state or municipal ownership on which it is located is terminated.

If a lease agreement for a state or municipally owned land plot

allocated in an auction is terminated, unfinished buildings on such land plot may be seized from the owner by court decision and be sold at public auction. The procedure

for such public auction is to be established by the RF Government.

The federal executive state authority or local authority responsible for disposal of the land plot has the right to file a claim for sale of an unfinished building at public auction. The claim for sale of the unfinished building

will be denied if the owner can prove that the breach of the construction timetable was due to acts/omissions of the state authorities, local authorities, or entities operating utilities systems to which the property requires connection/ technological connection.

The starting price for sale of an unfinished property is determined on the basis of its market value.

In the event of termination of a lease agreement for a land plot in state or municipal ownership that underlies an unfinished building, the property owner does not acquire the right to demand the transfer of the land plot (or part thereof) into use under art. 272 of the RF CC.

The Law also sets forth that the above rules on compulsory alienation of unfinished buildings do not

apply with respect to co-financed construction on a state or municipally owned land plot that is incomplete as of the expiration date of the land plot lease agreement.

Exchange of land plots

The Law adds a new chapter to the RF LC providing for exchange of land plots in state or municipal ownership for land plots in private ownership. Such an exchange is possible in two cases:

if the private land plot is seized for state or municipal needs;

If in accordance with an approved land development plan and PMT  a private land plot is intended

for siting social infrastructure (if the placement of a facility is

necessary to comply with town- planning standards), utilities or transportation infrastructure, or if it contains such facilities.

The exchange of land plots is formalized by the conclusion of an exchange agreement between the owners, and should meet the following conditions:

The buildings and structures on the exchanged land plots must also be subjects of the exchange agreement.

If the land plot and the social facilities or utilities and transportation infrastructure

thereon are the private property of a single person, the exchange agreement may provide for

gratuitous transfer of the properties into state or municipal ownership.

Differences in the permitted use of land plots are not an obstacle to concluding an exchange agreement for such land plots.

The exchanged land plots and immovable property thereon (except properties gratuitously transferred into state or municipal ownership) are subject to mandatory appraisal to establish their market value in accordance with RF law on appraisal activities.

The price of the exchanged land plots must be equivalent,

except in cases where the private land plot is seized for state or municipal requirements. A state or municipal land plot with a price lower than the purchase price

of the seized land plot may be transferred to the owner of such a land plot, provided:

The owner of the seized land plot consents to such an exchange, and

The difference between the purchase price of the seized and transferred land plots is reimbursed within three months of the passage of title to the seized land plot.

Repartitioning land and/or land plots

The Law amends the RF LC provisions on the repartitioning of land plots

and adds a new chapter governing such reallocation. It establishes the possibility of repartitioning not only several neighboring land plots,  but also land in state or municipal

ownership (i.e., land that has not been not formalized or registered as a

subject of rights -- a land plot). At the same time, the new rules imply that land can only be repartitioned if at least one of the land plots thereof has been duly formed.

The new chapter of the RF LC provides cases and grounds for repartitioning of land and/or land plots in state or municipal

ownership among themselves. Such repartitioning is permitted if all the repartitioned land plots:

Have not been allocated to citizens, legal entities, or state authorities or local authorities, and are not encumbered by  third party rights other than easements. In this case, the repartitioning of land and/or land plots is to be done on the basis of an agreement between the competent state authorities; or

Have been allocated on the same right to one and the same person (state authority). In this case, the repartitioning of land and/or land plots is done on the basis of a resolution from the respective authority.

The Law lists the requirements for the conclusion and content of the said agreements and resolutions, and also contains an exhaustive list of the circumstances that prohibit such repartitioning of state and municipal land and/or land plots. These circumstances mainly relate  to protecting the rights of the right holders of the repartitioned land plots (for example, consent has not been obtained from the owner of all repartitioned land plots) or the need to comply with town planning and cadastral requirements (in particular, if the boundaries of a plot involved in repartitioning require clarification).

