Mongolian Property laws are comprehensive and well made with adequate protection of the rights and interests of foreign property investors. There is no discrimination between Mongolian and Foreign Property Ownership, all immoveable property ownership is protected by law into what is known as a "Floating Freehold"
Mongolia’s legal regime adopted a combination of Soviet, German, and US legal systems that combine civil code and case-precedent; constitution ambiguous on judicial review of legislative acts. The legislative branch is the State Great Hural and the judicial branches are comprised of the constitutional courts (a.k.a. Tsets) and the Ordinary Courts, which include:
- Supreme Court – serves as appeals court for people’s and provincial courts but rarely overturns verdicts of lower courts
- Aimag Courts (Provincial Courts)
- Soum, inter-soum and district courts
In respect of the real estate sector, the following laws are the most relevant:
- Constitution
- Law on Registration of Immovable Property
- Company Law, 1999
- Law on Licensing, 2001
- Law on State Stamp Duties, 1993
- Law on Allocation of Land to Mongolian Citizens for Ownership
- Immovable Property Tax Law
- Law on Land
- Law on Land Fees
The Mongolian legal concept of ownership follows Roman law categories of property rights and specifies a right to own (umchleh erh); a right to dispose (zahiran zarzuulah erh); usus fructus (ezemshih erh); and usus (ashiglah erh). As a result, the land-related provisions of the Constitution, Civil Code and Law of Land are based on these concepts. However, the Law of Land of Mongolia only corresponds with the rights of usus fructus and usus, determines the relevant land contracts – “land possession contract” (contractor may sub-lease his land to others) and “land use contract”.
While the laws on Mongolian Property rights are well designed and do protect foreign investors, the judicial system as a whole is generally plagued by inefficiencies, contradictions and small level corruption.
The Foreign Investment Law of Mongolia states that foreign investors may acquire what is termed as “Immovable Properties”. The Law also states that foreign investors shall enjoy the rights “to possess, use, and dispose of their property including the repatriation of investments which were contributed to the registered capital of the business entity created with foreign investment” There is no legal discrimination between Mongolian and Foreign landlords with regards to ownership of those “Immovable Properties”. Immovable Property is, as its name indicates property that can’t be moved, an important distinction in a country populated by nomads, essentially it refers to apartments and houses. The precise legal definition for the ownership of immovable property in Mongolia is termed as “floating freehold”. It signifies that the property owners holds a freehold over the property but not over the land on which it sits. The land use and title is never the less locked to the immovable property certificate (title to the property). If anyone wants to redevelop the plot of land, they must own all certificates linked to it. This is a common system throughout the ex-soviet satellite countries. Immovable Property Ownership Certificates can be bought and sold, and used for loans and mortgages, it is a legal deed to ownership of a property. Neither the Government nor any other legislative body can evict landlords or confiscate property for which there are Immovable Property Ownership Certificates. Maintenance of common parts is decided by the owners’ association of every building or compound, generally speaking, the owners association appoints a state company to carry out maintenance but this can be changed through a resolution of the owners.
Neither the state of Mongolia nor any government agencies has the right to expropriate landlords (foreign or otherwise) from their property in Mongolia.
In some extreme cases, an eminent domain clause within the Mongolian Legal status would allow the state to expropriate landlords for public purposes and compensation will be given at market rates, neither the public purposes nor the compensation terms have ever been defined and no prior case of this exists at this stage.
It is deemed extremelly unlikely by analysts, observers and lawyers in Mongolia that a case of expropriation on sound and solid property within the city center can be made without it turning into an enormous PR nightmare. Furthermore, the Mongolian consitution clearly states that discremination between Foreign and Mongolian property ownership is not allowed, therefore any ruling that would apply to foreigners would apply equally to Mongolian landlords.
Please note that the state recognizes the “Immoveable Property Certificate” as the proof of legal ownsership (title / deed) for immoveable property in Mongolia. A written contract with a developer or any other form of contractual agreement has no or little legal value in the eyes of the law. This therefore means that buying off-plan has an additional risk element as the state may easily use the Eminent Domain laws in an effort to halt or suspend illegal constructions (such as was recently seen in the case of the Zaisan developments) or withdraw construction permits from a developer, the purchaser would than be left with no legal claim to their property beyond suing the developer. Off-plan purchases do not benefit from the same level of legal protection as completed projects do.
