The famous real estate businessman got caught in the pitfalls of the legislation: he pays the rent for the land, but cannot build anything on it.

Most of the buildings are on state land.

In Lithuania, property developers have several options for acquiring land on which to develop projects: renting land from the state or buying land. Owners of land owned by the owner have few, mainly on the outskirts of cities, where the land has been reclaimed or where it can be purchased at auction. Meanwhile, most of the objects, even 80%, are developed on leased land.

The leasing and sale of state land is regulated by the Land Law. There are procedures and conditions under which land can be leased and sold without auctions. In Lithuania, land near buildings and structures owned by natural persons is rented without auction. This type of lease is called a preferential lease and its terms are such that as long as there are buildings on the land, the lease and energy. In addition, the purpose of the state lands provided for in the legislation will not necessarily coincide with the territorial solutions provided for in the municipal master plans, for example, the legislation establishes that the leased land is for storage and the municipality plans to develop the land as a master plan. . the territory of apartment buildings and building permits will be issued only for such buildings. In theory, developers could change land use, but not everything is so simple.

The struggle of legislation and institutions

Arvydas Avulis, chairman of the board of directors of the real estate development company Hanner, shows a 2-hectare plot of land leased six years ago in the city of Vilnius, where the warehouses formerly owned by the Lithuanian railways were located, in the program of Delfi television Keturios sienos. The company sold the warehouses to a company that went bankrupt and the warehouses went to the bank. Hanner bought them at the bank by auction. According to Arvydas Avulis, after the purchase of the warehouses, the land lease will be assigned to them. After a while, Hanner’s warehouses were demolished because, like Arvydas Avulis, they were in a state of emergency. Furthermore, the Vilnius Municipality itself has emphasized that there cannot be warehouses in this part of Vilnius.

“We will not allow warehouses because this area is not dedicated to it. This is the beginning here, and then the performances began. Because the National Land Service says that if there are no more warehouses, then they have the right to terminate the land lease. Then I ask: how can we rebuild those buildings if the municipality does not allow it? So that dispute was transferred to the courts, ”says A. Avulis.

According to the businessman, according to the general plan of the city of Vilnius, this territory is included in the conversion zone, therefore, after the demolition of warehouses, the real estate company intended to build a building of premises commercial and a residential object here. However, due to the demolished warehouses, the National Land Service initiated the termination of the land lease. The company did not want to agree to this and the disagreements were moved to court.

“The point and the problem is that the legislation has not changed in the last 20 years, we ourselves had conversion projects <...>, the practice was to buy old buildings, demolish them and build new ones. And suddenly, a few years ago, the National Land Service began to interpret the legislation completely differently. And now we have a situation where some can, some can’t. <...> “We are not allowed to do anything, now there are disputes in the courts,” says the businessman.
A. Avulis assures that when signing the lease for this land, there was no requirement not to demolish the warehouses on it.

“80 percent. Projects in Vilnius are being built on state land. There are some buildings on it. <...> Usually those buildings are demolished and new buildings are built in their place. <...> We have leased this land for 99 years, we pay the rent, we already pay something, we still have time and here we still cannot do anything, we have the obligation to pay the property tax ”, emphasizes the Chairman of the Board of the Real Estate Developer.

According to A. Avulis, both he and the company are determined to fight for this terrain to the end. On the other hand, according to the businessman, it would be much more beneficial for the state if the company were allowed to continue leasing land and build facilities here and pay taxes. However, according to the interlocutor, the National Land Service offers a solution with which companies are not satisfied: to buy this land, despite the fact that the company once bought buildings on this land.

The interviewee continues that the practice of conversion has been established in Lithuania for 20 years, according to which it is not the buildings that are bought, but the possibility of building there. According to the businessman, the fact that the National Land Service did not allow the demolition of warehouses and the municipality demanded it is a great example of how the two institutions cannot agree with each other, and the company remains hostage to the conflict.

