Ukrainian law provides for the following real estate rights, apart from full ownership:
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Ukrainian law allows foreigners to own real estate in Ukraine but there are a number of important restrictions that may apply. The Land Code of Ukraine prohibits foreigners, foreign companies and foreign countries from owning agricultural land in Ukraine. It also precludes foreign companies from purchasing plots of land other than:
These restrictions also apply to joint ventures, ie companies established under Ukrainian law with the participation of foreign investors and Ukrainian legal entities and/or individuals.
It should be noted that on 31 March 2020 the Law of Ukraine "On amending some legislative acts of Ukraine regarding conditions of the agricultural land circulation" was passed. The respective law allows foreigners to purchase and own agricultural land only subject to the consent provided by Ukrainian people in a national referendum.
A number of other limitations exist under the Land Code, especially with respect to agricultural land.
The procedure for the purchase of land by foreigners can be complicated. In order to purchase land in Ukraine, a foreign company must act either through a subsidiary or a permanent establishment with the right to carry on business activity in Ukraine. A municipal plot of land may be sold to a foreign company with the approval of the Ukrainian Cabinet. Land owned by the Ukrainian state may only be sold to a foreign company subject to approval by the Ukrainian Parliament.
The acquisition of land by Ukrainian subsidiaries of foreign companies is even more problematic because the relevant provisions are not properly drafted. On the one hand, there are clarifications of the State Agency for Land Resources and court decisions stating that the acquisition of plots of land by Ukrainian companies that are 100% foreign owned is not provided for by Ukrainian law. On the other hand, there are court decisions stating that such companies should be allowed to acquire non-agricultural land in Ukraine.
There are other restrictions on the sale and purchase of real estate as well as the disposal of certain types of land by other means.
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Tenants who duly fulfil their obligations under their lease agreement, enjoy a pre-emptive right to purchase the property they occupy subject to payment of the sale price. If the real estate is then sold by auction the tenant's offer, if it equals the best offer made by the bidders at the auction, prevails.
Co-owners of property have a right of pre-emption if one of the owners is to sell his share. A co-owner who intends to buy property in this way must pay the purchase price set by the seller, who must inform the other co-owners of the sale. This right of pre-emption must be exercised by one of the co-owners within one month of the date the seller announces an intention to sell the property.
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Transfer of title to real estate is generally governed by:
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Different legal regimes apply to transfer of title depending on:
In such cases special laws apply, eg the Law of Ukraine ‘On the Privatization of State and Municipal Property’ No. 2269-VIII of 18 January 2018 and the Law of Ukraine ‘On the Privatization of the State Residential Fund’ No. 2482-XII of 19 June 1992.
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All transactions dealing with a transfer of the ownership of real estate should be notarized. Ownership of land and real estate is subject to mandatory state registration in the State Register of Proprietary Rights over Immovable Property.
As from 1 January 2013, ownership rights over real estate (including land) are valid once the ownership right is registered in the State Register of Proprietary Rights over Immovable Property by the state registrar. This may be either by
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As from 1 January 2013, title to real estate must be registered in the State Register of Proprietary Rights over Immovable Property as a condition for the validity of the title to real estate.
Since 1 January 2016 registration powers in respect of title to land and other real estate have been decentralized, ie the authority to effect state registration of title to real estate has been passed to the executive bodies of municipalities and legal entities authorized by Ministry of Justice of Ukraine.
With effect from 1 January 2013 notaries were authorized to register title to any real estate that is transferred in a transaction notarized by that notary. As from 1 January 2016 the authority of the notaries as a title registration body was broadened and notaries were granted similar powers to register title to real estate as those vested in the state registrars of municipalities or legal entities authorized by Ministry of Justice of Ukraine.
The new amendment of the Title Registration Act has set up the principle of extra-territoriality. Thus, the notaries and state registrars of the executive bodies of municipalities can register any title to real estate irrespective of the location of the real estate, but within the boundaries of their region, the cities of Kyiv or Sevastopol.
State registrars acting under the authority of the Ukrainian Ministry of Justice, who were authorized to register title to real estate with effect from 1 January 2013 will exercise their powers until the decision of the Cabinet of Ministers of Ukraine on the termination of their authority is adopted.
Claims challenging the decisions, actions and/or inactivity of the state registrars may be filed with the Ukrainian Ministry of Justice of Ukraine or the relevant court.
