Staking a Claim on St. Pete Soil

Although many people are aware that it is possible to buy buildings in Russia, many are still unaware that they can also buy land. In St. Petersburg, the buying and selling of land is well under way, and there is a growing secondary market for land.

Under the Soviet Union, all land was owned by the state. A series of presidential decrees, issued between March 1992 and October 1993, made it possible for land to be purchased by individuals and by enterprises. In many cases these decrees gave individuals, and firms that were privatizing, a right to purchase land that they already had an existing right to use. Thus, in its simplest conception, people and enterprises who qualify as possible buyers of land can apply to the authority in charge of managing federal or local property in their region to purchase land. If the land is sold by the government, the sale will be registered and the owner then has an asset that is freely alienable.

Thus the market for land can be broken down into two markets: the primary market, where buyers who qualify to purchase land from the government can make such purchases, and the secondary market, where people and enterprises who already own land can sell it without government intervention.

In theory, there are no restrictions for foreigners and foreign companies who wish to buy land. However, in practice it is difficult for foreigners or companies with foreign investments to buy land on the primary market. This is the result of foreigners not having existing rights to use land, whereas Russian individuals and companies do. On the secondary market, however, there are no such impediments to land purchases by foreigners, as it is a free market.

In St. Petersburg there are three principal bodies involved in overseeing the purchase of land: KUGI, the Committee on State Property Management; The Property Fund of St. Petersburg; and KZR, the committee on land resources and land improvement. KUGI accepts applications for land purchases, the Property Fund concludes the agreements for selling the land, and KZR registers the sale including any usage restrictions, or third party interests. When buying land from the government, all three bodies will be involved in the process. When buying land on the secondary market, only KZR will be involved as KZR acts as the land register.

It is important to note that although land sold on the secondary market may be freely alienable, this does not mean that it can be used for all purposes. Land is subject to specified uses and can be subject to government and third-party interests. Thus when buying land on the secondary market it is important to research what the intended uses of that land are and whether there are any other interests in the land. If the buyer wishes to use the land for a new use, careful consideration must be given to the possibility (and costliness) of changing the use designation.

Furthermore, many land plots come with government water, electric, or telephone facilities that must remain operative. These facilities take up space and require service (and therefore access) by the municipality. Thus the use of a land plot may be significantly limited by the necessity of leaving intact the existing municipal infrastructure. In some cases it is possible, and cost effective to modernize (so that they take up less space) and or move these facilities, but these questions should always be addressed before the purchase.

Jamison Firestone is an attorney and managing partner of Firestone Duncan, which maintains offices in Moscow and St. Petersburg.