The Law expands the list of cases in which repartitioning of land and/

or land plots in state or municipal ownership and land plots in private ownership is permitted. Such repartitioning is now permitted if it takes place:

Within the boundaries of a developed territory with respect to which an agreement has been concluded for further

development of such territory, for the purpose of bringing land plot boundaries into conformity with an approved PMT;

For the purpose of forming plots for siting capital structures in accordance with art. 49.1 of the RF LC (“Seizure, including by purchase, of land plots for state and municipal needs”), including for the purpose of seizing land plots for state or municipal needs;

For the purpose of bringing land plot boundaries into accordance with an approved PMT to prevent overlapping, interspersed, and broken boundaries and enclaves;

With respect to land and/or land plots intended for personal

homesteads, allotment gardening, gardening, dachas, and single- family dwellings.

In the last two cases, the area of  the land plots in private ownership may be increased as a result of the repartitioning, but not by more than up to the maximum size envisaged by law. At the same time, any such increase in the size of land plots at the expense of state or municipal

land and/or land plots shall be made up for by payment of an amount determined by the RF Government or regional or local authorities (depending on who the land and land plots belong to).

Repartitioning of state and/or municipal land and/or land plots and private land plots is performed on

the basis of agreements between the competent authorities and the land plot owners, which must conform to the approved PMT or

(absent such) the approved land plot location plan.

Establishment of an easement with respect to state or municipal land

The Law introduces special rules on establishing easements with respect to land plots in state or municipal ownership. In particular, the Law provides for the conclusion of agreements establishing easements with respect to such land plots in the case of:

Placement of linear facilities, telecommunications  structures, and special informative signs and protective structures that do not impede the use of the land plot in accordance with its permitted use;

Surveying works; Works related to subsoil usage. This list is not exhaustive, which

implies that it will be possible to establish easements on land plots in state or municipal ownership for other purposes.

The amendments to the RF LC reinforce the principle of payment for such easements, with payment made under an agreement establishing an easement, and set in accordance with a procedure established by either the RF Government or a regional or local authority, depending on who owns the land plot.

A significant development is  the conclusion of an agreement establishing an easement with

respect to a portion of a land plot in state or municipal ownership  for a period of up to three years by agreement of the parties without

carrying out cadastral works on the

respective portion of the land plot, without state cadastral registration  of the said portion of the land plot, and without state registration of the restrictions (encumbrances) arising in connection with the establishment of the said easement.

Gratuitous transfer of federally owned land plots into regional or municipal ownership

The Law adds a chapter to the RF LC that defines the cases and procedure for gratuitous transfer of federally owned land plots into municipal or regional ownership. This chapter contains an exhaustive list of land plots that are not transferable into regional or municipal ownership. A new regulation has been added to define the procedure for terminating third party rights to a land plot gratuitously transferred from federal ownership.

Classifier of types of permitted use for land plots

The concept of a land plot permitted use classifier was introduced into land law in 2010, but the associated rules remain inoperational as a classifier has not yet been approved. Previously the RF Ministry of Economic Development attempted to draft a permitted use classifier, which resulted in RF Ministry of Economic Development Decree No. 630 of October 29, 2013 on Approval of the Land Plot Permitted Use Classifier, but the decree was refused registration by the RF Ministry of Justice.

Nevertheless, the Law contains new provisions to the effect that a permitted use of a land plot

established before approval of the land plot permitted use classifier in accordance with the RF LC (“Classifier”) shall be recognized as valid irrespective of whether it conforms to the said classifier. At the same time, local authorities of rural and urban districts have until

January 1, 2020 to amend land use and development rules, with no public hearings on the draft amendments, to bring their types of permitted use of land plots into conformity with the Classifier.

Amendments effective after June 24, 2014

Law on State Registration of Immovable Property Rights and Transactions

The amendments introduced by the Law state that if title to immovable property arises on the basis of an agreement with a state or municipal authority, state registration may be performed on the basis of:

An application by the state or local authority, or

An application by the person that entered into the respective agreement with the state or local authority.

Law on Support for Housing Construction Development

Amendments have been made expanding the powers of the Federal Fund for the Support of Housing Construction Development, as well as providing for the involvement of land for which the state ownership has not been delineated .

Law on the Enactment of the Russian Federation Land Code

Right of citizens to acquire ownership of land plots free of charge.

The amendments introduced by the Law allow an RF citizen to acquire ownership of a land plot that he or she actually uses free of charge, provided it contains a residential house to which the citizen acquired title before the enactment of the RF LC, or after if the title to the house passed to the citizen by inheritance but the title of the person from

whom the heir inherited the house arose before the enactment of the RF LC.

Previously, the ability to acquire land rights was subject to tighter restrictions and did not cover, in particular, acquisition of title to buildings through inheritance.

