On February 29, 2016 Draft Law No.1007443-6 “On entering amendments to Federal Law ‘On turnover of agricultural land’ and other legislative acts of the Russian Federation” was submitted to the Russian Duma (hereinafter the “Draft Law”), providing increased liability for owners of agricultural land if the land is used improperly or not used as prescribed.                                              

In spite of measures on combatting bad-faith agricultural land owners in the current legislation, at the moment such measures have not substantially changed the situation with  agricultural land not being used as prescribed. 

As follows from the explanatory note to the Draft Law, the total area of agricultural land in Russia as of January 01, 2014 constituted 386,500,000 ha, of which 196,100,000 ha is agricultural land with priority status subject to special protection. At the same time, about 20,000,000-25,000,000 ha of such land is privately owned and is not being used as appropriate. 

In this connection, the Draft Law provides for certain changes in the regulation of agricultural land use. 

The owner of the agricultural land will have an obligation to use the land plot within 1 year from the time the respective ownership title is obtained, if based on the results of the state land monitoring, information on its improper use or non-use as prescribed for two or more consecutive years is recorded in the Unified State Register of Real Estate. 

For purposes of inspecting whether the said requirement is observed, the Russian agricultural authority Rosselhoznadzor (or its territorial bodies) on expiry of a year from the time the entity acquired the ownership title, shall perform state monitoring of whether the land plot owner is complying with the authorized use. Such measures on state land monitoring are not included in the annual plan for holding inspections. If violation of land plot use is revealed, the owner can be fined, with the amount of fine for legal entities reaching up to 10% of the cadastral value of the land plot. 

Furthermore, the Draft Law proposes to change the procedure for withdrawing the land plots classified as agricultural land if they are used improperly or not in accordance with their purpose. 

The Draft Law proposes to substitute the right of the executive authority of the Russian Federation region with an obligation to file a court claim on withdrawal of such land plot and its sale at a public auction within 1 month from the date the materials from Rosselhoznadzor (or its territorial bodies) on failure to cure the violations related to improper use or non-use of the land plot are received. If this obligation is not fulfilled, the official in charge can be fined. 

The said executive body of the Russian Federation region (if necessary) is to ensure cadastral works and the determining of the type of permitted use of the land plot, and must hold a tender related to sale of the withdrawn land plot within 6 months from the date the court decision on its withdrawal takes effect. 

It should be noted that legal entities whose founder/participant owns the land plot being withdrawn cannot participate in the public auction in the event of sale of such land plot. Transactions performed in violation of this rule will be deemed void. 

The measures provided by the Draft Law are aimed at promoting the use of unused agricultural land and, in the lawmakers’ opinion, will have a positive influence on achieving the goals provided by the state program for developing agriculture and regulation of the market of agricultural products, raw materials and produce for 2013-2020. 

We will monitor the work on the Draft Law and will inform you if it is approved and adopted. 

Elena Stepanova  Partner                                Moscow   estepanova@cls.ru   Tel.: +7 (495) 970 10 90

Olga Sofinskaya      Associate                Moscow    osofinskaya@cls.ru    Tel.: +7 (495) 970 10 90

Additional notes

Should any questions arise in connection with the above or if you need any additional materials, please contact Elena Stepanova or Olga Sofinskaya, Moscow Office of Capital Legal Services.

This Information letter keeps the clients of Capital Legal Services and other interested parties abreast of information that may, to any extent, affect their activity or cater to their particular interests. The opinions and commentaries expressed in this information letter shall not be deemed as legal opinions and do not cancel the need to obtain legal advice or legal opinion on separate issues.