Сonditions that may lead to loss of the right to permanent use of land

Imperfect legislation

First of all, questions arising are why does the right to permanent use of land lead to so many court disputes and what is wrong in the relevant field of law enforcement?

The right to permanent use of land is the right to own and use a state-owned or communal land plot with no fixed term.

At the same time, the current legislation significantly limits the number of entities which may acquire land plots based on the right to permanent use. Thus, they include, inter alia:

• state-owned or communal enterprises, institutions and organizations;
• non-governmental organizations of persons with disabilities;
• religious organizations;
• Ukrzaliznytsia Joint-Stock Company;
• educational institutions;
• co-owners of an apartment building;
• gas transmission system and transmission system operators.

The above legislative restriction already caused a number of questions. For example, is it possible to transfer the right to permanent use of a land plot in case of reorganization of the previous land user to its successor who is not included in this exhaustive list, yet is, for example, a private enterprise?

Furthermore, until 2002, other entities, including citizens, could acquire the right to permanent use of land for a (family-operated) farm.

After excluding individuals from the list of persons entitled to obtain the land, based on the right to permanent use, the “Transitional Provisions” of the Land Code provided that citizens and legal entities who have land plots in permanent use, but may not have them based on such a right, must re-register the right to title or lease in respect thereof by January 1, 2005 in accordance with the established procedure.

However, by its decision No. 5-рп/2005 of September 22, 2005, the Constitutional Court recognized the above provisions of the Land Code unconstitutional.

Thus, despite the statutory range of subjects of the right to permanent use of land, a much wider circle and a larger number of persons de facto continue to use such right. In this regard, the competent executive authorities and local governmental bodies miss no opportunity to terminate this right for those entities which may not have such a right, pursuant to the provisions of land legislation.

Below is the Supreme Court case law on the abovementioned proprietary right, which will help finding answers to the most difficult questions arising in connection with exercising such right.

Transfer of the right to a family farm and succession

Does the right to permanent use of land pass over to the family-operated farm from its founder? Is it possible to inherit the right to permanent use of a land plot provided for the operation of a family farm?

These controversial questions were answered by the Grand Chamber of the Supreme Court in the decision dated June 23, 2020 in the case No. 179/1043/16-ц.

According to the factual circumstances of the case, the heir, wife of the family farm founder, who believed that she had the right to inherit the land plot of her deceased husband and the rights of the founder of the established farm.

The courts of the two lower instances agreed that the plaintiff could inherit the rights of a founder of the specified farm, yet denied her right to inherit the specified land plot. Referring to the previous practice of resolving this category of disputes in the cassation court, the courts considered that with the death of a person who received a land plot into permanent use for operating a (family-operated) farm, such right was terminated and therefore could not be inherited. Having disagreed with this, the plaintiff filed a cassation appeal.

When solving this legal issue, the Supreme Court concluded that the right to permanent use is tied with the individual who was granted such a right, regardless of the purpose of using a relevant land plot.

Upon state registration of a family farm as a legal entity, the right to permanent use of land, which the founder received for the operation of such farm, shall pass over to the farm. Therefore, in such situation, this right may not be inherited, and the family farm remains a permanent user of the land plot after the death of the founder.

The right to permanent use of a land plot, which the founder received for the operation of a family-operated farm may be inherited only if the specified person was unable to create (register) the family farm before his/her death. In this case, the right to permanent use shall be part of the inheritance if such a person dies and may be inherited only for the purpose for which the right was received by the testator.

At the same time, as it is established by the Supreme Court, recognizing the inheritance rights of the plaintiff after the death of her husband as the founder of a family farm is an effective remedy for the protection of her rights as an heir of the founder.

If the farm has the authorized (shared) capital with the distribution of shares among its participants, heirs of the founder (participant) of the farm shall inherit the relevant rights of the founder (participant), who held the relevant share in the authorized (shared) capital.

This decision of the Supreme Court was concluded to solve a legal issue in the context of land reform and ensure the similarity and unity of law enforcement.

