He has a piece of land that is the subject of a dispute with the municipality and he cannot sell it. Does he have to pay Zakaah on it?
Question

                I have a number of pieces of land outside the city, with no lawful documents. All I have is just few papers of purchase I bought several years ago. Do I have to pay zakat on them? What shall I do now if I have to pay zakat? Bear in mind that these pieces of land were an issue of problems with the local municipality and we cannot valuate them now.
Praise be to Allah.
    If you bought this land with the intention of selling it, 
    then you must pay the zakaah on trade goods, so you must work out its value 
    every year and pay one quarter of one tenth (2.5%) of this value. 

    This is the basic principle concerning zakaah on trade goods. 
    But if you cannot sell it and dispose of it because of the dispute with the 
    municipality, then no zakaah is due on it for the period during which you 
    are unable to dispose of it, because you are not in full possession of it. 
    This is akin to a debt that is owed by a person who is delaying repayment or 
    by one who is in difficulty. 

    Shaykh Ibn ‘Uthaymeen (may Allaah have mercy on him) was 
    asked about zakaah on land, i.e., a man bought a piece of land but did not 
    pay zakaah on it for three or four years. After the purchase he submitted an 
    application to the municipality to divide it into a number of lots. This 
    process took three or four years and until now it is not complete. Is zakaah 
    due on it for the previous period, or should zakaah be paid just once at the 
    time of purchase? 

    Shaykh: Did he buy it to trade in it? 

    Questioner: He bought it to trade in it, but he thought, 
    based on the fatwa of a scholar, that no zakaah is due on land, then it took 
    too long to complete the application, and he cannot sell it in lots until it 
    is completed.  

    Shaykh: And he cannot sell as one piece either?

    Questioner: He cannot sell it as one piece, but the partners 
    bought the land to divide it into a number of lots. 

    Shaykh: Meaning that it is no longer in his possession? 

    Questioner: No, it is still in his possession. 

    Shaykh: Are they partners?  

    Questioner: Partners means that they recorded the name of one 
    person, one of the partners. 

    Shaykh: Firstly, may Allaah bless you, if he asked someone 
    about whether there is no zakaah on it, and that person is reliable in his 
    knowledge and religious commitment, then he does not have to pay zakaah, 
    because Allaah says (interpretation of the meaning): “So ask of those who 
    know the Scripture, if you know not” [al-Nahl 16:43]. But if he believed 
    that zakaah is obligatory then he must pay zakaah, except for the years when 
    he was unable to dispose of it, as there is no zakaah for those years, 
    because this is like a debt owed by one who is in difficulty. But the 
    correct view as far as I know is that trade goods are subject to zakaah.

    End quote from Liqa’ al-Baab al-Maftooh (11/148).

    And Allaah knows best.