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1.1 Legal Protection
1.2 Registries
1.3 Formal Ownership
In-Country Assessment

Armenia has strong cadastral, title, and mortgage registries. The vast majority of land has been privatized and home ownership is above 90 percent. However, the institutional framework and mechanisms for protection of property rights remain weak. More work needs to be done to develop effective legal and administrative procedures for private property ownership, development and trading. What is more, the current legislation does not contain mechanisms for securing the rights of tenants. Owners can terminate leases at anytime, especially when ownership changes, with little notice and no compensation.

There is also a need for improvement in the enforceability of existing legislation concerning real property rights and for simplification of procedures involved in the leasing of commercial property. Complicated and lengthy procedures and different payments involved at each step create difficulties for small businesses and opportunities for bureaucratic interference and corruption.

Small businesses also face risks of unfair expropriation. The 2006 Law on the Alienation of Property for Public and State Needs is not very clear and is not always followed adequately. For instance, the law does not specify how the price offered by a developer for a government-approved project is supposed to be calculated, or whether the expropriated owner can apply to another assessing agency to challenge the offered price. In addition, according to Article 30 of the Law of the Republic of Armenia “On Taxes,” in case of nonpayment of tax obligations the court can seize all the assets of the taxpayer rather than just the assets subject to taxation.

 

Goal – Property rights that are legally protected, secure, recorded in a single, accurate, widely accessible electronic registry and that lead to high levels of formal ownership for all citizens

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1.1 Legal Protection

 

1.1 Legal Protection
Core Question: Does an effective and sufficient legal framework exist to protect property rights for all citizens? No – Weak, while many advances have been made over the last decade, protection of property rights is still weak.

Legal Framework
1.1.1 Are property rights clearly defined and protected by law? No – Weak – Ranking 95th out of 142; Score 3.77 out of 7 Trend ↓

Security of Tenure
1.1.2 Can citizens challenge the legality of government takings? No – Weak – 84th out of 142; Score 3.25 out of 7 Trend ↑

Source:Global Competitiveness Report 2011-2012 – World Economic Forum

www.weforum.org/issues/global-competitiveness

Bundle of Rights
Survey Question
SQ1: What is the bundle of rights (group of rights such as occupancy, use and the right to sell or lease) associated with both residential and commercial property ownership? Very Strong – Everyone shall have the right to freely own, use, dispose of and bequeath the property in Armenia.

Source: Constitution of the Republic of Armenia, Article 31.

www.parliament.am/parliament.php?id=constitution&lang=eng
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1.2 Registries

 


Core Question: Does a reliable property registry exist including cadastral, title and mortgage lien information? Yes – Strong, cadastral registry has been operational for over 10 years and is entering a new phase of development.

1.2.1 Cadastral Information Status – Strong, system is one of the best in the region.

Survey Questions
SQ2: Is cadastral information (information about the dimensions and location of land parcels) easily accessible to the public? Yes

SQ3: Is zoning/permitted use information included and are use regulations respected and enforced? Yes

SQ4: Are Geographic Information Systems (GIS) including Global Positioning Satellite (GPS) information used to create and update the registry? No, but improvements are underway.

Source: Law on State Registration of Rights to the Property

www.parliament.am/law_docs/300499HO295eng.pdf?lang=eng;

The State Committee of the Real Property Cadastre www.e-cadastre.am/en/,

Civil Society Resource: Association of Private Surveyors

1.2.2 Title Registry
Very Strong – Ranking – 5th out of 183 Trend ↓

1.2.2.1What is the number of procedures required to register the transfer of a property from one owner to another? 3

1.2.2.2 What is the duration of time in calendar days that it would take to complete the transfer? 7

1.2.2.3What is the total cost of the transfer including all fees, taxes, etc. expressed as a percentage of the value of the property? 0.3%

Source: 2012 Doing Business – Registering Property, World Bank www.doingbusiness.org/data/exploreeconomies/armenia

1.2.3 Mortgage Registry
Status – Strong – time to register is short and costs are low.

Survey Questions
SQ5: The mandatory use of notaries or similar officials slows down and adds cost to the process. Does a notary need to be involved in the registration process? Yes

SQ6: Is information in the registry available electronically? Yes

SQ7: Title insurance is indemnity insurance against financial loss from defects in title and from the invalidity or unenforceability of mortgage liens. Is title insurance available to lenders? No

Source:Financing Homes 2008, World Bank and International Housing Finance Corporation

http://www.cipe.org/sites/default/files/publication-docs/Financing%20Homes%202008.pdf

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1.3 Formal Ownership

 


Core Question: Do citizens understand and trust property rights institutions and avoid the informal sector? Yes – Strong – There are no legal barriers to land transactions. However, purchase and sale are constrained by the high cadastral value of land fixed by the government.

