The DPRK Law on the Leasing of Land was adopted by Resolution No. 40 of the Standing Committee of the Supreme People’s Assembly on October 27, 1993, and amended by Decree No. 484 of the Presidium of the Supreme People’s Assembly on February 26, 1999.
The law consists of 42 articles in 6 chapters.
Chapter 1. Fundamentals (Articles 1~8)
This chapter stipulates that the mission of the law is to contribute to establishing a proper system in the leasing of land needed for foreign investors and foreign-invested enterprises and for use of the leased land.
A foreign corporate body or individual may lease and use land in the DPR Korea and the lessee has the right to use the land leased. When land is leased, natural resources and deposits in the land leased are not covered by the right to use land. The term of lease is fixed by agreement between the contracting parties within the limit of 50 years.
Chapter 2. Ways of leasing land (Articles 9~14)
This chapter defines the ways of leasing land.
It stipulates that the leasing of land should be undertaken through consultation or by means of tender or auction. It also notes that the lessor should provide the lessee with the data like the location and area of the land and its topographical map, uses to which the land may be put, the building area, a plan for development of the land, the period during which construction must be completed and the minimum amount of investment required, the requirements for environmental protection, hygiene and anti-epidemics and fire prevention, the term of lease of the land and the state of development of the land.
The lessee must use land in accordance with the contract for use of land. A lessee who wishes to alter the use of land must conclude a supplementary contract with the lessor.
Chapter. 3 Transfer and mortgage of the right to use land (Articles 15-27)
This chapter stipulates that the lessee is permitted, with the approval of the lessor; to transfer (by means of selling, re-leasing, donation or inheritance) or mortgage to a third party the right to use a part or the whole of the land leased and defines in detail the problems arising in the transfer and mortgage of the right to use land.
It also prescribes the condition for transferring the right to use land, the limits of its transfer and the procedure for the sale of the right to use land.
The lessee is allowed to sell, re-lease, donate or mortgage the leased land only after paying the total amount of charge for transferring the right to use land stipulated in the contract for leasing the land and making the contracted investment. In case of the transfer of the right to use land, the rights and obligations relating to the use of the land, and the structures and other appurtenance on it, are also transferred.
When a lessee sells the right to use land, the lessor has the preferential right to buy it.
The chapter also notes that the lessee may re-lease the land leased observing due formalities and defines the procedures for mortgaging the right to use land.
A lessee may mortgage the right to use land with the purpose of obtaining a loan from a bank or other financial institutions. In this case the mortgagor and the mortgagee must conclude a contract for the mortgage in accordance with the terms of the contract for leasing the land. The two contracting parties must register the mortgaged right with the relevant lessor within 10 days.
If the right to use land is mortgaged, the structures and other appurtenance on the land are also mortgaged with the land. When concluding a contract for the mortgage, the mortgagee may request the mortgagor the contract for leasing the land, a copy of the transfer contract, a copy of the certificate for use of the land or other information relating to the current state of the land.
The chapter defines the right of mortgagee when the right to use land is mortgaged as well.
The mortgagee may dispose of the right to use the land mortgaged by contract, as well as the structures and other appurtenance of the land in accordance with the mortgage contract if the mortgagor fails to pay the amount due by the expiry of the mortgage, or if business has been dissolved or gone bankrupt during the period of the mortgage contract. One who has won the right to use land and the structures and other appurtenance on it disposed of by the mortgagee must receive attestation from a notary office, register the change with the registration office and use the land in accordance with the contract for leasing the land.
The mortgagor is not permitted to remortgage or transfer the right to use land during the period of contract without the approval of the mortgagee.
Chapter 4. Rent of land (Articles 28-33)
This chapter notes that the lessee must pay rent for the leased land to the lessor. When leasing developed land, the lessor will receive from the lessee the charge for transferring the right to use land plus the cost of land development. The lessee must pay the total amount of charge for transferring the right to use land within 90 days of signing the contract for leasing land. If the charge is not paid before the prescribed deadline, the lessor must demand additional payment equivalent to 0.1% of the overdue rent on a daily basis, starting from the first day of default.
A lessee who has been leased land through consultation or auction must pay to the lessor a guaranty equivalent to 10% of the charge for transferring the right to use land, within 15 days of the conclusion of the contract for leasing the land. The user of the land leased should pay annually land use charge. In this case, for those who invest in priority sectors and in the Rason economic and trade zone, land use charges may be reduced or exempted for up to 10 years.
Chapter 5. Return of the right to use land (Articles 34~38)
This chapter provides that the right to use land automatically returns to the lessor on the expiry of the term of the lease stipulated in the contract. The structures and other appurtenance on the land also return, without compensation being paid.
The chapter defines the procedure for canceling the registration of the right to use land, extension of the term of land lease, the expense for the withdrawal and clearance of the leased land and the cancellation of the right to use the leased land.
Chapter 6. Penalties and settlement of disputes (Articles 39-42)
This chapter specifies that if a lessee illegally uses land without the certificate for the use of land, or changes the use of land or transfers or mortgages the right to use land without approval, he must be fined, have the facilities on the land confiscated or be required to restore the land to its original state, and the contract for transfer or mortgage be declared null and void.
The chapter also stipulates the ways of depriving the lessee of the right to use land, appealing to or filing a suit on it and settling the disputes.
In case of a failure to invest 50% of the total sum of investment during the period prescribed in the contract for the leasing of land, or to develop the land as contracted, the lessee may be deprived of the right to use land.
If the lessee disagrees with the penalty imposed on him, he may appeal to an institution senior to the one that has imposed sanctions or file a suit with an appropriate court within 20 days of the receipt of the notice of penalty.
Disagreements arising in leasing land or transferring and mortgaging leased land to a third party must be settled through consultation.
In case of failure in consultation, they must be settled through arbitration or legal procedures provided by the DPRK, or may be taken to an arbitration body in a third country for settlement.
The DPRK Law on the Leasing of Land contributes to establishing a proper system and order in the leasing of land needed for foreign investors and foreign-invested enterprises in order to secure their investment and activities.