Plots under historical holdings are exempted from
inclusion in the lease regime when transferred to
third parties during bank foreclosure of
collateralised properties or when assets are divided
between a divorced couple, a draft regulation
authored by the Ministry of Urban Development &
Construction (MUDC) suggests.
The Ministry has finalised a 33-page draft
regulation, which its senior officials describe as a
“model regulation,” and will soon table it to the
Council of Ministers, for approval.
The document will clear up much of the confusion
engulfing the country, following the issuance of a
proclamation revising the urban land lease regime,
in October 2011, Ministry officials hope.
The revised law has met formidable resistance from
members of the public, after Parliament ratified the
bill with hardly any public debate on its substance.
The most controversial part of the provision in the
revised law is the potential inclusion of historical
holdings of plots under the lease regime, which many
perceive as an attempt by the state to deprive them
of the right to own property.
There are over 346,664 houses registered with title
deeds that are not currently included in the urban
land lease regime.
Although the recently revised law foresees the
inclusion of these plots under the lease regime in
five years, the modalities in which this will be
enforced was left to
a follow-up regulation to be drafted by the Ministry
and approved by the Council of Ministers.
Unlike the procedure that the Ministry followed
during the legislative process of the revised law,
the draft regulation is up for public debate,
incorporating nine sections and 42 provisions. The
draft regulation also excludes the transfer of
properties of historical holdings, if capital gains
taxes are paid.
However, all transfers of properties, with the
exception of an heir’s exercise of inheritance
rights, will not be permitted if it is done without
the inclusion under the lease regime, according to
article six of section two of the draft regulation.
The lease rate to be imposed when such transactions
are conducted will be determined by the existing
initial lease rate of the area.
But, legal experts see the limitations of the
regulation in rectifying the many complaints that
the revised law evoked among members of the public.
“It is a violation of the hierarchy of laws,”
Anberbr Bazezew, a legal expert who has worked in
the federal and first instance courts for over a
decade, told Fortune.
Despite its contested application of legal
authority, the draft’s exclusion of historical
holdings in foreclosure has pleased presidents of
commercial banks, many of whom have piles of
properties on their auction lists.
“We have been financially affected due to the bonds
that we are [required to] purchase whenever we give
out loans,” said a senior executive at a private
bank. “I take this regulation as a way to compensate
for and recover sick loans.”
However, the draft regulation remains unclear over
what applies when one of the heirs or ex-spouses
wants to transfer their historical property right
Another provision of the proclamation, which most
lawyers are alarmed by, is the setting of a time
period for force majeure on alleged failures to
commence or complete construction projects. It has
put a time limit of 24 months for the construction
of small projects, while large construction project
have double the time. Those in between will have 36
months to complete construction.
These deadlines, though possible to postpone, cannot
be extended more than six months for small
constructions or more than a year for medium and
large constructions, according to the proclamation
and the draft regulation.
This is another elusive part of the law, putting
six-month and one-year extension limits in the case
of unforeseen obstacles to completion, without
considering the unpredictability of force majeure,
legal experts argue.
But, although the time period may appear to be
short, putting a limit on it might have an advantage
in fighting corruption, Anberbr argues.
Officials at the Ministry will let members of the
public, with diverse interests, debate the draft
before they send it to the Council, they said. One
such dialogue with the public was held with members
of the metropolitan chamber, held inside the city
municipality on Wednesday, January 25, 2012.
The time it takes to finalise the model regulation
will be determined by the volume of feedback from
the public, officials told Fortune.