How to buy, lease, and use state-owned land?

The Land and Spatial Development Board, or MaRu, manages nearly 21,000 properties belonging to the state land reserve.

Of the total volume of procedures carried out with state land during the year, the Land and Spatial Development Board accounts for:

• 55% of sales procedures,
• 38% of procedures for granting the use of state property,
• 56% of other procedures.

Of the land managed by the Land and Spatial Development Board, 37% or over 8,000 immovable properties have been granted for long-term use for various purposes:

1. Approximately 5,800 immovable properties for agricultural use,
2. 1,600 immovable properties with building rights on state land for the purpose of owning a building,
3. 666 registered immovable properties leased for the purpose of mining.

Agriculturally valuable land supports Estonia's food security

Keeping agricultural land in active use ensures that agriculturally valuable land does not remain vacant and also supports Estonia's food security.

Land and Spatial Development Board makes land available for agricultural use in two different ways:

1. At lease auctions, land with agricultural potential is made available for use. At lease auctions, bids are made for an annual lease fee, with a starting price set at 3% of the market price of the leased land. Lease agreements concluded as a result of the auction are generally valid for five years, and tenants for the next period are again determined by auction. In lease auctions, the previous user has the right of first refusal to conclude an agreement, unless the agreement with the user has been terminated due to a breach.
2. Usufruct agreements have been concluded with farmers during the land reform process for an initial period of 15 to 20 years. Usufructuaries have the right to purchase the land they use at market price if the state has no need to retain it in the public interest. If the user expresses a desire to purchase, the Land and Spatial Development Board will announce the market price of the land, and if the user agrees, the land will be sold to the user.

When the initial usufruct agreement expires, the user has the right to extend the agreement for another 15 years. Before the agreement expires, the Land and Spatial Development Board informs the user of the market price of the land in their use and the usage fee that will apply upon extension of the agreement, and the user can decide whether they wish to purchase the land or conclude a new agreement for extension. If the usufructuary chooses to extend the agreement, they will retain the right to purchase the land for the duration of the new agreement. If the usufructuary does not wish to purchase the land or extend the agreement, the usufruct agreement will be terminated and the land will generally be put up for auction.

State land with building rights

State land is mainly encumbered with building rights in the course of land reform and in cases where the owner of a building located on state land did not have the right or desire to privatize the land under the building. The holder of a building right established under the Land Reform Act also has the right to purchase the land under the building if the state has no need to retain the land in the public interest. The purchase of land is subject to the restrictions set out in the Restrictions on Acquisition of Immovable Property Act, i.e. in certain areas, persons who are not citizens of the Republic of Estonia or a Member State of the European Union do not have the right to acquire land.

Building rights on state land are also established on the basis of the State Assets Act — mainly for the construction of commercial and industrial buildings. In such cases, the builder does not have the right to purchase the land. If the state finds that land encumbered with building rights under the State Assets Act does not need to be kept in the state reserve, it can only be sold by public auction.

A new trend is to make more valuable state land available for use by establishing building rights. This is considered primarily in cases where:

• it is not possible or difficult to realize the development interest or need for state land elsewhere,
• the state land is located in a place where it is expedient for the state to retain ownership of the land and thus control its use, taking into account future needs or security considerations,
• it is important for the state or local government to ensure the continuation of certain production or business activities, e.g., wind energy production, power plants, security of supply, or objects of public interest (gas stations, terminals, stadiums, etc.),
• if there are no alternatives in the regional market in a specific location or if they are very limited.

If the building right is established on state land for which there is no plan or specific vision of what can be built on it, an agreement is first concluded for the development of the land, and once the building right has been clarified, the building right is established for the construction and ownership of buildings on state land.

Lease agreements for the extraction of mineral resources

In Estonia, mineral resources such as oil shale, limestone, dolomite, gravel, sand, clay, and peat are extracted. Oil shale is mainly used for the production of energy, oil, and gas. Dolomite, sand, gravel, clay, and limestone are used in the construction of buildings, roads, and streets. Peat is used in various growing media for plants and, to a lesser extent, as fuel.

State-owned land is granted for mining to a person who has been issued a mining permit. The holder of a mining permit may mine the mineral resource during the period and in the volume specified in the permit and, upon expiry of the permit, shall return the land to the state in good order. The annual usage fee is generally three percent of the land tax value.

For the purpose of peat production, the Land and Spatial Development Board has been granted the use of 180 registered immovable properties, covering 26,000 hectares. A total of 486 registered immovable properties with a total area of 8,500 hectares have been granted for the extraction of other mineral resources.

Easements

Access to some registered immovable properties often runs through state-owned land, or it is necessary to establish a technical network on state-owned land. In such cases, a real easement or personal right of use is established on state land. A real easement guarantees the right to use the land for the maintenance of a specific property. If the land is used for the benefit of a person, a personal right of use is applied.

Before state land is put up for sale, the Land and Spatial Development Board involves the owners of neighboring registered immovable properties if necessary. If it turns out that the road located on the registered immovable property being sold is the only access to some built-up registered immovable properties, their owners can apply for the establishment of an easement before the sale. This avoids a situation where the properties are left without legal access after the land is sold, and at the same time, the new owner of the state land knows exactly what rights and obligations come with the property.

Short-term use of state land

Sometimes it is not necessary to use the land permanently, but only for certain works or events. In such cases, state land can be given for temporary use. Permits for temporary use are granted, for example, for the storage of construction materials or forest materials, and for the organization of various competitions, exercises, and events.

Land use fees

The key issue in the administration of all of the above-mentioned land use agreements in the previous and current year is the increase in usage fees. This is because the fees for most land use agreements depend on the taxable value of the land, which rose significantly last year. As the fees dependent on the taxable value of land had remained unchanged for over 20 years, the increase came as a surprise to many land users. The Land and Spatial Development Board recommends that land users carefully monitor the due dates of the invoices sent to them and, in the event of any problems with payment, contact the contract administrator in good time (contact details on the Land and Spatial Development Board's website at https://maaruum.ee/riigimaa-tehingud-ja -maakorraldus/riigimaa-korraldus-ja-toimingud/lepingute-haldus). The Land and Spatial Development Board's goal is to find possible solutions through cooperation and avoid the use of legal remedies.

Sale of state land at auction

Land and Spatial Development Board sells land belonging to the state land reserve at auction that the state does not need to retain in the public interest and that it is not practical to lease under a contract. For example, arable land is not generally sold at auction, except in very exceptional cases where the agriculturally usable part of the property is very small, fragmented, or where the land has fallen out of agricultural use and restoring it to farmland would require disproportionately large investments. Similarly, land whose value may increase significantly in the future due to its size, location, or quality is not generally put up for sale. If possible, such land is put up for auction until a more specific use for it becomes clear.

If you are interested in purchasing or acquiring the use of a specific piece of state-owned land at auction, we recommend that you subscribe to auction notifications by email in the auction environment (at https://riigimaaoksjon.ee). To do this, enter the cadastral unit ID of the state-owned land you are interested in in the auction environment settings, and if an electronic auction is announced for the sale or use of this cadastral unit, the auction environment will automatically notify you.

Decisions on the use and sale of state land affect us all, whether it be in agriculture, energy, or access issues. The Land and Spatial Development Board works to ensure that land is used responsibly and supports both today's needs and future development trends.

Authors: Tiina Vooro, Head of the State Land Department at the Land and Spatial Development Board, Mai Lind, Head of the Planning Coordination and Land Use Department at the Land and Spatial Development Board