Comprehensive legal support for the client at the stage of preparing the industrial base for sale and conducting Due Diligence

This situation relates to the owners of buildings/structures/structures on rented municipal land. The client's company is a tenant of a 1.6-hectare land plot (industrial base) rented from the administration of the city of Rossosh. The lease is for 59 years. During the rental period, the client's company constructed five buildings, including warehouses, without obtaining permits or understanding what documents are required. The client assigned us several tasks related to ensuring the readiness of the industrial base for quick sale: 

• conduct Due Diligence that includes the legal verification of real estate objects in the industrial base
• legitimize the buildings that have been built
• Reduce rental payments legally
• provide an opinion on the possibility of selling the industrial base when there is no consent of district administration to lease the land plot
• prepare an agreement on reimbursement of construction costs, because some buildings were built by the third person on rented land without permits. 

Due Diligence revealed that there are unauthorized constructions and also that there is requirement to register rights to them. Furthermore, it was discovered that some of the buildings were constructed using the forces and resources of a third party that is the client's tenant. So it is necessary to reach an agreement with him and reimburse him for construction costs in order to avoid any unjust enrichment of our client. 

Due Diligence also revealed the possibility of lowering the cadastral value of land. The cadastral value of the land has grown twice following the revaluation in 2022. Simultaneously, after the revaluation, the rent for the land plot in favor of the district administration, calculated on the basis of the cadastral value, increased proportionally. 

We solved the problem of legitimizing five buildings on the property of industrial base. As for other buildings, they were built without any permitting documentation (including obtaining a building permit). We examined buildings for compliance with urban planning standards and received a favorable expert opinion.
The procedure for challenging the cadastral value of a land plot allowed reducing rental payments by half. 

The client's main question regarding the sale of the industrial base was whether it was permissible to sell buildings and the right to lease land if the administration refused to transfer the right to lease the land to the buyer. As well as whether it was permissible to retain the right to lease the entire land plot if only part of the buildings were sold. In the absence of a definition of shares in the right to use a land plot, an analysis of judicial practice and the lease agreement revealed that there are no obstacles to conclude an agreement in terms of joint leasehold on the tenant's side. The court will declare invalid the administration's refusal to amend the contract and joint leasehold on the tenant's side when there isn’t any attached calculation of shares.