Konstantin Boytsov analysed for Forbes the legitimacy of the General Prosecutor’s Office claims against one of Russia’s largest tea manufacturers

Tea producer Matsestinsky Tea, which leases 538 hectares of land in Sochi’s Khostinsky district from the city administration, as well as a number of farmers who received part of that land under an assignment agreement, must vacate the plots within a month. Such a ruling was issued by the Khostinsky district court at the suit of the Prosecutor General’s Office.

The supervisory department had claimed that the The Federal Agency for State Property Management (Rosimushchestvo) had illegally transferred the disputed territory from federal to municipal ownership in 2009. The basis for the transfer was a federal law, issued a year before, according to which the land within the borders of resorts of federal importance, including the land of Matsestinsky Tea, would become the property of municipalities or subjects of the Russian Federation.

Konstantin Boytsov, Head of Real Estate and Construction practice at Maxima Legal, explained to Forbes magazine that besides the law of 2008 there was another law of 2001 regarding differentiation of state property for land. According to that law, the federal status of the land was determined, among other things, by the location of the privatized buildings, which were previously in state ownership. This law stated that if there were such buildings or constructions on the land, it could not become municipal property.

In the lawsuit, the General Prosecutor’s Office pointed out that before the privatisation in 1992 the Matsestinskiy Tea JSC was a state enterprise – the Matsestinskiy Tea State Farm of Lenin – which had a “property complex” on its territory. Consequently, the Regional Department of Rosimushchestvo had no right to transfer the land plot to the municipal ownership – the Sochi City Administration.

According to Konstantin, the General Prosecutor’s Office mistakenly referred to the 2001 law, as it became invalid in 2006 when the Land Law was amended. “The law of 2008 also says that lands where state property is located cannot be transferred from federal to municipal ownership. However, it refers only to property owned by the state at the time the law came into force (and not to previously owned property that had been privatised). By 2008, the property that was on the disputed land was no longer federal. Therefore, the land was to be transferred to municipal ownership. And Rosimushchestvo did not violate anything,” a Maxima Legal expert said.

The General Prosecutor’s office also claimed in its lawsuit that the local department of Rosimushchestvo transferred the land to the municipal property to conceal another violation – “splitting” the former state farm into separate plots and assignment of the lease rights to third parties on gratuitous conditions or at an understated price. The plaintiff asserted that the privatisation of the 1992 state farms, including the tea farms, was supposed to be conducted under special conditions – retaining “the integrity of the specialised production areas, technological lines and technologically indivisible objects necessary to preserve the established specialisation of production”.

Konstantin Boytsov confirmed that the privatisation involved the transfer of integral production plots into private ownership. But, in his opinion, it is not clear from the lawsuit filed by the Prosecutor General’s Office what the land was like at the time of privatisation, because “the lawsuit refers not to a single production complex, but to production plots”. The expert admitted that at the time of the privatization the territory could have already been divided into several plots.

Among the claims of the supervisory authorities was also “unintended use” of the agricultural land, including construction of residential buildings on it. The suit says that in the course of its activities, Matsestinsky Tea was transferring the land lease rights to affiliated companies without any compensation, and then selling the lease rights to third parties, who did not use the land for its intended purpose. In particular, capital construction objects, including residential buildings, a restaurant, etc., are located on the disputed land.

Konstantin emphasized that it is forbidden to build recreational facilities, including a restaurant, on agricultural land. Such facilities can be built on lands of specially protected areas, if they are related to recreational areas, and on lands of settlements, if lands are related to recreational areas. According to the suit, part of the land leased to the Matsestinsky Tea JSC belonged to settlements, but was issued for agricultural use.

According to the Head of Real Estate and Construction practice at Maxima Legal, it is impossible to say for sure whether the defendants could build recreational facilities on such territories, relying on the lawsuit. “It all depends on the requirements of town planning regulations. Obviously, one of the main permitted uses of such land would be agricultural use. Whether other uses are allowed depends on the provisions of the land use and development rules of a particular settlement in each specific case,” the specialist clarified.

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