Kuwait Court of Cassation principle number 74

Summary: - Unbuilt private residential plots owned by a natural person. Their subjection to the increase in the prescribed annual fee if their area exceeds five thousand square metres. This is not altered by whether the plot's owner is a natural or legal person. Exemption of state-owned plots from the fee. Meaning thereof. An area of less than five thousand square metres owned by a natural person is exempt from the fee. Law 8 of 2008 amending Law 50 of 1994 concerning the Utilisation of Vacant Land. - Prohibition on dealings in private residential plots by legal persons and treating such dealings as absolutely void. It does not encompass legal persons excepted from the prohibition under Article (99) of Law 30 of 2003 concerning the Addition of a Special Section on Islamic Banks to Law 32 of 1968. They may not be excepted from liability for the fee due on unbuilt plots owned by them within the scope of financing operations conducted in accordance with financing methods and formulas. Reason therefor: the plots may remain in the possession of the Finance House or the customer for a prolonged period until the prescribed financial obligations are paid, without building on them, which may prevent dealings in these plots for a long period, contrary to the legislative purpose of encouraging owners of unbuilt plots who are permitted to deal in them to utilise them promptly. Meaning thereof. The Finance House is obliged to submit written approval from the Ministry of Finance and have the prescribed fee paid before proceeding with registration procedures. Rule: Article 2 of Law No. 8 of 2008 amending the title and certain provisions of Law No. 50 of 1994 concerning the Regulation of the Utilisation of Judicial Land provides that: "The text of Article 1 of Law No. 50 of 1994 shall be replaced by the following text: 'If the area of unbuilt private residential plots owned by a natural person, in any location and in any project containing plots designated for private residential purposes, whether these plots are in one location or multiple locations, and in one project or multiple projects, exceeds five thousand square metres in aggregate, an annual fee of ten Kuwaiti dinars shall be imposed on each square metre exceeding that area ...'" Article 3 of the aforementioned Law added to Law No. 50 of 1994 three new articles numbered (Article 1 bis, Article 1 bis (a), and Article 1 bis (b)). Article 1 bis provides that: (The annual fee prescribed in the preceding Article shall fall due from the first day of the month following the expiry of one year from the effective date of this Article, or from the first day of the month following the expiry of two years from the date of approval by Kuwait Municipality of the private subdivision project or any project containing plots designated for private housing, whichever is later. Except for state-owned plots, this fee shall be due whether the plot's owner is a natural or legal person.) This means, as established in the jurisprudence of this Court, that the legislature increased the fee due on unbuilt private residential plots owned by a natural person if their area exceeds five thousand square metres, in any location and in any project containing plots designated for private residential purposes. The fee is due under Article 1 bis whether the plot's owner is a natural or legal person. The legislature exempted state-owned plots from the fee. Since the wording of Article 1 of the Law addressed the identification of land subject to the fee, while Article 1 bis identified those required to pay the fee and those exempted from paying it, reading the two provisions together requires the conclusion that an area of less than five thousand square metres owned by a natural person is exempt from the fee, whereas an area exceeding that amount is subject to the fee prescribed in Article 1 of the Law, whether the plot's owner is a natural or legal person. As for the contention that legal persons are no longer subject to the fee because the legislature, under Article 1 bis (b), added by the aforementioned Law, prohibited them from dealing in private residential plots in any manner and treated such dealings as absolutely void, leaving no scope for imposing the fee on them, and that this necessarily means that only natural persons are subject to the provisions of the Law, it is refuted because the scope of the prohibition does not encompass legal persons excepted from this prohibition under Article (99) of Law No. 30 of 2003 concerning the Addition of a Special Section on Islamic Banks to Law No. 32 of 1968, as disclosed by the cassation judgment in Appeals Nos. 239, 244 and 279 of 2009, Administrative, hearing of 2/2/2011. Accordingly, they may not be excepted from liability for the fee due on unbuilt private residential plots owned by them in the field in which they are authorised to deal, within the scope of financing operations conducted in accordance with financing methods and formulas consistent with the provisions of Islamic Sharia. This is because ownership of these plots is transferred to Kuwait Finance House, which is one of the legal persons intended by this provision, through sale and purchase contracts satisfying their civil-law constituent elements. The time during which plots remain in the possession of the Finance House or the customer may be prolonged until the financial obligations prescribed in these contracts are paid, without building on them. This may prevent dealings in these plots for lengthy periods, which defeats the purpose of the legislation, whose basis is to encourage owners of unbuilt plots, whether natural or legal persons permitted to deal in them, to utilise them promptly by adding buildings to them, thereby relieving the housing crisis suffered by the State of Kuwait. Whereas, in view of the foregoing, the aforementioned Law No. 8 of 2008 contains no express provision exempting legal persons from payment of the fee set out therein, and the judgment of the Court of Cassation in Appeals Nos. 239, 244 and 279 of 2009, Administrative—which the appellant took as the basis for his request that the property in dispute not be subject to that fee—disclosed the exception of Islamic banks from the prohibition on dealings in private residential plots contained in Article 1 bis (b) of the aforementioned Law, and the judgment did not address, directly or indirectly, the exception of Kuwait Finance House from the fee prescribed in Article 1 of the Law, Kuwait Finance House is therefore obliged to submit written approval from the Ministry of Finance and have the prescribed fee paid before applying to the Real Estate Registration Department to proceed with registration procedures.