To publications there is a speech about conditions, an order of the conclusion, change and cancellation of lease contracts of the earth, restriction and encumbrance of the rented site.
In the majority of types of an entrepreneurial activity the earth is used: both as the fixed business assets (agricultural industry), and as a place of placement of production, commercial real, office estate. Therefore many legal entities face need legally to issue the right to the land lot. Legal entities of private form of ownership can issue or an ownership right on the earth, or the right of rent.
At first sight, the ownership right is more attractive: the rate of the land tax is, as a rule, lower, than a rent; the earth which constantly grows in the price, it is possible to sell or transfer favourably in pledge for receiving financing etc. However there are the certain reasons doing rent of more convenient, at least, at the first stage of the business project. Among the main reasons it is possible to list the following.
1. Foreign legal entities and individuals (nonresidents), and also the Ukrainian legal entities in which authorized capital there is a share of nonresidents, can’t get the right sobstvennosti on farmlands. To buy the nonagricultural lands of the state and municipal form of ownership nonresidents can only after receiving permission of the Supreme Council or Cabinet council of Ukraine. Procedure of delivery of such permissions legislatively isn’t fixed, therefore receiving permission turns into a hard task which can be tightened for a long time.
2. The lands being in the state and municipal property on which private real estate objects aren’t located, it is authorized to sell only through auctions. Procedure of auction doesn’t give a guarantee of acquisition of a site, and the starting price based on an expert assessment, can increase several times. Though the Supreme Council also passed on December 19, 2006 the law, obliging to transmit the vacant land lots of the state and municipal property in rent only through auction (competition), his President vetiroval, and deputies didn’t decide to overcome the veto.
Therefore many use this opening in the legislation, making out a nice site in rent, and then, having constructed a real estate object, redeem this site at the price defined by the expert and approved by appropriate body of the government or local self-government.
It is possible to list and other reasons on which businessmen prefer rent to an ownership right. However after acquisition and land registration the legislation quite completely regulates use and protection of an ownership right on it, without leaving the owner of the right to modify volume of this right. As to the right of rent, the legislation, despite existence of the ad hoc act, leaves many relations on consideration of the parties. And the lease contract of the land lot which is a legislative basis of the relations of rent, is very important for the parties. Especially it concerns the tenant for whom the termination or change of a lease term out of his will can entail seryyoezny problems in an entrepreneurial activity.
In this article the main legal risks of the termination or change of provisions of the lease of the land lots of the state, municipal and private form of ownership for the tenant are considered.
Recognition of the lease contract of the earth by the void
Any party according to the lease contract, and also the authorized state authority (prosecutor’s office) or the third party, which rights are broken, can appeal to court with the claim about contract recognition by the void. The lease contract is nullified from the moment of its conclusion. In this case the tenant should return a site; at the same time the sum of a rent paid for the actual lease term, to the tenant doesn’t come back.
Most often the bases for recognition of the lease contract of the earth void are:
1) the conclusion of the contract the unauthorized person or the person which does not have the rights of rent;
2) non-compliance with the procedure of the conclusion of the lease contract established by the law which includes:
- acceptance and coordination of decisions by authorized bodies (at rent of lands of the state and municipal property);
- state registration of the lease contract;
3) lack of one of the essential provisions of the lease of the earth listed in article 15 of the Law of Ukraine About a ground lease, namely:
- object of rent;
- period of validity of the contract;
- a rent with designation of its size, indexation, forms of payments, terms, an order of its introduction, revision and responsibility for its failure to pay;
- conditions of use and a designated purpose of the land lot which is transferred in rent;
- conditions of preservation of a condition of object of rent;
- conditions and terms of transfer of the land lot to the tenant;
- conditions of return of the land lot to the lessor;
- existing restrictions concerning use of the land lot;
- definition of the party which bears risks of casual damage or a unichyotozheniye of object of rent or its part;
- responsibility of the parties;
4) non receipt of a consent to site rent from an ipotekoderzhatel.
Except above-mentioned, one more possible basis for contract recognition void is non-compliance with the requirement of the legislation on the notarial certificate of the contract.
The requirement of the notarial certificate of the lease contract of the earth contains in article 290 of the Economic code of Ukraine (HK). At the same time article 14 of the Law of Ukraine About a ground lease directly specifies that the lease contract consists in writing and only on request of one of the parties makes sure notarially. The state committee of Ukraine on ground resources (Goskomzem) in several letters stated the position on which the lease contract of the earth isn’t subject to the obligatory notarial certificate on the ground that the Law of Ukraine About a ground lease is the special act in relation to HK.