Acquisition of an agriculture category/purpose land plot free of buildings/structures.

If a land plot within the boundaries of a population center that is intended for agricultural production is free

of buildings and structures and the said land plot has been allocated to an agricultural organization or farm in perpetual use or hereditary life tenancy, the said persons have the

right to acquire ownership of the land plot at a price established by regional law, but not more than 15% of the cadastral value. This rule does not apply in Moscow and St. Petersburg as cities of federal importance.

A tenant of a land plot free of buildings and structures allocated out of agricultural land or settlement land intended for agricultural production has the right to acquire ownership of the land plot at a price determined in accordance with the rules described above if the tenant’s lease rights arose as the result of conversion of a perpetual use right or hereditary life tenancy into a lease right.

For reference: regulatory acts amended by 171-FZ

The Law amended more than 30 regulatory acts, including:

Russian Federation Land Code,

Federal Law No. 137-FZ on the Enactment of the Russian

Federation Land Code of October 25, 2001

Russian Federation Town-Planning Code, Federal Law No. 191-FZ on the Enactment of the Russian Federation Town-Planning Code of December 29, 2004

Part I of the Russian Federation Civil Code

Russian Federation Forest Code No. 201-FZ on the Enactment of the Russian Federation Forestry Code of December 4, 2006

Russian Federation Administrative Penal Code

Federal Law No. 122-FZ on State Registration of Immovable Property Rights and Transactions

Federal Law No. 221-FZ on the State Cadaster of Real Estate of July 24, 2007

Federal Law No. 102-FZ on Mortgages of July 16, 1998

Federal Law No. 101-FZ on the Circulation of Agricultural Purpose Land of July 24, 2002

Law on Subsoil (as amended by Federal Law No. 27-FZ of March 3, 1995)

Federal Law No. 131-FZ on the General Principles of the Organization of Local Government in the Russian

Federation of October 6, 2003

Federal Law No. 74-FZ on Farms of June 11, 2003

Federal Law No. 126-FZ on Telecommunications of July 7, 2003

Federal Law No. 189-FZ on the Enactment of the Housing Code of the Russian Federation of December 29, 2004

Federal Law No. 214-FZ on Participation in Co-financed Construction of Apartment Buildings and other Immovable Properties and Amendments to

1Art. 7.2 RF LC.

Certain Legislative Acts of the Russian Federation

Federal Law No. 33-FZ on Especially Protected Natural Territories of March 14, 1995

Federal Law No. 116-FZ on Special Economic Zones in the Russian Federation

Federal Law No. 66-FZ on Gardening, Allotment Gardening, and Dacha-based Non- commercial Associations of Citizens of April 15, 1998

Federal Law of December 29, 2006 on Additional Measures of State Support for Families with Children

Federal Law No. 135-FZ on Appraisal Activities in the Russian Federation of July 29, 1998

Federal Law No. 52-FZ on Public Health and Wellbeing of March 30, 1999

Federal Law No. 49-FZ on Territories of Traditional Natural

Resource Use by Minority Peoples of the North, Siberia, and the Far East of the Russian Federation

Federal Law No. 185-FZ on the Fund for Support of Housing and Utilities Reform

Federal Law No. 161-FZ on Support for Housing Construction Development of July 24, 2008

Federal Law No. 244-FZ on the Transfer of Land Plots within the Boundaries of Federally Significant Resorts into the

Ownership of Russian Federation Regions or Municipalities, on

the Referral of Such Land Plots to Federal Property, Regional Property, or Municipal Property, and on Amendments to the Federal Law on Specially Protected Natural Territories of December 3, 2008

Federal Law of July No. 145-FZ on State Company Russian Roads and on Amendments to Certain

Legislative Acts of the Russian Federation

Federal Law No. 327-FZ on the Transfer to Religious Organizations of Religious Purpose Property in State or Municipal Ownership

Federal Law No. 43-FZ on Particulars of Regulation of Certain Legal Relations in Connection with the Accession of Territory to Russian Federation Constitutive Subject Federally Significant City Moscow and

on Amendments to Certain Legislative Acts of the Russian Federation

Federal Law No. 108-FZ on the Preparation and Holding in the Russian Federation of the FIFA Football World Cup 2018 and FIFA Confederations Cup 2017, and Amendments to Certain Legal Acts of the Russian Federation.