Survey Questions
Land
SQ8: What is the status of land ownership? Strong – the vast majority of land has been privatized.

Source: Land Reform in Eastern Europe, Food and Agricultural Organization of the U.N.

www.fao.org/docrep/007/ad878e/ad878e03.htm

Home Ownership
SQ9: What is the percentage of formal home ownership? Very Strong – due to privatization 96% of housing stock is in private hands, but affordability remains a problem.

Source: Social Housing Foundation,

www.shf-armenia.org/index. php?option=com_content&view=article&id=6&Itemid=5

Informal Sector
1.3.3 What is the percentage of service firms that report competition with unregistered or informal firms? 44.6% – Very Weak Formal Sector (2009)

Source: Enterprise Surveys

www.enterprisesurveys.org/ExploreEconomies/?economyid=10&year=2009

In-Country Assessment Information
Field Question (FQ) 1: Even if legal provisions exist, what is the actual status of property rights and ownership for small businesses?
The laws and regulations are not adequately enforced. The current legislation does not contain mechanisms for securing the rights of tenants. Contracts can be terminated at anytime by owners with little notice and no compensation.

FQ 2: Are standard purchase contracts used for commercial properties? If not, how are property purchases usually completed?
All purchase contracts are subject to notary verification. Standard purchase contract forms are sometimes used in notary offices.

FQ 3: Do separate contracts or other means exist to hide value from authorities when registering property transactions?
In practice the reported value of the transferred property is as low as possible within minimum purchase price laws. No legal provision requires the valuation of real property for registering the transaction. In cash transactions the real value is not stated.

FQ 4: Are standard leases used for commercial space? If not, what is a typical arrangement for rental?
Yes. Standard lease contract forms are used by notary offices and the State Cadastre.

FQ 5: What are the typical rates, terms and availability of office, retail, manufacturing and logistics facilities in both cities?

Yerevan
Rates vary from 1,200 AMD (approximately $3) to 25,000 AMD (approximately $60) per sq meter per month, depending on location, conditions, and facilities provided. The highest rates are for commercial spaces (shops, restaurants, etc). For office and manufacturing spaces the rates are comparatively lower. In terms of availability the market is rather active. Terms of lease depend on a number of factors and vary case by case.

Dilijan
Rates are lower than in Yerevan, ranging from 500 AMD (approximately $1.5) to 7,000 AMD (approximately $20) per square meter per month. The highest rates are for retail facilities.

FQ 6: What are the processes for government expropriation of property especially notice and due process for owners? Are those laws followed or do expropriations happen by collusion between officials and connected elites?
The mechanisms and processes for government expropriations of private property are based on the special Law on Alienation of Property for Public and State Needs adopted in 2006. Real property can only be expropriated for public or social need. The Law fixes the compensation based on market value and on written consent by the owner. This consent can be replaced only by a court decision. Experts have mentioned different practices and the law is not always followed adequately. The law itself is not very clear. Unfair treatment of businesses by state officials is not always adequately prosecuted by the judiciary.

FQ 7: What protections do businesses who lease space have from arbitrary eviction by owners? Almost all interviewed renters indicated that they do not feel secure as a tenant.

FQ 8: What services are typically provided to tenants (common areas, public access, security) and what means of redress are available if services are not provided?
Lease conditions can be different. The main services provided to tenants are: utilities, security, communication (including Internet), etc.

FQ 9: What is the actual experience of transferring a property, accessing the registry and dealing with registry officials?
A different payment at each step wastes time and leaves opportunity for extra payments (sometimes in the form of bribes.)

FQ10: How large is the presence of unregistered and/or illegal uses of commercial property?
The majority of entrepreneurs surveyed estimated the percentage of unregistered or informal firms to be 15-20%. It is not beneficial for entities not to register because lease payments are deducted from the profit tax. The more serious problem is that many registered firms try to hide part of their turnover or sales (estimated up to 40%).