However Goskomzem’s letters aren’t regulations therefore there is a probability that courts, solving a question of need of the notarial certificate of the lease contract of the earth, will come to a conclusion that the ground lease between subjects of an entrepreneurial activity should be regulated by HK. In this case the tenant should make itself the decision, he wants to save on payment of the state fee and notarial services or prefers to secure itself against possible recognition of the contract by the void. Besides, at procedure of the notarial certificate of the contract the notary checks absence of restrictions and encumbrances in the state registers that is an additional guarantee of reduction of risks.
Early cancellation of the lease contract
By the general rule the unilateral termination of the obligation isn’t allowed. The earth lease contract, as well as other types of contracts, stops by agreement the parties. So, the contract can be terminated on request of the parties, authorized state authority or the third party which rights are broken, only by a court decision and on the bases which have been directly provided in the contract or the legislation.
The lessor can appeal to court with the requirement to terminate the earth lease contract in case the tenant long time essentially breaks the following requirements:
- to use the earth with a view of, provided by the legislation and the lease contract;
- in time to bring a rent. The law not predusmatrivaet the period of delay of introduction of a rent after which the tenant has the right to demand termination of the contract. If in the lease contract this term isn’t provided, most likely, it is necessary to refer to the general provision on Yoprosrochka of payment under contracts of property hiring which establishes the three-months period ( article 782 of the Civil code of Ukraine);
- to observe requirements of the legislation about environmental protection;
- to support anti-erosive and drainage systems;
- to adhere to requirements servitutov and other legal restrictions established for the user of the land lot.
The contract stops the action from the moment of pronouncement of the decision on its cancellation if it isn’t appealed in court. The tenant in a certain measure is protected by procedure of the appeal which can delay rent termination of the contract for enough long time.
The law provides possibility of termination of the contract of a ground lease in case of repayment for social needs and condemnation proceeding of the land lot based on social necessity.
Change of essential provisions of the lease
The change of essential contract provisions made against the will of the tenant is quite frequent, can put the last in such situation when the ground lease becomes for it economically unprofitable.
As well as in a case with cancellation, the Law provides change of contract provisions only at a mutual consent of the parties. The unilateral rastoryozheniye of the lease contract is forbidden, if another isn’t provided by the contract or the law. Dispute on modification of the contract is subject to the decision in a judicial order.
At the same time certain provisions of the lease contract of the earth can be changed by new regulations, namely:
- the rent of the land lots of the state and municipal property is defined according to their monetary assessment which is made on the basis of special procedure and there can not be less than a size of the land tax. In case of revision by the legislator of procedure of carrying out a monetary assessment, and also the size of the land tax, the rent can be changed without will of the tenant;
- in case of toughening of requirements for environmental protection additional obligations on preservation of quality of the soil can be assigned to the tenant.
Change of the owner/lessor or his status
As a rule, as the lessor the owner of the land lot acts. In case of sale or alienation in a different way a site to the new owner pass all rights and obligations according to the existing lease contract of a site. The new owner can’t terminate or change the lease contract unilaterally, if other not predusmotyoreno the contract.
To remove any questions about it, it is recommended to register in the lease contract preservation of its action in case of change of the owner, and also a duty of the owner predupredit the tenant about sale (alienation) of a site and the priority right of the tenant to site purchase in case of its sale.
Restrictions and encumbrances of the rented site
All restrictions and the encumbrances which have been legally imposed concerning the land lot to the conclusion of the lease contract, extend the action and concerning a right of use of a site of the tenant. Restrictions and encumbrances are established on the basis of laws, acts of public authorities, judgments and contracts.
The main restrictions and encumbrances which are imposed on the land lot, the following:
- mortgage (pledge);
- ban on alienation;
- land easements;
- restriction of a right of use by a site.
Restrictions and the encumbrances established on the land lot, are subject to the state registration. However in the absence of uniform system of registration of the rights to the earth of registers much they also are conducted by different registrars.
Before the conclusion of the lease contract of the earth it is necessary to check absence of the registered restrictions (encumbrances) by receiving at the notary of extraction from the state registers: The incorporated register of a ban on alienation of real estate objects, the State register of mortgages, the State register of pledges of personal goods (concerning tax pledge).
In addition it is necessary to receive the reference (decision) from local management of ground resources about existence (absence) of restrictions and encumbrances on the rented land lot. These steps allow to reduce essentially risk of the appeal in court of the lease contract of the earth, and also restriction of a right of use by a site after the conclusion of the lease contract.
In this article only some essential legal risks which trap the tenant farmer are listed. It is necessary to emphasize once again that the relations of a ground lease are in many respects regulated by the lease contract. Therefore the tenant has a possibility to minimize these risks, having correctly made the lease contract and observing the procedure of the conclusion of such contract established by the Law. Time and the efforts spent at the conclusion and drawing up of the contract, will pay off a storitsa at the subsequent predicted and free use of the earth in an entrepreneurial activity.
(On newspaper materials Legal practice).