Transfer of State Property for Use — the General Rule
State property is not always sold: a large part of it is transferred for use to state bodies, organs of the autonomous republics, municipalities and public-law legal entities, as well as to natural and private-law legal persons. The rules of transfer for use, the fee and the consequences of non-performance of conditions are regulated by separate norms, and it is precisely these norms that shape the everyday practice of citizens and business who use state property.
A state body or a public-law legal entity is entitled to receive, in the name of the state, and place on its balance property transferred by a natural person or a private-law legal entity, and/or to receive completed work. This norm gives the public sector a legitimate channel for receiving property and at the same time creates a certain legal basis for the transferring person.
Initial Transfer to State Bodies and Municipalities
A state body, an organ of the Abkhazian or Ajarian Autonomous Republic, or a municipality applies to the property manager with an application concerning the initial transfer of state property for use. Within 2 weeks of the application, the property manager, under the established procedure, takes a decision on giving consent — which, in a case provided for by legislation, is the ground for registration of the transfer of the state property to the respective organ in the respective registering body — or declares a motivated refusal to transfer the property.
Upon a refusal, the issue of transfer is considered under the procedure determined by a decree of the Government of Georgia. In this way the law regulates both a swift positive decision and an alternative route for reviewing the dispute.
Transfer to Natural and Private-Law Legal Persons
State property is transferred to a natural person or a private-law legal entity for consideration, in the forms of use provided for by the Civil Code of Georgia, on the basis of an auction, with the consent of the property manager, by the state organ, organ of an autonomous republic, municipality or public-law legal entity which holds that property for use or carries it on its balance. Where the property has not been transferred for use, it is transferred to a natural or private-law legal person by the property manager under the established procedure.
An agricultural land parcel may be transferred to natural and private-law legal persons for use for a period of no more than 49 years, except in a case provided for by law. State forest lands are granted for use for agricultural and non-agricultural purposes by the respective forest-management bodies, in accordance with Georgian legislation. A recipient for consideration is obliged, throughout the period of use until returning the property to the transferor, to pay the fee for using the state property and to ensure the maintenance and stewardship of the property.
Unlawful use is regulated separately: a user who has no document confirming the right to use the property lawfully and uses it for entrepreneurial — commercial — purposes must, upon the written demand of the property manager, pay into the state budget the transfer-for-use fee corresponding to the market value, on the basis of an expert or audit conclusion, for the entire period of use from the moment of registration of the state's ownership in the public registry. The procedure for determining the transfer-for-use fee is approved by the Government of Georgia.
Forgiveness of Penalties and Release from Sanctions
The law provides mechanisms for cutting off historical liabilities. The acquirer of state property, and a person receiving management or use rights, are forgiven the monetary penalty imposed or imposable before 1 January 2014 for failure to perform the obligation to submit information on the performance of obligations under the protocol or contract to the property manager. A person receiving usufruct rights is forgiven the unpaid penalty imposed or imposable before 1 January 2016 for failure of the same type of information-submission obligation.
With respect to buyers of state property who applied to the ministry no later than 1 July 2010 for release from sanctions for non-performance of other obligations under the ministry's protocol or contract, or for a change or review of obligations, the ministry is authorized — for the purpose of promoting the investment environment, relying on the principles of protecting public and private interests, in a case of justified necessity and with the consent of the Government — to decide on changing or reviewing the conditions of the contract or on releasing from a sanction. A decision on changing or reviewing privatization conditions established by the President of Georgia is taken by the President himself, upon the Government's proposal.
A more general mechanism also exists: in contractual relationships where the party is the State Property Agency and/or the ministry, the contract party may apply to the property manager with a justified request to change or cancel a condition of privatization, transfer into ownership, transfer of management rights or transfer for use, or to forgive an unpaid penalty under the contract. The manager reviews the request and, considering public and private interests, presents a proposal to the Government for a decision.
Release from the Fee for Unlawful Use
Natural and legal persons are released from the obligation to pay the transfer-for-use fee for unlawful use of state property for entrepreneurial — commercial — purposes for the period of use before 17 September 2012. Where the registration of the state's ownership in the public registry took place after 17 September 2012, the persons are released from the payment obligation for the period existing up to the moment of registration. In this way the law creates a fair balance between historical and current liabilities.
Special Deadlines and the State of Emergency
Where the performance of any condition of the transfer of state property becomes impossible or complicated during a state of emergency, an epidemic or pandemic especially dangerous to public health, the decision on measures to be applied towards the party of the respective contractual relationship, or on introducing an amendment into the contract — except a reduction — is taken by the Government of Georgia, on the basis of the party's justified request and the property manager's submission, under the procedure established by civil legislation.
The combination of these mechanisms shows the logic of the system: the right of use is granted within formalized conditions, and breach entails financial consequences; at the same time the law defines the cases where historical burdens or an extraordinary situation lead to a revision of obligations. If you use state property or plan its acquisition and use, it is precisely the exact knowledge of these conditions and deadlines that determines your financial risk — and qualified consultation on these matters in good time will protect you from unnecessary expenses.