Tricky legal acts on the lease of state-owned land

Information about the decision of the National Land Service under the Ministry of Agriculture to terminate the agreement of lease of state-owned land where Žalgiris stadium complex is located raised questions to numerous lessees and investors of state-owned land as to the grounds of termination of agreements and as to what should be done in order to avoid such situations in respect of other leased land plots.

The Law on Land lays down a general rule that state-owned land is leased by way of auction to the person, which offers the highest rental fee.

State-owned land may be leased without auction on the grounds provided by the Law, the list of which is limited: if a permit for use of underground resources located in that land is obtained in the manner prescribed by the Underground Law, if the land is necessary for the implementation of a concession project, if land plots which do not exceed the size established by the Government are situated among leased state-owned land plots (the land may be leased to lessees of state land plots referred to), etc.

However, it is almost common practice that state-owned land is leased without auction in cases when the state-owned land contains constructions or facilities owned by or leased to the person who wishes to lease the land (except for temporary constructions, engineering networks as well as structures without a clear functional dependence or structures intended for specific use or business which serve the main construction or facility or their appurtenances). In that case the owner or lessee of the constructions submits an application to the National Land Service under the Ministry of Agriculture or another competent institution with regard to the making of an agreement on lease of state-owned land.

Should a state-owned land plot contain no constructions, save for the exceptions referred to above and other limitations, it can be leased to a private legal or natural person by auction only.

In case constructions owned by a private person are no longer present on the state-owned land plot (for example, they are demolished), in the formal construing of the Law, the person is deprived of the title to have the state-owned land plot under lease, if the latter had been leased without auction, on the basis that the plot holds constructions which belong to the lessee. Therefore, when one acquires constructions located in a state-owned land and seeks to avoid the deprivation of the title for lease of state-owned land, he should avoid situation where the plot remains empty in both legal and actual sense – even if new constructions are planned in the future.

Furthermore, legal acts provide that construction of new structures and facilities as well as reconstruction of the existing ones in land plots leased in the way other than auction is allowed only in case it is stipulated by the agreement of lease and provided that such construction or reconstruction does not infringe the established regime of operation and use of the territory. Therefore, projected construction works should be defined in the agreement of lease.

On the other hand, when competent institutions issue the required permits and consents for construction of new structures on state-owned land, a further questioning of the agreement of lease with regard to the new construction in progress is hardly compatible with the principles of fairness, good faith and reasonableness established by the Law and inevitably leads to litigation.

Besides, it is essential that a state-owned land plot should be used in accordance with its intended purpose. The Law on Land provides that the agreement on lease of state-owned land must be terminated prior to the term at the request of the lessor if the lessee uses the land for purposes other than the principal purpose and/or way of use provided for by the agreement.

For instance, if the agreement on lease of land plot provides that the plot is leased for the operation of structures intended for public needs, it cannot be used for construction of structures intended for other purposes. However, the Law does not forbid state-owned land lessees to initiate the change of the intended purpose or way of use of state-owned land, but this option must also be included in the agreement on lease of state-owned land or amendment thereof. In case the intended purpose and/or way of use is changed, but this option is not provided by the agreement of lease, it constitutes the reason for termination of the agreement on lease at the request of the lessor.

It should be emphasised that state-owned land plots are leased within the sizes specified in territorial design documents or land management projects, which is essential for the operation of constructions or facilities in line with their direct purpose as laid down by the Real Estate Cadastre. Hence, should the land plot leased for the operation of constructions be non-proportionately large, the agreement of lease may be questioned with regard to the plot size, which is not necessary for the operation of the existing constructions.

Agreement of lease of state-owned land may also be terminated in other cases provided by the Civil Code of the Republic of Lithuania and other laws.


By Jolanta Liukaitytė-Stonienė, Senior Associate, Attorney-at-Law at law firm GLIMSTEDT

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