Article 8. Legal Guarantees for Foreign Investment.
1. Foreign investment within the territory of Mongolia shall enjoy legal as guaranteed by the Constitution, the present Law, and other laws and regulations which are consistent with the preceding and as guaranteed by the international treaties to which Mongolia is a signatory.
2. Foreign investment within the territory of Mongolia shall not be nationalized or be subjected to unlawful expropriation.
3. Investments of a foreign investor may be subjected to expropriation exclusively for public purposes or interests and only in accordance with due process of law on a non-discriminatory basis and with against full compensation.
4. Unless provided otherwise in international treaties to which Mongolia is a signatory country, the amount of compensation shall be determined by the value of the expropriated assets at the time of expropriation or public notice of expropriation. Such compensation shall be effected without delay.
5. Losses suffered by foreign investors due to a state of emergency or war in Mongolia shall be treated equally with losses suffered by Mongolian investors.
Article 37. Expropriation of Land Owned by Citizens
37.1. During occurrence of environmental or public disasters such as damages to lives and health of many people, loss of animals and livestock, earthquakes, strong wind, drought, zud, flood, fire, outbreak of lethal infectious diseases that may cause significant damage to property and environment or emergency situations such as big scale industrial accident, loss of radio active or poisonous chemical substances, a land owned by Citizens may be expropriated according to procedures provided by law and based on decision of authorized state entity for purposes of taking measures in order to protect and rescue the population, livestock, animals and property and to eliminate the negative consequences. Damages caused to Citizens owning land due to such expropriation shall be compensated to full extent.
37.2. If it becomes impossible to return the expropriated land, the owner shall be compensated for the value of the land and the damages according to the market rate of that time or the damages shall be compensated by allocating other land not worse than the expropriated land by its status and quality.37.3. If there is a dispute regarding the determination of the rate of the expropriated land and damages caused to the land owner, it shall be resolved by Court.
The only known case of expropriation in Mongolia is with regards to the Dornod Uranium Licenses owned by Khan Resources but this has been disputed in court and Khan Resources has won back their licenses.
Mongolia developed as a communal land-sharing system long before capitalists and Communists clashed over the principles of property and ownership. Today, with a changing economical environment, the state has since 2002 been gradually introducing land privatization within the cities. Whilst immovable property can be owned outright by foreign investors, land can only be leased. According to the Law of Mongolia on Land, 7 June 2002, “The state-owned land may be given possession with a license to Mongolian citizens, companies, and organizations as well as entities with foreign investment for duration of 15 to 60 years. The land possession license may be extended for not longer than 40 years at a time.” The inability of Mongolians to easily register and obtain clear titles to their land poses a serious obstacle to the Government of Mongolia’s promotion of real property ownership. The Property Rights Project of the Millennium Challenge Account has been set up to help Mongolian citizens obtain secure, long-term rights to the suburban and peri-urban land (the small plots of land located in the crowded suburbs around Ulaanbaatar and other cities) they occupy, and promote investments in home improvement, business activities and agricultural productivity.
While it is currently impossible for a Foreign citizen to own land in Mongolia, it is never the less possible to either lease land for a short term period or create a joint venture agreement with a Mongolian company (or individual) to develop the land under a longer term “construction lease”. This construction lease (and its permits) is subject to meeting various deadlines and requirements as stipulated by the state and its authorities. A Mongolian – Foreign Joint venture can obtain a specific lease term to build on the land and thus eventually obtain an immovable property certificate. The land would then be locked to that specific certificate and can be returned to the government without risk. In general, land may be leased for at least 15 years and for up to 60 years with a single extension of up to 40 years. In other words, the maximum duration of a lease in any given case is 100 years. Obtaining all the current construction permits for any type of permanent structure is currently a relatively bureaucratic process with a great number of signatures required. It is a process rumored to be relatively corrupt and unnecessarily complicated.
While it is technically possible to claim immovable property from a deceased parent or close relative, this is a legally complicated and convoluted process within Mongolia’s legal system. The matter is generally handled by the bailiffs office and can take a very long time to be resolved. Should there not be a will present (or should it be lost) and should no immediate heir present themselves, property ownership will revert to the state. Within the scope of the law, there is no differentiation between a Mongolian and foreign landlord, inheritance laws apply to all parties equally.
