This article will address issues of condemnation of the company’s property for the public needs. The regulations related to the article heading are set forth in the Civil Code of the Republic of Kazakhstan (further the CC of RoK), the Land Code of the Republic of Kazakhstan (the Land Code of RoK) and the Law of the Republic of Kazakhstan "On State Property"(further the Law).
The condemnation of the company’s property for the public use are the actions of the government agencies aimed at stopping with regard to the legal entity as the non-governmental organization of its right of ownership to, or land right to, land or other immovable property, implemented for the public needs in the extraordinary cases set in the laws of the Republic of Kazakhstan, subject to the compulsory compensation of the cost of such land or other immovable property and the losses so caused to the owner or the land user.
The Land Code of RoK establishes the possibility of compulsory condemnation of land for the public use in extraordinary cases. The ground for the forced condemnation of other immovable property is set forth in Article 249 of the CC of RoK. Other real estate may be alienated from the owner in a forced manner in the condemnation of the land, on which this property is located.
Grounds for the condemnation of land for the public use
Condemnation of land for the public use is possible only in exceptional cases and only if it has been found impossible in any other way to meet these needs, subject to compulsory compensation for it in the equal value and to the consent of the property owner or land user, or condemnation in a forced manner under court decision. If there is an alternative way to meet the state needs, the forced condemnation is not allowed.
The list of exceptional cases is given in the Land Code of RoK, Article 84, Item 2. These are the cases, such as:
1) International obligations arising out of international treaties, ratified by the Republic of Kazakhstan;
2) The provision of land for the needs of defense and national security, specially protected areas, health, recreational, historical and cultural facilities, the establishment and operation of special economic zones;
3) Discovery and development of mineral deposits;
4) Construction (reconstruction) of roads and railways, construction (reconstruction) of airports, aerodromes, navigation facilities and air-technical centers, railway facilities, bridges, subways, tunnels, power system facilities and power lines, communication lines, facilities providing space activities, the trunk pipelines, engineering and communication networks, the implementation of concession projects, public facilities in settlements;
5) Implementation of master plans for the settlements with regard to construction of the facilities that are subject to the list of exceptional cases, as well as the construction of facilities provided under the documents of the Republic of Kazakhstan System of State Planning, at the expense of budget funds.
It should be noted that the forced condemnation is permitted only in the cases described above.
According to the Land Code of RoK, Article 84, Item 5, any alienation of non-governmental entities for the purpose of profit-making and meeting non-governmental interests, or other alienation not arising out of the purposes of performing public functions and pursuing socially important goals shall not be regarded as a forced condemnation of land for the public use.
According to the Law, Article 62, Item 3, in these cases the alienation of property is permitted by an agreement between the property owner and the person pursuing commercial goals, under the contract of sale of the property concluded between them.
One of the requirements for the forced condemnation of land is the condemnation of the land only to the extent in which it is necessary to meet the public needs. But if after the condemnation the owner cannot use the rest of the property for its intended purpose, then the whole area is subject to condemnation.
Procedure for condemnation of real estate of a company for public use
The whole procedure of forced condemnation of land or other immovable property shall be carried out, subject to publicity. The failure to keep the procedure open to public, if there is such requirement from the owner, shall be the ground for refusal of condemnation of the property for public use (the Law, Article 61, paragraph 2).
The procedure for forced condemnation begins with rendering by the Government of the Republic of Kazakhstan or local executive body of a relevant resolution as to the start of forced condemnation of land or other immovable property.
Under the Law, Article 63, Item 2, the following shall be specified in the resolution:
1) The purpose of, and grounds for forced condemnation of land for public use;
2) The location, area, cadastre number of the land;
3) The property owner or the land user;
4) The date of forced condemnation, to be not earlier than three months from the date of official publication of the resolution;
5) The facility the property owner or the land user has to apply to for conciliation procedures.
Resolution as to the start of forced condemnation of land or other immovable property shall be published in the national or local media, within three working days from the date of adoption of the resolution (the Law, Article 63, Item 5).
If the land owner has failed to register the private ownership to such land on time, he/she may take all necessary steps to support with evidences his/her right to such property. With this, the period of forced condemnation that was set in the regulation can be extended to no more than six months in accordance the Law, Article 63, Item 7.
No later than three calendar days from the date of publication of the resolution, the executive body is obliged to send to the owner by a registered mail a written notice of forced condemnation, with the attached contract of buy-out of land or other immovable property. If the notice has not been received by the owner, it shall be sent again. Notice of forced condemnation shall be registered as a legal claim.
Upon expiry of the term specified in the resolution, the land or other immovable property is condemned with the consent of the owner or under the court decision. Thus, the ground for forced condemnation is the contract of buy-out of the land or other immovable property or under court decision.
Based on the meaning of the Law, Article 65, Item 5, the local executive body shall, within a two month period from the date of receipt of the notice by the owner, submit to the local representative body a draft contract of buy-out of land or other immovable property for consideration by the Standing Commission. In its turn, the Standing Commission shall within two weeks consider the draft contract with the obligatory participation of the owner and other persons, whose rights will be terminated or restricted.
Condemnation of immovable property of a company for public use by agreement of the parties.
Upon reaching an agreement regarding all the terms of the contract, the contract of buy-out of land or other immovable property shall be approved by the local executive body in coordination with the local representative body and shall be signed by the owner or the land user.