Unilateral termination

Situations when the competent authorities unilaterally terminate the previously granted right to permanent use of a land plot are rather common. During the adoption of such decisions, executive authorities and local self-government bodies usually refer to the systematic non-payment of land tax, acquisition by another person of title to part of the buildings and structures located on the disputed land plot, reorganization of a legal entity, etc. As a result, land users who believe that their rights have been violated have no other choice but to apply to court.

The answer to the question of whether such decisions on termination of the right to permanent use of a land plot are lawful was given, in particular, by the Commercial Court of Cassation in its decision dated September 09, 2020 in the case No. 6/88-Б-05.

Since the land user neither consented to the seizure of the land plot, nor filed a motion for the termination of the right to use, the lower instance courts concluded that the village council had no powers to adopt the contested decision on terminating the plaintiff’s right to permanent use of the land plot.

The Supreme Court has emphasized that in light of legal grounds for terminating the right to permanent use stipulated by Article 141 of the Land Code, and in the absence of consent from the land user, the right to permanent use of the land plot was to be terminated in court.

Citizens and legal entities cannot lose the right to use the land plot previously granted to them in cases established by legislation in the absence of grounds established by law. This position corresponds to the conclusion set out in decision of the Constitutional Court No. 5-рп/2005 of September 09, 2005.

Termination of the perpetual right to permanent use of a land plot on which the land user’s property is located without proper legal grounds is an act of interference with the plaintiff’s right to peaceful use of his/her possessions and a violation of Article 1 of Protocol No. 1 to the Convention for the Protection of Human Rights and Fundamental Freedoms, being the basis for invalidating such a decision.

Change in ownership of a part of real estate

Is the right to permanent use terminated, if another person acquires title to part of the buildings and structures located on the disputed land plot?

In its decision, dated November 18, 2020 in case No. 904/6059/19, the Commercial Court of Cassation has noted that the right to use a land plot cannot be terminated for a person who lawfully continues to own real estate located thereon, and title to only part of the property has passed over to another person. Since based on the provisions of the Land Code, the right to use a land plot also applies to a relevant part thereof.

Considering the fact that the plaintiff continued to own part of the buildings, the court concluded as follows: arguments of the city council that the acquisition by another person of title to part of the buildings and structures located on the disputed land plot was grounds for terminating the right to permanent use for the previous land user were based on the misinterpretation of clause “g” of part 1 of Article 141 of the Land Code.

Thus, the court upheld the rulings of the lower courts, which, since their adoption, invalidated clauses of the city council’s decision, on the basis of which the subject’s right to permanent use of the land plot was terminated in connection with another person’s acquisition of title to buildings and structures located thereon.

Winding-up of a legal entity

Despite the unity of case law, cases of appeals against decisions of competent authorities to terminate the right to permanent use of a land plot, which were made since the successor of a subject of such a right was not included in the exhaustive list determined in Article 92 of the Land Code, are common.

When resolving this issue, in its decision dated October 06, 2020 in the case No. 917/1198/16 the Commercial Court of Cassation noted that the right to permanent use of land was perpetual and could be terminated only on grounds stipulated by Article 141 of the Land Code.

It is allowed to terminate the right to use a land plot based on winding-up of a legal entity, only if winding-up of such an entity excludes succession (decisions of the Supreme Court, dated April 11, 2018 in the case No. 911/4065/16 and October 10, 2018 in the case No. 907/916/17).

The right to use the land acquired in accordance with the established procedure shall not be lost due to the lack of e-registration thereof by a company, which, according to the current Land Code, may not acquire the right of permanent use of land, yet shall be reserved for it until the rights and obligations in respect of such land are brought in line with the requirements of current legislation, including for the successor of such a land user.

The given legal position is also set out in Supreme Court decisions dated January 15, 2020 in the case No. 925/361/19, September 02, 2020 in the case No. 918/194/19 and January 27, 2021 in the case No. 906/706/19

In conclusion, during the last year the Supreme Court considered a significant number of cases concerning the right to permanent use of a land plot, which allowed to establish and maintain the positions already developed in law enforcement, which aimed at protecting the holders of such a right.