Lease of State-Owned Land in Lithuania

Lease of State-Owned Land in Lithuania

Lithuania
Tools
Typography
  • Smaller Small Medium Big Bigger
  • Default Helvetica Segoe Georgia Times

Issues relating to the lease of state-owned land in Lithuania are regulated by the country’s Law on Land.

According to its general principle, state land shall be leased by auction to the person offering the highest rental price. 

State-owned land shall be leased without an auction in limited cases prescribed by statute: 1) if land is built upon with buildings, structures, or installations that belong to natural or legal persons by the right of ownership, or are leased by them; 2) if a license to exploit subsurface resources or caves is obtained; 3) if it is required for the implementation of economic or cultural projects of national significance, regional socio-economic development, or infrastructure projects; 4) if the state-owned land parcels do not exceed a prescribed size, and are located between other state-owned land parcels leased to the lessees of such land parcels; 5) if it is required for the implementation of a concession project; 6) if it is necessary for the implementation of a general partnership agreement between the government and private entities; or 7) if aquaculture ponds are constructed upon it.

The most common situation in which state-owned land is leased without an auction is when the land is built over with buildings, structures, or installations that belong to natural or legal persons by the right of ownership or are leased by them. In such a case, when structures or facilities are leased by natural or legal persons, the land parcels shall be leased only for the term of the lease on these structures or facilities. The leased land parcels shall be of the size stipulated in the territorial planning documents or landholding projects, and required to operate the structures or facilities pursuant to their primary purpose.

The Law on Land requires that the lessee shall use the land in compliance with the principal purpose of the land use and by the method of use stipulated in the contract. The principal purpose of land use and the method of its use may be changed when the possibility of changing the principal purpose of land use and its method of use is stipulated in the lease contract for the state-owned land, or in an amendment to the contract. Otherwise, the lease contract for the state-owned land may be terminated at the request of the lessor.

The lease of state-owned land without an auction is considered to be a lease on preferential terms. One of the objectives of such a lease is to enable lessees to properly exercise their property rights and legitimate interests.

Conversely, non-compliance with laws regulating the lease of state-owned land creates the preconditions for private persons to illegally lease state-owned land on privileged terms, and thereby avoid the payment of real (auctioned) prices for leased state-owned land, thus unjustly enriching themselves at the expense of the public, in clear violation of the public interest.

The National Land Service, being the state-owned land lessor and the main institution in the Republic of Lithuania charged with implementing state policy in the field of land management and administration, and having a duty to consider the termination of the lease contract when the right to lease state-owned land on preferential terms disappears, began initiating terminations of doubtful lease contracts for state-owned land. However, under the current regulation, a number of disputes arose, and the business environment for investors became uncertain.

In order to clarify the procedure for issuing a state-owned lease without an auction and establishing restrictions upon lessees who have obtained a lease without an auction on state-owned land which is built over with their buildings, an amendment to the Republic of Lithuania Law on Land has been proposed. The proposed amendments provide for the prohibition of the building of new constructions on state-owned land parcels, as the exception was intended to apply only to existing structures, engineering networks, or infrastructure. It was also proposed to prohibit the reconstruction of existing structures by increasing their land area by more than five percent, or by changing their use. It was proposed to exclude these provisions when construction or reconstruction is carried out on non-privatized land. Lessees would be allowed to build a new construction or to reconstruct an existing one only after paying a special one-time fee to the state, equal to 20% of the value of the parcel leased. However, these amendments have not yet been accepted by the Parliament of the Republic of Lithuania, and a new working group continues to work on the improvement of the legal framework.

By Daina Senapediene, Managing Partner, Anita Vanagaite, Associate, CEE Attorneys Vilnius 

This Article was originally published in Issue 5.6 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.