The contract of buy-out of land or other immovable property shall contain the following conditions by virtue of the Law, Article 65, Item 6:
1) The price of the condemned land and the identifying features of the property or land provided to the owner or land user in lieu of;
2) The difference in value if the price of the condemned land has turned out to be higher than the price (value) of the land provided in lieu of;
3) The amount of losses to be indemnified, including the value of the immovable property condemned in connection with the condemnation of the land for public use, in case such losses were borne in connection with the forced condemnation;
4) The term of payment of the price (value) of the condemned land or other immovable property in connection with the condemnation of the land for public use or transfer of the land (other real estate) provided to the owner in lieu of the land condemned for public use;
5) The composition of the assets alienated for public use;
6) A list of the entities which rights in relation to the alienated property will be terminated or limited;
7) The procedure for financing of government expenditure on the purchase of property for public use.
Condemnation of real estate of a company for public use under court judgment.
Based on the meaning of the Law, Article 65, Items 7, 8, if the property owner does not agree with the resolution as to the beginning of the forced condemnation of land or other immovable property, the value of condemned property, or the amount of the losses to be compensated, the local executive body shall upon expiry of three months from receipt of the notice by the owner, and not later than the date set in the resolution as to the forced condemnation, refer to court with an action against the forced condemnation. Such civil actions are considered and resolved by the judge within a month period from the date of the end of preparation of the case for trial. In the event of a failure in the lawsuit, all the losses caused to the owner in connection with judicial proceedings and the adoption of the resolution shall be reimbursed from the budget.
Conciliation procedures in the event of forced alienation of property for public use
Article 69 of the Law establishes the procedure of conciliation. The owner of the property is entitled to start the conciliation by filing an appeal to the local executive body, within one month from the date of receipt of the notice about the start of forced alienation. The appeal is registered on the date of submission and is considered by the local authorities within one month. During this period, the local executive body is obliged to consider the proposal of the owner regarding the condemned property, the persons whose rights will be affected, and the amount of the losses to be compensated. From the moment of receipt of the proposal, the local executive body is obliged to arrange an independent valuation of the property and to determine the mode of financing of government expenses.
After reaching an agreement with all the parties, the draft contract of buy-out of the property shall be submitted to the local representative body for approval. In the failure to reach the consensus, the forced alienation of the property shall be carried out in an action at law.
It should be emphasized that the actual transfer of condemned property is allowed only after the owner has got fair compensation.
Termination of the right of ownership and the accrual to the state of the right to property is subject to registration with the state bodies. In this case the state registration shall be carried out, providing that the document confirming the payment of compensation has been produced (the Law, Article 65, Item 9).
The amount of compensation for the value of land or other immovable property
Article 67 of the Law establishes the procedure for determining the amount of compensation payable to the owner. If the land was purchased by the owner from the state, the value of such land shall be determined as the amount that was paid to the state. But there is an exception for the land that was provided for individual housing construction, private farming (except for field plots), which has an individual house on it. The cost of such land is determined as the amount not exceeding its market value.
If the land was acquired in a civil transaction, or by court judgment, the cost of such land is determined based on the value specified in the civil-law contract or in the court judgment. If the price is not specified in the contract, the cost of the land is determined by its cadastral (estimated) value.
The cost of real estate located on the land, is determined as the amount not exceeding its market value.
The market value of land or other immovable property shall be determined by an independent appraiser as of the time of receipt by the owner of a notice of the forthcoming alienation. This property evaluation is carried out in accordance with the Evaluation Standard "Evaluation of Land or Other Immovable Property Alienated for Public Use in Connection with the Condemnation of Land for Public Use" approved by Order #240 of the Minister of Justice of the Republic of Kazakhstan of June 28, 2012.
On demand of the owner, re-evaluation of the property alienated for public use shall be carried out by another appraiser on the date of payment of compensation.
In case of compensation to the owner in a form of assets other than cash, the valuation shall be carried out in accordance with the Law of the Republic of Kazakhstan "On Appraisal Activity". In this case the payment of remuneration to the appraiser is made from budget funds.
The amount of compensation is determined based on the value of the property and the losses caused to the owner, in full. The amount of compensation to the other persons, whose rights are affected, shall be determined, based on the losses which will arise to them as a result of alienation.
By agreement of the parties, the owner may be given other land replacing the alienated one that will offset the cost of the land provided to him in lieu of the alienated one at the cadastral (estimated) value.
Procedure to compensate the cost of the land condemned
Article 68 of the Law contains a requirement as to the form of payment of, and the time limit for payment of, compensation. The compensation of the cost of property shall be made in full from the budget funds as a non-recurrent payment not later than one month from the date of signing of the contract to buy out the property, or from the date of entry into force of the court judgment prior to transfer of the property to the state. In this case, payment of compensation in installments is not allowed.
List of statutory regulation acts cited to:
- Civil Code of the Republic of Kazakhstan (General Part) adopted by the Supreme Court of the Republic of Kazakhstan on December 27, 1994;
- Land Code # 442-II of the Republic of Kazakhstan of June 20, 2003;
- Law # 413-IV of the Republic of Kazakhstan “On State Property” of March 1, 2011.
Gulnar Ospanova, Partner
Viktoria Chagai, Junior Lawyer
Artyushenko & Partners Law Firm
Accountant and Law Journal, Issue #4(118), 2016
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