The information from the State Register of Rights Over Immovable Property is publicly available. In particular, every person has the right to obtain information about the owners of the real estate (including buildings, structures, land plots etc), if those rights are registered in that State Register. Since 1 January 2015 the information in the State Register of the Rights Over Immovable Property has become publicly available online via web-site of the Ministry of Justice at this link.
All transactions affecting real estate (both plots of land and other property) executed prior to 1 January 2013 were also registered with the State Registry of Deeds (a record of transactions) administered by the Ministry of Justice and operated by the notaries. Almost every real estate transaction must be registered with this registry. As from 1 January 2013, registration of real estate transactions is abolished (the State Register of Deeds is discontinued) and replaced with registration of titles under the Title Registration Act.
Almost every transfer of title effected in Ukraine up to 1 January 2013 was subject to mandatory registration in the State Register of Deeds (a record of transactions). As from 1 January 2013, a transfer of title is not subject to registration under Ukrainian law, but only the title itself.
Some insurance companies offer this kind of insurance, although it is not well established in Ukraine yet.
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Generally, the transaction will include the following stages:
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Usually investors carry out financial, technical, legal and environmental due diligence on title, building permits, leases and contracts, and other aspects relevant to the property. As a rule this is carried out before purchase, either after signing the preliminary agreement, letter of intent or term sheet etc (which provides the buyer with an exclusivity period), or after signing a principal agreement, which will make the conduct of due diligence a condition precedent for completion.
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Where a single property is jointly owned, for example by a husband and wife, written and notarized consent from all the co-owners is required for every material transaction in Ukraine (eg sale and purchase of real estate, real estate leases). In addition, the co-owners can choose to empower one of them to make decisions about the jointly owned property. Ukrainian law also requires the permission of the guardianship authorities for the sale of real estate owned by someone under the age of 18.
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Real estate sale and purchase agreements must be made in writing and notarized in accordance with the applicable legislation. Ukrainian law stipulates that agreements must contain certain essential provisions, including details of the parties, the specific details of the property and the purchase price.
The parties to the agreement also generally execute an instrument of transfer and acceptance in relation to the real estate.
The content of the contract is negotiable.
Sale and purchase contracts for real estate (other than land) usually include the following:
Sale and purchase contracts involving plots of land should include the mandatory conditions necessary for the effective fulfilment of the agreement (location and size of the plot of land, its cadastral number, purchase price, encumbrances, terms of transfer, timing of the transfer, etc).
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Under the Ukrainian Civil Code, the seller is obliged to warn the buyer about any rights of third parties affecting the property (eg rights of tenants, security interests, rights of lifelong use etc).
In the event that a third party brings a claim against the buyer, concerning matters which arose before the sale, the seller must participate in the court hearings on the side of the buyer.
The seller is obliged to transfer the property and to deliver all the related documents (eg the 'technical passport' –- the set of documents containing all the technical information about the premises) to the buyer in accordance with the sale and purchase contract and relevant legislation.
The property that the seller transfers to the buyer must comply with quality requirements. The warranty period in which a claim can be brought is three years unless the contract provides for a longer period.
Generally statutory warranties can be limited by agreement of the parties, although some statutory warranties cannot be changed.
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The range of remedies depends on the kind of misrepresentation made. For instance the seller is obliged to warn the buyer about the rights of third parties otherwise the buyer is entitled to demand a reduction in the price or the termination of the sale and purchase agreement. In addition, the buyer can terminate the sale and purchase agreement if the seller refuses to transfer the property.
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The following matters should be verified by the investor:
Acquisition of real estate forming a single integral property complex may require anti-monopoly clearance (in a form of consent of the Anti-Monopoly Committee of Ukraine)
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The Ukrainian Land Code provides for liability in the case of individuals and companies doing anything that contaminates the land with chemical or radioactive agents, or sewage, or pollution by industrial, everyday and other waste. Moreover, the law dealing with the preservation of the natural environment stipulates that companies whose activities have a harmful effect on the environment must equip themselves with any installations and facilities necessary for purifying or sterilising emissions, as well as minimising the effect of harmful agents. Those causing environmental damage are also obliged to provide compensation to those affected if they cannot prove that a natural disaster caused the damage, or that it was caused by intentional activity by the victims.
Although formally the liability should be imposed on the person who caused the environmental damage, in practice the controlling authorities tend to go against the current owner of the real estate, not tracing the history of the ownership of the real estate. Thereafter the buyer of the real estate may file a restitution claim against the person who caused the environmental damage.
