The proper way to protect lessor's rights if regulatory monetary valuation of state or municipal land is changed - SC GC conclusion

If the amount of rent is changed due to a shift in the normative monetary value of a state or communal land plot, the proper way to protect the lessor's rights is to file a claim for the recovery of rent not paid by the lessee.

The unpaid rent is subject to recovery for the entire period of delay from the moment the council's decision to change the amount of the normative monetary value of state and communal land plots is applied.

The Grand Chamber of the Supreme Court emphasised these conclusions.

In the case at hand, the village council filed a lawsuit against a private enterprise seeking recognition of an additional agreement to the land lease agreement as concluded in connection with a change in the normative monetary value of the land plot. The village council passed a resolution approving new technical documentation on the normative monetary valuation of the land plot, which was the basis for amending the land lease agreement in terms of the amount of rent.

The court of first instance found the disputed additional agreement to be concluded. The court of appeal agreed with this, but changed the decision of the court of first instance in terms of the moment from which the agreement should be considered concluded.

The Grand Chamber of the Supreme Court noted that the obligation to take into account the normative monetary value of state-owned and communal land when determining the amount of rent is established by law (paragraph 2, part 1, Article 13 of the Law of Ukraine "On Land Valuation").

The normative monetary value of land is established by approving technical documentation on the normative monetary value of land plots, which is carried out by the relevant village, town or city council. This mandatory regulation makes it impossible to establish the normative monetary value of land plots by agreement, in particular, an agreement between a local self-government body and a lessee.

Therefore, from the moment the new normative monetary value of state-owned and communal land plots is applied in accordance with para. 271.2 of Art. 271 of the Tax Code of Ukraine, the rights and obligations of the parties to the lease agreement in terms of the amount of rent, if it is determined as a percentage of the normative monetary value, will automatically change. In such legal relations, the parties are not obliged to amend the lease agreement by entering into an additional agreement, as the obligation to pay rent in accordance with the amended normative monetary value of the land plot arises for the lessee from the moment such normative monetary value is applied.

In addition, the Grand Chamber of the Supreme Court noted that satisfaction of the claim for recognition of the disputed additional agreement on amendments to the lease agreement for a state or municipal land plot, which are related only to the change in the normative monetary value of the land plot, will not protect the rights or interests of the plaintiff. This is due to the fact that a court decision recognising the disputed additional agreement as concluded will not result in the recovery of rent from the defendant in accordance with the changed normative monetary value of the land plot.

Thus, in this case, the claim of the village council does not meet the criteria of an appropriate and effective remedy.

The proper remedy for the lessor in this case is a claim for recovery of the rent not paid by the lessee. At the same time, the unpaid rent is subject to recovery for the entire period of delay from the moment the council's decision to change the amount of the normative monetary value of state and municipal land plots is applied in accordance with para. 271.2 of Article 271 of the Tax Code of Ukraine.

Resolution of the Grand Chamber of the Supreme Court of 5 June 2024 in case No. 914/2848/22 (proceedings No. 12-66гс23) - https://reyestr.court.gov.ua/Review/120396090.

This and other legal opinions of the Supreme Court are available in the Database of Legal Positions of the Supreme Court - https://lpd.court.gov.ua.