Kuwait Court of Cassation principle number 92

Summary: - Unbuilt private residential plots owned by a natural person. Their subjection to an increase in the prescribed annual fee if their area exceeds five thousand square metres. This is not altered by whether the owner of the plot is a natural or legal person. Exemption of State-owned plots from the fee. Its implication. 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 exploitation of vacant land. - Prohibiting legal persons from dealing in private residential plots and deeming dealings in them absolutely null and void. This does not extend to 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 payable on unbuilt plots owned by them within the scope of financing operations conducted in accordance with financing methods and forms. The reason: plots may remain held by the Finance House or the customer for a prolonged period until the prescribed financial obligations have been paid, without building upon them, which may prevent dealings in these plots for a long period, contrary to the legislative intent of encouraging owners of unbuilt plots who are permitted to deal in them to exploit them promptly. Its implication. The Finance House is obliged to submit written approval from the Ministry of Finance and ensure payment of the prescribed fee before proceeding with registration procedures. Rule: The provision in Article Two of Law No. 8 of 2008 amending the title and certain provisions of Law No. 50 of 1994 concerning the regulation of the exploitation of judiciary lands that: "The text of Article One 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 comprising plots designated for private residential purposes, whether these plots are in a single location or multiple locations and in a single project or multiple projects, exceeds five thousand square metres in total, an annual fee of ten Kuwaiti dinars shall be imposed on every square metre exceeding that area ...'" Article Three of the aforementioned Law added to Law No. 50 of 1994 three new articles numbered (Article One bis, Article One bis (a), and Article One bis (b)). Article One bis provides that (the annual fee prescribed in the preceding Article shall become payable as of the first day of the month following the expiry of one year from the date this Article enters into force, or as of 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 comprising plots designated for private housing, whichever is later; with the exception of State-owned plots, this fee shall be payable whether the owner of the plot is a natural or legal person). This means, as established in the jurisprudence of this Court, that the legislature increased the fee payable 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 comprising plots designated for private residential purposes. The fee is payable under Article One bis whether the owner of the plot is a natural or legal person, and the legislature excepted State-owned plots from the fee. Since the wording of Article One of the Law addressed the identification of land subject to the fee, while Article One bis identified those required to pay the fee and those exempt 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 One of the Law, whether the owner of the plot 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 One bis (b), added by the aforementioned Law, prohibited them from dealing in private residential plots in any manner and deemed such dealings absolutely null and void, leaving no scope for imposing the fee upon them, and that this entails that only natural persons are subject to the provisions of the Law, it is rejected because the scope of the prohibition does not include 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, 279 of 2009, Administrative, at the hearing of 2/2/2011. Consequently, they may not be excepted from liability for the fee payable on unbuilt private residential plots owned by them in the field in which they are permitted to deal, within the scope of financing operations conducted in accordance with financing methods and forms 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 period during which the plots remain held by the Finance House or the customer may be prolonged until the financial obligations prescribed in these contracts are paid, without building upon them, which may prevent dealings in these plots for lengthy periods. This defeats the purpose of the legislation, whose basis is to encourage owners of unbuilt plots, whether natural persons or legal persons permitted to deal in them, to exploit them promptly by adding buildings upon them, thereby alleviating the housing crisis suffered by the State of Kuwait. Whereas, in view of the foregoing, the aforementioned Law No. 8 of 2008 contained no express provision exempting legal persons from payment of the fee stated therein, and the judgment of the Court of Cassation in Appeals Nos. 239, 244, 279 of 2009, Administrative—which the appellant adopted as the basis of its request that the property in dispute not be subject to that fee—disclosed the exception of Islamic banks from the prohibition on dealing in private residential plots contained in Article One bis (b) of the aforementioned Law, and the judgment did not address, directly or remotely, the exception of Kuwait Finance House from the fee prescribed in Article One of the Law, Kuwait Finance House is therefore obliged to submit written approval from the Ministry of Finance and ensure payment of the prescribed fee before applying to the Real Estate Registration Department to proceed with registration procedures.