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Planning documentation kept by local authorities, as well as documentation pertaining to each particular property, should be verified. These include, in particular, the master plan, the detailed plan of the locality, zoning plan, title documents etc. The zoning of land can be checked in the State Land Cadastre and title documents.
Generally, the use of land can be changed, but there are some categories of land where a change of use is not permitted or where this involves a complex procedure, requiring approval from the Cabinet of Ministers of Ukraine or the Parliament of Ukraine.
From 1 January 2015 (with amendments of 1 March 2018), the following restrictions apply in relation to zoning issues:
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As from 31 December 2010 cooperation between the private and public sectors has been governed by the Law of Ukraine ‘On Public-Private Partnership’. A PPP is usually involved in the construction of highways, roads, railways, runways, bridges, tunnels, metros, river – and sea-ports and associated infrastructure. PPP projects became more popular in the course of the preparations for the Euro 2012 football championship. Such PPP projects were based on the Law of Ukraine ‘On the Organization and Implementation of the Final of the Euro 2012 Football Championship’, dated 19 April 2007.
On 24 May 2016, the Law of Ukraine ‘On Amendments to Certain Laws of Ukraine regarding Lifting of the Regulatory Barriers for Development of Public-Private Partnership and Stimulation of Investments in Ukraine’ entered into force. The aforesaid law broadened the list of privileges and guarantees for private partners (eg now the private partners can acquire into their ownership the objects created by them in course of PPP; the objects of PPP can also be in joint ownership of the public and private partners; disputes arising out of agreements on PPP concluded with participation of non-residents can be resolved by an international arbitral tribunal; in case of early termination of an agreement on PPP through fault of the public partner, he is obliged to compensate the private partner investments non-reimbursed within the term of such agreement and damages occurred due to early termination of the agreement on PPP).
On 3 October 2019 the Law of Ukraine ‘On Concession’ (Law 155-IX) entered into force. According to Law 155-IX, private investors under the right of concession can benefit from the public-owned property, including the property prohibited to privatize: roads, railways, seaport and airdrome facilities etc. After investments in the object of concession are made investors under the concession agreement can receive revenue and other benefits from utilizing this object of concession for less than 50 years.
On 17 December 2020, the Verkhovna Rada of Ukraine adopted the Law of Ukraine On state support of investment projects with significant investments in Ukraine. According to this Law, investors who intend to invest not less than EUR20 million in Ukraine are able to execute a special investment agreement with the Cabinet of Ministers of Ukraine. Please note that investment projects shall concern construction, modernization, technical and/or technological re-equipment of investment objects in the particular spheres (processing industry, transport industry, post industry etc.) and meet other requirements provided for by the Law.
According to the respective Law, an investor may be entitled to obtain lease title to land plot for construction of investment object under the simplified procedure. The goverment of Ukraine guarantees to support the investor on each step of an investment project under the special investment agreement. In practice it is also possible to enter into investment agreements, joint venture agreements, etc with public authorities.
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Compulsory purchase by the state is possible in the following cases:
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In the case of asset sales, VAT is payable at the rate of 20%. The VATable consideration in respect of such transactions cannot be less than the book value of the property asset as of the beginning of the tax period during which it is disposed of (or the arm's length value – if the property asset is not included in the accounts). The sale of plots of land (without buildings and/or other constructions) is not subject to VAT.
State duty (calculated according to the value of the transaction), pension fund duty, state registration fees, legal fees, technical and financial consultants' fees etc may apply.
State duty applies by state notaries as a fee for notary services at 1% of the contractual value of the real estate being transferred. As a matter of practice, private notaries charge fees for their services in the amount no less than state duty.
Pension fund duty is paid by a purchaser of real estate at 1% of the value of the real estate (excluding VAT) indicated in the sale and purchase agreement.
The notary's fees are divided between the parties as agreed by the parties. The amount of the state registration fee varies depending on the procedure for state registration and the type of real estate involved, ie increased fees apply to the state registration of complex multi-element real estate developments and for expedited state registration.
The state registration fee for the registration of title to real property is UAH 227.
Real Estate agencies' charges are around 2.5% to 5% of the contractual price.
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A share deal is not subject to VAT, notary's fees and state duty, or pension fund charges.
Other expenses (ie the legal fees, technical and financial consultants' fees etc) are normally payable by the buyer or may be shared by the parties.
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What are the normal steps involved in a real estate transaction?
Generally, the transaction will include the following stages:
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