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. Last Updated: 07/27/2016

Ministry: People Should Sue Moscow for Land

City Hall is breaking the law by refusing to privatize its land, and prospective buyers should sue for their right to buy the plots they occupy, the Property Ministry said Wednesday.

"It's quite clear to everybody that the city's laws on real estate are quite different to what was intended in the federal Land Code," First Deputy Property Minister Dmitry Aratsky told reporters.

Aratsky said buyers interested in acquiring land on which they are the sole occupiers should have no fear of suing the city because they will "certainly" win. However, he stopped short of saying the Property Ministry itself would challenge the city on the issue in court.

Legal experts agreed that City Hall's policy violates the new Land Code, but criticized the ministry for failing to take action to force Moscow into compliance.

If the federal government does not take more action, "then federal laws won't work in Moscow," said Konstantine Kouzine, a real estate lawyer with Linklaters.

Kouzine said that while building owners may be content with the 49-year leases the city offers, developers need clear title to the land they build on to ensure their investments.

But suing the city would likely irritate municipal authorities, who can "make life hell" for those who cross their path, he said.

"Besides, the developer risks not getting construction permits, which are still within the city's control," he added. "That's why no serious developer will risk that."

The Land Code, which allows privatized enterprises to buy the land on which they stand, came into force on Oct. 30, 2001.

City Hall, however, has turned down requests to buy land in the capital, and a city law essentially allowing the federal Land Code to come into force in Moscow only comes into effect this week.

Apart from a few experimental plots in Zelenograd, no Moscow land has been privatized.

The city only leases its land, usually for 49 years, under a system by which tenants pay for the right to lease and then pay rent.

City Hall argues that the prices set forth in the Land Code are eight times lower than fair value.

The Property Ministry, which represents the federal government on a commission that is currently delineating which land is federal and which is municipal, upped the ante in April when it sold the land under a privatized former federal enterprise in Moscow.

City Hall has refused to register the sale, which is being contested through the courts.

The 1.7 hectare site was sold for some $500,000, but the city says it should have brought in at least $2 million.

Aratsky disputed the city's formula for calculating "fair value" for land simply because there is "no land market in Moscow."

Deputy Property Minister Sergei Molozhavy scoffed at suggestions that the city administration should be allowed to dictate "market" prices.

The federal government believes that the most economic use of land is for it to be privately owned and taxed according to its market value, Aratsky said.

The federal government plans to privatize nearly all state-owned enterprises and the land they stand on by 2008 and wants regional and municipal authorities to do the same, Aratsky said.

He added that this year alone the federal government expects land sales to generate more than 100 billion rubles ($3.3 billion) in budget revenues.