Lexwell & Partners

Insight into Ukrainian Land Legislation

The land legislation of Ukraine comprises of but is not limited to the Land Code of Ukraine of 26 October 2001 (Land Code of Ukraine), the Land Lease Act of Ukraine of 6 October 1998, the Payment for Land Act of Ukraine of 3 July 1992, the Land Regulation Act of Ukraine of 22 May 2003, the State Control Over Land Use and Protection Act of Ukraine of 19 June 2003, and the Decree of the President On the Sale of Non-Agricultural Land. Enforcement of the Land Code of Ukraine, which can be described as the land constitution of Ukraine, introduced the need to review the mass of normative acts of Ukraine and adoption of new legislation. At the same time it should be noted that the Land Code of Ukraine incorporated the realities of the transitional period of the Ukrainian economy by securing a moratorium on the sale of agricultural land and limiting the total area of agricultural land that can be acquired by an individual or legal entity.

Land Categories

Valid land legislation of Ukraine stipulates different regimes for plots of land depending on the category and designated purpose thereof. The decision on the category and designated purpose of a plot of land shall be the prerogative of the public authorities and organs of local self-government acting in line with their remit. In general, plots of land can be divided into two main categories: agricultural land and non-agricultural land. Owners of both agricultural and non-agricultural land shall use land in accordance with its designated purpose and applicable provisions of the laws of Ukraine. Landowners shall also guarantee the legal rights and interests of third persons. Failure of the owner to secure abidance by the requirements of the land legislation of Ukraine shall be grounds for cessation of the corresponding land relations.

Subjects of Ownership Rights

Ukrainian land legislation deals with private, municipal and state ownership rights to land. The Land Code of Ukraine distinguishes the following groups of subjects of ownership rights to land: individuals and legal entities with respect to land in private ownership, the local community with respect to land in communal ownership realizing ownership rights independently or through bodies of local self-government, and the state with respect to land in state ownership realizing ownership rights through the corresponding public authorities. In this respect it should be noted that the Land Code of Ukraine declares the securing of the equity of ownership rights to land for individuals and legal entities, local communities and the state as one of the main principles of Ukrainian land legislation.

For the purposes of reflecting the realities and state of development of land relations in Ukraine as well as state policy, the Land Code of Ukraine distinguishes between, among others, such subjects of ownership rights, as citizens of Ukraine, foreign citizens and stateless persons, Ukrainian and foreign legal entities, foreign states, agricultural and non-agricultural enterprises.

Acquisition of Ownership Rights to Land

Under the Land Code of Ukraine ownership rights to land can be acquired:

• on the basis of civil agreements (purchase agreements, barter, other deeds);
• in the form of a contribution to the charter fund;
• by right of succession;
• on other grounds stipulated by the law.

It should be noted that state and communal land can be acquired on a competitive basis only, with the exception of redemption of a plot of land by the owner of the object(s) of real estate located on such land.

Ukrainian land legislation attributes special attention to non-residents as potential subjects of ownership rights to land. Both foreign individuals and legal entities are deprived of the right to acquire and continuously realize ownership rights to agricultural land. To this effect the Land Code of Ukraine requires obligatory sale of agricultural land within 12 months following the acquisition of ownership rights to agricultural land by a non-resident.

In addition to limitations stipulated for non-residents with respect to agricultural land, the Land Code of Ukraine imposes special provisions for legal entities as well as joint ventures, established by Ukrainian and foreign persons, seeking acquisition of non-agricultural land. A foreign entity and/or JV can acquire non-agricultural land within an inhabited locality in the case of purchase of real estate or for the purposes of construction of objects in the course of business activity in Ukraine, while the purchase of non-agricultural land outside an inhabited locality can take place only in the event of purchase of real estate. At the same time, unlike the purchase of land in private property, the purchase of non-agricultural land by non-residents (a foreign entity or JV) from the state or local community shall be agreed with the Supreme Council (Parliament) of Ukraine or the Government, respectively.

Leasing of Land

The law defines the leasing of land as based on a temporary agreement and paid possession and use of land by the lessee in the course of his business or other activities. A land lease agreement can be concluded for a term agreed by the parties to the agreement not exceeding 50 years.

Valid legislation of Ukraine provides for and guarantees the right to lease. The Land Code of Ukraine, the Civil Code of Ukraine, the Land Lease Act of Ukraine and other normative acts adopted in line with Ukrainian land legislation form the regulatory basis for land lease relations. The law empowered landowners with the right to lease plots of land in private, as well as in state and communal ownership.

In accordance with Ukrainian land legislation, a leased plot of land (or its part) can be sub-leased by a third person at the landowner's consent. The sub-lease shall be valid in the event that the primary lease agreement provides for sub-lease or the landowner gives his permission to sub-lease. The provisions of the sub-lease agreement shall be restricted by and conform to the leasing agreement. In the case of sub-leasing of state and municipal land, the payment for sub-leasing shall not exceed the sum of the lease payment.

Ukrainian land legislation does not restrict the circle of potential subjects to leasing agreements and provides for the leasing of plots of land by foreign legal entities as well as companies set up by foreign legal entities in Ukraine. In this respect it should be noted that the Land Lease Act of Ukraine doesn't incorporate bias classification of subjects of land relations or special requirements with respect to the order of acquisition of rights to land for foreign entities and joint ventures.

Land Deeds: General Remarks

Agreements on the sale of land as well as other civil agreements on the transfer of ownership rights to land require notarization as well as state registration. The State Registration of Proprietary Rights to Immovable Property and their Restrictions Act of Ukraine of 1 July 2004, introduces a unified system of state registration of proprietary rights to plots of land and the restriction of such rights. The Act provides for obligatory state registration of proprietary rights to plots of land.

Instead of a conclusion: In view of the valid land legislation of Ukraine, a number of successful cases in which land issues burdened with a "foreign" element were resolved advocate the need to carry out due diligence with respect to each land target, which may, at first sight, seem unreachable.