Nota bene: amendments to land transactions in Ukraine
2 February, 2009
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The Ukrainian land law is undergoing significant changes due to the constant development of land transactions in Ukraine. In autumn 2008 one could observe an unprecedented number of amendments to the laws covering real estate issues in Ukraine.
The Law of Ukraine ‘On Amendments to Certain Laws of Ukraine on Promoting Construction Activity’ # 509-VI (the Law) came into force on 14 October 2008. This Law has been hailed by real estate specialists as a construction revolution in Ukraine. The Law introduced amendments to the Land and Civil Codes of Ukraine, the Law ‘On Land Lease’ and a number of development and construction laws. In general, the Law is intended to secure the investments in the construction area and includes the amendments in order to simplify and shorten the construction procedures. The Law also introduced significant changes in the land transactions concerning the land auctions, more detailed procedure of land allocation and other issues intending to simplify the procedures in this area as well.
In particular, one of the innovations became the possibility of disposal of land lease right. Now, the right of land lease can be sold (including on land auctions), mortgaged and inherited. The owner of a land plot can also contribute the right of land lease to the capital of a company for the term of up to 50 years.
Certain changes were made in the Land Code of Ukraine with regard to such rights to land as ‘superficies’ (the right to construct on the land plot owned by another person) and ‘emphyteusis’ (the right to use the land plot owned by another person for agricultural purposes). From this moment, these rights to land of state and municipal ownership can be sold only by auctions. Previously, the Ukrainian law stipulated the obligatory auction procedure only for sale and lease of state and municipal land. As we see, one of the main principles in land transactions in Ukraine is the competitive basis of state land purchase and use.
Thus, the Land Code now establishes the right of a person to alienate (sell, inherit, contribute to the charter capital of a legal entity) and to pledge the rights of lease, superficies and emphyteusis regarding land plots.
At the same time, the Law contains certain restrictions with regard to state and municipal land. The rights to land of state and municipal ownership (lease, superficies and emphyteusis) cannot be alienated by land users, mortgaged and contributed to the capital of a company. With adoption of the new amendments to the Land Code, the Ukrainian legislator finally specified what types of land do not need auctions for the purchase or lease, namely:
• land occupied by buildings owned by individuals or legal entities without state shares, unless the owner of the building located on the land plot refuses to buy or to lease the respective land plot;
• land used for usage of natural resources and special water usage according to the special permits (licences);
• land used by religious organisations legalised in Ukraine for the location of religious buildings;
• land or buildings located on such land operated by state or municipal enterprises, institutions or organisations, or an enterprise or public organization in the sphere of culture and the arts, including by
national artistic unions;
• land used for location of diplomatic and similar representative offices of foreign states and
international organisations in accordance with the international treaties of Ukraine;
• land used for construction and maintenance of line transportation or energy infrastructure (ie roads, railways, petroleum and water pipelines, power transmission lines, airports, petroleum terminals,
power stations, etc);
• land used for the complex reconstruction of a residential quarters of an old residential fund in
accordance with the law;
• land used for construction of social and affordable housing in case there was a relevant construction tender.
The above-mentioned amendment saved the players of the real estate market from lots of confusion, as before that it was not clear what procedure had to be used for such categories of land.
The Law establishes general requirements for carrying out auctions of state land and the rights to state land purchase, defining in more detail the procedure of their purchase, and the procedure of plot preparation for auctions. In this respect it is necessary to note that the Law provides for payment in advance when buying state land that was not provided before. The rejection of an advance payment is one of the grounds for denial of land purchase.
In general, the Law presents a number of positive innovations that will let the players of the land market avoid different deadlocks and conflicts caused by the earlier contradictions and discrepancies in Ukrainian legislation. With the adoption of this Law, the Ukrainian legislator has made a significant step towards making the procedures in construction and land transactions more transparent and increasing foreign investment into the Ukrainian market.
