Dechert OnPoint: Land Registration in Georgia

Dechert Georgia, through the contribution of partners Archil Giorgadze and Nicola Mariani, joined by senior associates Ruslan Akhalaia and Irakli Sokolovski, as well as Ana Kostava and Ana Kochiashvili, is partnering with Georgia Today on a regular section of the paper to provide updated information regarding significant legal changes and developments in Georgia. In particular, we will highlight significant issues which may impact businesses operating in Georgia.

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INTRODUCTION

The National Agency of State Property (the “Agency”) commenced comprehensive registration of state property (the “Project”) in March 2013. The objective of the Project is to create an integrated, updated and easily-accessible information system for real property owned by the state of Georgia.

According to the Project, hundreds of unregistered land plots in districts across Georgia have been registered in the ownership of the Agency since January 2016. The media have raised the issue of whether the Agency gained ownership over the land plots without giving any notification to the lawful possessors.

The problem of unregistered land plots has sparked heated discussion regarding the urgent need for a coherent state policy with regards to land ownership. This edition of OnPoint provides an overview of recent developments in the legal framework regarding land ownership in Georgia.

RECOGNITION OF LAWFUL POSSESSION

The Law of Georgia on Recognition of Property Rights of the Parcels of Land Possessed by Natural Persons and Legal Entities under Private Law (the “Law on Recognition”) regulates the procedure under which the lawful possessor is entitled to register ownership rights over a given property. According to the Law on Recognition, lawfully-possessed land constitutes state-owned agricultural or non-agricultural parcels of land with or without fixed structures built upon them. An additional requirement for lawfully-possessed land is that a natural person or legal entity acquired the right to lawful possession before the abovementioned law entered into force, as well as land squatted on before 1994 and registered in a technical inventory archive.

A person who lawfully possess a land parcel can submit a request for recognition of property rights to the Public Registry. To register ownership rights over the land, a document confirming the lawful possession of the land shall be presented. In most cases such documents do not exist due to their being lost, destroyed or never concluded. According to information from the Public Registry, only 30 percent of existing land plots are officially registered (only 1,200,000 million registered land parcels out of an estimated existing 4,000,000).

REGISTRATION OF STATE OWNERSHIP

In accordance with the objectives of the Project, the Ministry of Justice of Georgia (the “Ministry”) adopted a Strategy regarding Land Registration and Unification of Cadastral Data in Pilot Areas (the “Strategy”) on 29 October 2015. Under the Strategy, the Ministry plans to prepare legislative amendments and carry out awareness campaigns before taking further actions towards land registration.

Accordingly, the Ministry presented a bill with amendments to the Law of Public Registry (the “Bill”). Under the Bill, the Public Registry would register state ownership over property upon the submission of the Agency. The lawful possessor is entitled to claim rights over the property within one year of such registration upon presentation of documentation confirming lawful ownership. The Agency shall also be prohibited from disposing of the property for one year from the date it becomes the registered owner. The Bill is still pending before the Parliament and it is planned to be reviewed in the upcoming plenary sessions.

Despite the fact that the Bill has not been adopted, the Public Registry commenced the process of registration and hundreds of land plots in pilot areas have now been registered in the ownership of the Agency.

REGISTRATION OF AGRICULTURAL LANDS BY FOREIGNERS

Another unresolved problem closely related to the urgent need for state policy regarding land ownership is the registration of agricultural land parcels by foreigners.

In 2010, the law of Georgia on the Possession of Agricultural Lands (the “Law on Agricultural Lands”) was amended and foreign individuals were deprived of the right to gain ownership over agricultural land in Georgia. A foreign citizen who gained ownership of agricultural land by inheritance or by possessing the land legally as a Georgian citizen was obliged to sell it to a current citizen, household or legal person registered in Georgia within six months from acquiring it. By its decision dated 26 June 2012, the Constitutional Court of Georgia (the “Constitutional Court”) declared the abovementioned practice unconstitutional because it disproportionally restricted the rights of foreign individuals.

Then, on 28 June 2013, the Parliament of Georgia further amended the Law on Agricultural Lands to prohibit foreigners from acquiring agricultural land on the territory of Georgia until 31 December 2014 (the “Moratorium”). On 24 June 2014, the Constitutional Court decided that the Moratorium constituted an even stricter prohibition—as it ruled out the possibility of a foreigner owning land even temporarily—and declared the Moratorium unconstitutional.

Legally, following the decision of the Constitutional Court and expiration of the Moratorium, foreigners and legal entities registered in Georgia by foreigners shall be able to purchase and register agricultural land parcels located in Georgia without restriction. However, it is an established practice of the Public Registry that each and every application of a foreigner regarding the registration of agricultural land is reviewed, and granting ownership rights is decided on a case-by-case basis without any such procedural indication in the law.

Legal entities registered outside of Georgia are prohibited from purchasing land on the territory of Georgia since both applications to the Constitutional Court were made by individual persons, and prohibition for legal entities thus remains in force.

CONCLUSION

The existence of a coherent, effective land registration system is an important tool for the state in terms of land administration and the protection of private and public interests related to land ownership. It forms a basis for the functioning of a market economy, especially in the agricultural and investment sectors. The issues of unregistered lands and the purchase of agricultural lands by foreigners have become the subject of heated debates. Such issues indicate the need for a comprehensive state policy and long-term plan regarding land ownership. Fortunately, the Ministry of Justice of Georgia has begun taking steps toward creating an improved system for land registration in Georgia.