Bar News - December 14, 2001
Land Reform and the Pursuit of Happiness in Russia
By: Charles A. Szypszak
Attorney Charles A. Szypszak, of Concord, writes about the collaboration of a New Hampshire delegation with Russian judges and administrators on real property issues. The collaboration is part of an ongoing rule of law project between a New Hampshire delegation and the Russian judiciary (see "Rule of Law" article on page 11 of the Nov. 23, 2001 issue of Bar News).
IN 1785, DURING the formative period of American constitutional government, Thomas Jefferson wrote home to James Madison about the concentration of land ownership in monarchist France. He said, "It is not too soon to provide by every possible means that as few as possible shall be without a little portion of land. The small land holders are the most precious part of a state." This notion is again at the heart of a political and legal transformation, this time in the transition underway in formerly communist states.
To a large extent, America is the nation of "small land holders" that Jefferson urged us to be. About 70 percent of Americans live in their own homes, but inadequate housing remains a serious and persistent problem. On a grand scale, however, there is an extreme contrast between home ownership in America and in Russia. Single-family homes, which in this country often compete in their excess, are virtually absent from the Russian landscape. Home in Russia almost always means a cramped apartment in a huge block of buildings, under the best circumstances with heat and plumbing that work.
Residential construction in Russia is still financed by the government and handled by the same groups that received contracts during the Soviet period. Even if more and better housing is built, few Russians have the means to buy. The banking system is dysfunctional. Mortgage lending has increased in the big cities recently, but remains infinitesimal by comparison to market economies. Loans are short-term, and are weighed down by interest rates that would be usurious here. Borrowers cannot provide reliable security for the loan, due to the unsettled nature of property rights, and the national economy remains unstable.
Since 1999, I have been privileged to get a close look at the Russian land owner ship system as a member of the New Hampshire-Vologda Rule of Law delegation. During a conference organized by Superior Court Judge Kathleen McGuire and attorney Elizabeth Hodges of the Administrative Office of the Courts, I had my first visit to the regional title registry, and spent more time there during visits in May 2000 and September 2001.
The regional registries were established by legislation in the late 1990s. The Vologda registry facility is new and nicely equipped, unusual among the government offices we have visited. The registry I visited efficiently processed 8,000 applications for transfer per month.
Unlike New Hampshire’s real estate recording system, the Russian registry system involves governmental review and approval of land transfers. To transfer ownership of land or buildings in Russia, the buyer submits an application to the registry with proof that the property may be legally transferred (which usually must be obtained from the local government). The registry investigates to determine whether the property may be privately owned and checks for competing claims. If all is in order, the registry issues a "License on State Registration," very attractively decorated with official seals of approval.
The Russian registration system is different from the American system in another fundamental respect: The records are not available to the public. There are several explanations for this secrecy. Freedom of information is not part of the political landscape in Russia. On a more practical level, any property ownership is a sign of relative wealth in modern Russia, and those who exhibit it become targets for criminals.
Private land sales were legalized in 1994, but most Russian land remains in government ownership. Only a very small percentage is in private hands. History teaches that any private ownership in Russia is tenuous. Those attempting to facilitate greater private ownership face considerable, and often emotional, opposition, especially from the Communists. A Communist leaflet circulated in rallies against land reform legislation proclaims: "Comrade! Those who seek to introduce private ownership of the land, want to buy it up, sell it, and enrich themselves once again. Then your future lot is a farm-laborer’s life."
Despite opposition, this summer the Russian Duma passed national land reform legislation, intended to furthering privatization of some land, and avoiding volatile issues concerning farm land and the right of foreigners to own. The regional and local authorities who must implement the property reforms, and the judges who will be hearing cases involving property rights, are entering what is new territory for them. Hopefully, they can learn something from our successes and failures.
Recently, the Rule of Law program sponsored a visit to New Hampshire by several Russian judges and a land administrator. The Russians met with New Hampshire judges, attorneys, business leaders and government officials to witness and discuss many aspects of land transfers, recordation and use regulation in New Hampshire. The Russian delegation identified mortgages as being of urgent interest. Many of us living amidst an affluent culture may have become blasé about the Rockwellesque image of a young couple closing on the purchase of their first home. But in transitional market economies, it is a prized dream.
Developing a functioning mortgage market in Russia is a daunting challenge. Progress in this regard may be a key to major transformation. I cannot conceive of a functioning housing market unless citizens have true and open ownership rights. Such reform would have profound implications.
In September, I had further discussions about mortgages with many land administrators and judges in Russia. I gave presentations to judges and to city planners, assessors, architects and other officials. One session included the vice mayor, who apparently manages and controls the state-owned property in Vologda. The vice mayor expressed his disapproval of what he perceived as the American mortgage system, but heard disagreement from two other members of the audience who were part of the July 2001 program. Program veterans explained to me that the city officials and employees were very curious about mortgages, but had not had access to information about them.
We are now planning future program activities that will focus on issues the Russians identify as key in their transition, such as mortgages, appraisal and land registration. I look forward to being able to continue to share whatever understanding I have gained from President Jefferson and his legacy about the pursuit of happiness.
Charles Szypszak is an attorney with Orr & Reno, Concord, and has been involved in the rule of law project since its start. Those interested in participating in the project should write a letter to Elizabeth Hodges, Deputy General Counsel, New Hampshire Supreme Court, One Noble Drive, Concord, NH 03301 or Hon. Kathleen A. McGuire, Merrimack County Superior Court, 163 North Main Street/P.O. Box 2880, Concord, NH 03302.