Lawyers Make Motorway Directorate to Reroute

INTELLECT-S proved in court the legality of its client’s land rezoning.

The amount at stake was at least RUB135 million plus the risk of loss by INTELLECT-S client of its multimillion investment in development.

INTELLECT-S proved in court the legality of its client's land rezoning, challenged by the road building authority to knock its market price 10 times down, and helped its client to rescue its threatened investment.

The firm's client, a developer represented by INTELLECT-S's attorney Alexander Latyev, had bought some unused agricultural land, had it officially rezoned as residential area, and started development to build cottages, including parceling into retail properties, plotting roads and building utilities.

A year and a half later it became known that a motorway had been planned right through the center of the future development. In cases like that, road building authorities have the right to buy out — at the market price to be agreed on by the parties, or as determined by court on the basis of independent valuation.

The Urals Motorways Directorate for would not pay the market price it found too high, and challenged in court the legality of prior rezoning agricultural land which is ten times less expensive than residential. This meant that the price of land would have been RUB15 million instead of RUB150, and no compensation whatsoever for investments into "illegal" development.

What compounded the case was that the defendants were the local and federal zoning authorities, while the property owner, most interested in the outcome, was brought as a non-party intervener.

The developer's counsel Alexander Latyev demonstrated the absence of both prerequisites for avoiding the official rezoning decisions: first, the rezoning complied with all legal requirements, and, consequently, neither decision contravened the law, and, secondly, the rezoning infringed on none of the applicant's rights.

Alexander Latyev proved that the applicant had failed to designate the land as intended to be used for public needs in order to prevent its rezoning and was therefore estopped by omission from asserting that the land had been reserved for building the motorway.

INTELLECT-S's attorney argued that the Motorways Directorate submitted no evidence that the motorway could not be built elsewhere, the more so that the applicant admitted in court that routing the road across the property at issue was one of four alternative options.

The Sverdlovsk Region Arbitrazh Court and finally the Seventeenth Appellate Arbitrazh Court in April 2012 dismissed the action by the Urals Motorways Directorate in

The case led to a few landmark holdings that went into case law:

  • official rezoning decisions do not constitute law;
  • rezoning affects none of the interests of a potential transport infrastructure developer;
  • prior reservation of land has legal implications;
  • matters which rezoning authorities are not aware of, do not affect rezoning; and
  • a property owner's awareness of any proposed official development of the property has legal implications.

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