Acquisition & ownership of land and property

A revolutionary land reform was implemented in Azerbaijan in the 90-s of XX century. The country was one of the first among the former USSR republics to introduce private ownership of land as well as free trade and transfer of titles to land and distributed the large portion of land to the population. A lot of formerly state owned real estate was also either sold or distributed to population and businesses.

Azerbaijani law provides for the following basic rights in land: (I) ownership; (II) lease; (III) use. The real estate in the Azerbaijani legislation is best matching the term "immovable property". Further to recent adoption of the Law On State Register of Immovable Property, creation of rights in property (ownership and other rights), transfers and termination of rights are subject to state registration with the register of immovable property.

The Law recognizes registration of the rights in immovable property carried out by various state authorities prior to the date of the law and provides for data transfer to the Register from various state authorities engaged in registration of rights in immovable property in the past. The Register in accordance to the Law will be available to a limited list of persons entitled to receive information on data maintained in the Register. As a general rule, registration of property rights over immovable property shall be accomplished within 20 days.

The Law contains special provisions in respect of registration of certain rights in immovable property:

- Ownership and other property rights regarding unfinished construction of immovable property can be registered in advance.

- Property right regarding individual apartments in unfinished buildings or non-residential properties and mortgages thereon can also be registered in advance.

- In the event immovable property is leased or given for use for a period exceeding 11 months, such right shall be registered by either party of a lease or use agreement.

The concept of ownership in Azerbaijan includes rights to exercise possession, right to use/benefit and the right to dispose of the land (transfer ownership or other rights in land to third parties). It should be noted that ownership right in land is a privilege of (I) the Republic of Azerbaijan, (II) municipalities, and (III) Azeri individuals and legal entities. Foreigners (individuals and legal entities) and stateless individuals cannot own land in Azerbaijan. Foreigners who acquired ownership rights in land through general legal procedures such as enforcement of security interest, grant or succession shall dispose of their ownership within one year; otherwise the land shall be acquired by the state or relevant municipality. International organizations, foreign legal entities and foreign citizens and states may lease land in Azerbaijan, although they may not own land and may not be granted a purchase option on a lease. There is no legal limitation for ownership of buildings, constructions etc. by foreign individuals and legal subjects.

Certain categories of land plots are in the exclusive ownership of the state or municipalities, and may only be leased by or granted for the use of private persons. Individuals may own land within the limits established by law.

In addition to ownership, the Land Code recognizes perpetual and temporary land use rights, lease rights and easements.

Temporary land use right is granted for up to 99 years and may be extended by the parties. A perpetual land use right is granted for an indefinite period. The holder of such rights is liable only for the land tax for the land use. Perpetual and temporary land use rights are granted by the state and municipalities only in exceptional circumstances to a limited number of persons listed in the Land Code. Landowners may grant perpetual or temporary land use rights under an agreement with the land user. Land use terms are defined by an agreement between the landowner and the land user.

Land lease is the use of land for a definite period, for a charge. Leases are concluded for a period agreed by the parties. Rent payments for the lease of privately held land parcels are freely negotiable. Rent payments for state or municipally owned land parcels are determined according to market conditions, but cannot be less than specified statutory rents. With regard to agricultural land, discounts from statutory rents are available depending on market conditions in the agricultural sector.

Obtaining licenses

A license is granted without discrimination to any entity that satisfies the requirements for that specific license. Thus (with certain exceptions), foreign investors may obtain licenses under the same conditions and in with the same procedure as Azerbaijani nationals. Normally, a licensee may not transfer a license to another legal entity or individual.

Licensing in Azerbaijan is regulated by the presidential decrees and orders of the Cabinet of Ministers of the Republic of Azerbaijan. The Ministry of Economic Development is the government agency entrusted to exercise overall control in the field of licensing and to maintain a single register of licenses.

Regulations on procedures for the licensing of specific types of activities are generally issued by the Cabinet of Ministers. An applicant is required to submit all documents specified in the regulations and pay the required fee, upon which (subject to the application meeting all requirements) a license is issued within 15 days. The basic term of any license is five years.

Azerbaijani licensing system was reformed in 2002. As a result the number of business activities requiring a license went down to 30. The application, paper processing and regulating bodies were defined and the overall procedure streamlined.

As the result of the reform the licensing system in Azerbaijan was liberalised. Licensing differs from the permitting procedure related to special “hazardous” activities such arm trade or nuclear materials storage. In Azerbaijani terms this type of permits is called “special licenses”.

A person who wishes to obtain a license to carry out specified entrepreneurial activity should either create a legal person or register as an entrepreneur, i.e. become an “individual businessman”.