Law on Disposal of State Property I

On July 22, 2017, the law on the Rules and Procedures for the Disposal of State Property (the “Law”)[1] was promulgated determining the procedures for legalizing the transfer of state private land that is currently under illegal possession (also referred to as adverse possession). The Law lays out the general outline, leaving many details to the standards and conditions expected to be issued by the Council of Ministers. A period of three months (renewable for one term) was set for submitting requests for legalization. The Law also adopted a decentralized approach, leaving it up to each administrative authority to establish their own special committees for legalization, instead of assigning the task to a central committee. It should be noted that the Law applies only to cases of illegal possession (it does not apply to transfer of state private property in general), and that it only applies when the transfer or the legalization process is made in favour of the existing occupant/transgressor.

Background

The state's private property is that property (usually land) which the State may dispose of by means of sale and transfer, either of full property rights, or through the granting of leaseholds, usufruct or other partial property rights. The transfer or assignment of state private property is a very complex matter, governed by an intricate web of legislation and supervised by multiple administrative bodies. For instance, there is a legal framework for state desert lands, one for agricultural lands and another for lands in Sinai. The legal framework also varies according to the purpose of use; the May 2017 Investment Law gave the General Authority for Investment and Free Zones (“GAFI”) an important role in relation to the allocation of land for investment projects, allowed the investor to obtain approvals from GAFI directly (with the option of attaining them from other administrative bodies as well), and excluded those lands from the application of the Bids and Tenders Law. As a reflection of this complex context, Article 1 of the recent Law on the Disposal of Private State Property defines the "competent administrative authority" in general terms as "the ministry, governorate, public body, state apparatus or other public body corporate with the authority to manage, use, or dispose of, the State's private property that is under its jurisdiction". It is necessary to point out here that this recent Law is essentially a law relating to the state's reaction to infringements on its own property or territory. Thus, contrary to the State Property Act of 1991, it does not apply to private property that the State decides to dispose of for the first time.

Standardization Procedures

The Law essentially gives the competent administrative authorities the right to take a confrontational or a conciliatory approach. An administrative body may remove existing transgressions over land under its jurisdiction (e.g. illegal buildings) at the expense of the transgressor. However, the same body may also, through a defined process, transfer property rights to the transgressor/occupant/person in possession by way of a direct agreement, as long as the transgression occurred before the issuance of this Law (22 July 2017), and provided it obtains the approval of the Ministry of Defence. Crucially, the Law exempts such transfer of title from the Bids and Tenders Law, although Article 31 (bis) of the latter law provides that real estate may be disposed of by direct agreement between the State and the person with adverse possession in cases of necessity and if it serves the public interest (with a cap of 100 feddans for desert and reclaimed lands and ten feddans for agricultural lands). The Law provides the procedures for legalizing infringements on state private property. The applicant (natural or legal person in adverse possession) shall submit a request to legalize his or her status within three months from the date of publication of the regulations and conditions for the application of the Law (not yet published). This term may be extended only once by a decision of the Council of Ministers and any request submitted after the specified period will not be considered. The Law stipulates that legalization requests will be considered through technical committees formed within each administrative body separately, and that each committee shall include technical, financial and legal expertise. One may wonder whether the formation of separate committees would be more functional than having these maters handled by a central committee with a concentration of expertise and resources, in light of the complexity of the matter at hand. It should also be noted that, although it excluded the Bids and Tenders Law from its purview, the new Law does not include any criteria to guide the technical committees in deciding whether to reach an agreement with the person in adverse possession. The Law stipulates, however, that the Council of Ministers shall determine rules and conditions to guide these committees. It also stipulates that an appeal against the decision of a technical committee shall be made to the same committee that issued the first decision within fifteen days of the first decision. At any rate, the appellant may make a further appeal to the proper judicial authorities. The Law includes some provisions for the post-legalization or post-contracting period, stressing the need for the party to the contract (the previous transgressor) to use the land and exploit it for the purpose agreed upon in the contract. It emphasizes that any contract that does not include that requirement shall be considered null and void. The Law also regulates the transfer of land after legalization, stating that a person who has contracted with the state to legalize the land may not dispose of it until after payment of the full transfer price, and that any new party (new buyer or lessee) must keep its use in accordance with the original purpose stipulated in the contract between the state and the original transgressor.

Penalties

The Law contains several provisions related to penalties. Article 10 clarifies that the legalization of land in accordance with this Law means that no criminal charges can be made with respect to the crime of encroachment on state property. The Law also stipulates that the penalty for using land for a purpose other than that agreed upon will be a minimum of two-hundred and fifty-thousand pounds and a maximum of one million EGP, in addition to the sequestration of land and buildings. It also states that in case a legal person is a party to the contract, the same penalty shall be applied to the natural persons in charge of its management, if it is proven that he or she was aware of the illegal act, and if the crime resulted in part from a breach of managerial duties.

Conclusion

The Law on the Disposal of Private State Property was issued shortly after authorities announced their intention to take quick and substantial measures to address the wide encroachments on state land. While dealing with a grave matter, the Law did not address many important points such as the role of the land recovery committee established in February 2016 and its relationship with the administrative bodies. The Law also failed to address the criteria for contracts between the competent administrative bodies and the person in adverse possession (former transgressor), and did not give a timetable for issuing the conditions and standards that must be issued by the Council of Ministers before the Law can be properly enforced.   [1] Law No. 144/2017 on the Rules and Procedures for the Disposal of State Property, Official Gazette, Issue No. 29 (bis), 22 July 2017.