“There is chaos in the country, which prevents Lithuania from attracting more investment. Because one institution says no, nothing can be built here and another does not want to see warehouses here. Is this how the investor who bought the land is treated ? ”Asks the businessman.

According to A. Avulis, the legislation on land leasing is clear: land leasing can only be terminated if the land lease is free and if the land is used for other purposes. For the latter reason, the National Land Service wants to terminate the land lease with Hanner.

“And now there are those interpretations and attempts to show that we are not using it for its intended purpose. <...> But after all, the spatial planning documents say how to use this land, ”says A. Avulis.

Developers avoid buying buildings with leased land

Disagreements over land leasing and inconsistencies in legislation are also known to other real estate developers. Mindaugas Statulevičius, president of the Lithuanian Real Estate Development Association, says that problems with land leasing have been going on for five years, because the laws regulating the use of land leasing are old and their treatment has changed significantly.

“We have had this problem with the possibility of developing on leased plots for almost five years, when the legislation has not changed, the use of the land is determined by the land law and the Government decree that regulates development on leased plots. But the treatment has changed significantly in the first place. And in recent years, developers have looked very risky and responsible for the possibility of buying buildings with leased land, ”explains M. Statulevičius.

According to the interlocutor, the problem may be due to the fact that the land in the cities is owned by the state and the municipalities implement planning policies, so generating sustainable territorial development is not easy. M. Statulevičius points out that if the National Land Service does not agree to change the purpose of a certain piece of land, municipal policy and land planning will be in vain.

Disagreements and problems related to the lease and change of destination of the land, according to the interlocutor, could be resolved by transferring the right to transfer the land in the territory of the municipality to the municipalities. However, according to the interlocutor, the problem is that the process of restitution of property rights in Lithuania has not yet been completed. Therefore, some parcels cannot be sold at auction.

All regulations are followed

Algis Bagdon, deputy director of the National Land Service, says the treatment of land lease legislation has not changed, only that it is much stricter than it was five years ago and without exception.

All disputes arise when it is necessary to make sure that the buildings on the plot of land are at all, what is their condition, because we have many cases where some foundation or something like that. the owner wants to rent the state land below them and participate in other activities there. However, in recent years, such regulations have been much more compliant with all regulations. As a result, it may appear that something has been adjusted, “says Bagdon.

The interlocutor emphasizes that if the state land is leased without auction, in which case the tenant cannot demolish the standing buildings, he must operate them. Furthermore, the purpose of said land corresponds to the purpose of the structure. In other words, if there are deposits on state land, then the purpose of the state land is storage.

“If there is state land and you want to rent the land without auction, the clause of the contract is already” exploitation of existing buildings. “It is possible to change the terms of the lease, the purpose of the leased parcel in one case: when the plan general does not foresee activities as the purpose of the building. In other words, if we rent the plot according to the purpose of the building, for example, a building – commercial, but back to the general plan of commercial buildings are not provided there, then it is it can change the purpose of the land. But if the general plan foresees the same activities foreseen in the lease, then the change is not possible, although there may be several types of activities in the general plan “, explains the expert.

Bagdon says that in cases where a building on state-owned land is no longer fit for use (is in a state of emergency, etc.), the lease with the owner is terminated.

The interlocutor agrees that the current laws on land leasing and alienation in Lithuania are not perfect, so both the National Land Service and other stakeholders are actively working to facilitate the possibility for developers to change the purpose of the earth.

“It is planned to change the conditions and the procedure when the tenant can change the activities on that plot: purpose, method of use, construction of new buildings, demolition of old ones. That will be very clearly regulated, establishing the conditions under which it can be done. One of the conditions is a certain complement to the state rent of the land ”, explains the interlocutor.

According to A. Bagdon, until the new proposals are adopted, the tension between the National Land Service and the state owners will remain. He stresses that no misunderstandings would arise if property developers were more interested in buying private land or buildings with parcels of land.