The Supreme Arbitrazh Court confirmed tenants’ rights to challenge cadastral values, but will this position remain intact after the “merger” of the supreme courts?

In the Moscow region, in contrast to the Volga, North Caucasus, Far East, and other arbitrazh districts, the courts have not recognized a tenant’s right to demand the establishment of the cadastral value at the market rates. In a landmark ruling dated 7 March 2014, case number A40-59687/13, the Federal Arbitrazh Court of the Moscow District held that a tenant establishing cadastral value equates to a tenant attempting to change unilaterally the terms and conditions of an agreement. It also would deprive landlords of the possibility of challenging the unfair cost of the land plot, which serves as the basis for calculating the rent. In justifying its position, the court noted that the tenant cannot dispose of property and has no economic interest in establishing its market value. Moreover, in the Moscow region, legal proceedings have shown that landowners are not permitted to contest the cadastral value of land, and the courts have supported the authorities’ position.

The situation may be changed after the publication of the Ruling of the Presidium of the Supreme Arbitrazh Court (SAC) dated 11 February 2014, case number 13839/13, which gives an unambiguous answer regarding a tenant’s right to challenge the cadastral value of land. In the ruling, the SAC stated that not only the land owners of specific land plots and municipalities have the right to contest the cadastral value of land plots but also tenants, land holders owning land either with the right of permanent (perpetual) use or lifetime inheritable possession, as well as persons who do not have authorized legal rights to the land plot but own property on the plot. The SAC pointed out that the court also may identify other persons whose rights and interests may be affected as a result of contesting the cadastral value and involve them in the process, according to the rules of the Arbitrazh Procedural Code (APC) of the Russian Federation.

The ruling of the Presidium of the SAC contains wording that opens the door for the revision of decisions in certain cases due to new facts. In accordance with Article 312 of the APC, the deadline for submitting applications for revisions is three months from the publication date of a ruling.

Currently, it is not clear how the general jurisdiction courts of the constituent entities of the Russian Federation will use the SAC position or if they will use it at all, even though the disputes were under the jurisdiction of these courts. Experts fear that, after the abolition of the SAC, the new the Supreme Court of the Russian Federation will not accept the position in the ruling. It is no secret that the judges of the general jurisdiction courts are always reluctant to invoke the position of the “economic” courts and rarely use their findings as a basis for their own decisions.

It is important to note that the arbitrazh courts will consider all litigation involving cadastral value that began before 6 August, the abolition date of the SAC, on the basis of the SAC ruling. After this date, the general jurisdiction courts, which are known to be more dependent on the regional authorities, who are interested in a steady flow of lease payments into the state budget, will handle the cadastral value cases. The hope is that the parties to a dispute before the cassation court (the Judicial Panel on Economic Disputes of the Supreme Court is the second cassation court) also will have the opportunity to invoke the SAC ruling.