Ukraine Real Estate > Investment Reports > Guide on how to Safely Purchase Real Estate in Ukraine (Land Code of Ukraine)
 
 

Guide on how to Safely Purchase Real Estate in Ukraine (Land Code of Ukraine)

General conditions and principles:

The law codes for the purchase of land in Ukraine is subdivided into separate categories. Each category has its own procedure of purchase, possession, and special restrictions and conditions. This report covers each of the following categories of land:

1. Lands for agricultural purpose;
2. Lands for civil building;
3. Lands for nature reserves;
4. Lands for sanatoriums and health resorts;
5. Lands for recreational use;
6. Property zone historical and cultural;
7. Lands for forest resources;
8. Lands for water resources;
9. Lands used by the government for industry, communication infrastructure, power generation, defense, etc.

Practically all categories of the land can be both used as state, municipal and private property. However, it is necessary to understand the distinctions in the application of property right to each of these categories of the land use in Ukraine, especially concerning foreign
citizens. Foreign citizens can purchase all categories of the lands in Ukraine, except for agricultural purposes. Foreign firms can purchase lands in Ukraine under the condition that they maintain a permanent mission and are registered to conduct economic activities in Ukraine. Thus:

1. The purchases of state lands areas are carried out by Cabinet of Ministers of Ukraine with the coordination with the Supreme Rada of Ukraine (Parliament);
2. The purchases of municipal properties are carried out by local regional councils with the coordination with the Cabinet of Ukrainian Ministers.

These rules also apply to the purchase of auctioned lands by foreign investors who are register to conduct business in Ukraine.

Summary of land purchasing procedures for foreigner investors:So, purchase of the ground by foreign citizens at private proprietors
is possible (except for the grounds of agricultural purpose) in accordance with general practice.

Basis land contracts:

  • Sale and purchase,
  • barters,
  • Donations

Besides the basis for purchase of the ground by the private persons who are not being citizens of Ukraine, is inheritance of the ground, and as the repayment of the ground, under condition of accommodation on this ground area of the real estate which is taking place in their property. Purchase of the ground by foreign citizens at the state (except for the grounds of agricultural purpose) carries out the Cabinet of Ukraine as agreed with the Supreme Rada of Ukraine. Purchase of the ground by foreign citizens at bodies of a municipal
services (except for the grounds of agricultural purpose) is carried out by local Councils at the coordination with the Cabinet of Ukraine.

So that the foreign company or the company with the part of the foreign capital could acquire the land, it must have a constant representation at the territory of Ukraine, with the right of conducting economic activity in the territory of Ukraine. In this case the foreign companies can acquire the land (besides the land of agricultural designation) only in case of the procurement by them the objects of the immovable property, or building of such units, connected with the realization by them enterprising activities in the territory of Ukraine. (according to the item 83, units 2,3 of of the Ground Code of Ukraine)

Let's consider in more detail the procedure of purchasing the property
rights by foreign investors for various categories of the lands of Ukraine .A question about the realization of the rights of property of the land for the foreign investors in Ukraine (up to the categories of land) appears as follows.

Buying Agriculture Lands in Ukraine:

This category of the lands represents significant interest first of all because of the rapid development of an infrastructure of warehouse and logistical complexes in Ukraine. For the Odessa region these are the lands located in immediate proximity from large transport units, such as seaports of Odessa, Illichivsk, Yujniy, etc. Or pieces of lands, adjoining to highway M -05 Odessa- Kiev.

The main part of the lands of agricultural designation by the current moment belongs either to the state, or to the municipal services. Thus all know, that for the period till 2007 the state declares the moratorium on transactions on sale and purchase of the lands of agricultural purpose. As a matter of fact, any transaction on sale of the lands of agricultural designation, till the year 2007 will be acknowledged ineffective, what is the factor 100% risk for the acquirers. And it is completely unimportant who in this case will come out as the acquirer of this land: the citizen of Ukraine, or the foreign investor: after transaction is acknowledged ineffective, the land will be returned into the fund of state, or into the municipal property.

However, in this case it is necessary to understand, that the discussion deals with the transactions on sale of the agricultural lands the state bodies, or municipal services. In the given context the question is a suspension of action of article 37 of the Ground Code of Ukraine on which the private nonagricultural enterprises, the organizations and establishments can get the lands of agricultural designation in the property for conducting a part-time farm.

However in Ukraine there is also a third group of lawful owners of the ground of agricultural purpose - private proprietors. Private proprietors on the ground - rather new legal phenomenon in Ukraine. This category has arisen as a result of disintegration of collective farms and state farms of the former USSR, by free-of-charge privatization of the lands of the former cooperative property. The land, taking place in the property of these citizens of Ukraine have some other status called "lands OSG" (a personal farm). OSG lands can be subject of sale and purchase during the action of moratorium, but in legal relations between citizens of Ukraine only.

But as for the foreign citizens the law is even more severe. The OSG lands cannot be acquired by foreign citizens into the property and are accessible only for lease, or sublease, which in the overwhelming majority of the cases is unattractive for foreign investors.

moreover,under the low of Ukraine, for the foreign citizens or legal persons(companies) who obtain the right of property to the land of agricultural designation as the inheritance,this property must be expropriated in not more than one year term.

The brief summary on the lands of agricultural designation:

1.In order to acquire the lands of agricultural designation in property during the action of moratorium on procurement-sale, it is necessary for this land to be recalled from under the state jurisdiction, or of municipal service system via its"unsoldering" and releasing to an individual (the process of privatization)
2.In this case land section acquires status of the "land OSG".
3.The private proprietor of "land OSG" can be the citizen of Ukraine only
4. In accordance with the law of Ukraine, the land OSG can be sold to the citizen of Ukraine only
5.Foreign citizens can obtain lands of agricultural designation(including lands OSG) only for lease
6.Under the low of Ukraine, for the foreign citizens or legal persons(companies) who obtain the right of property to the land of agricultural designation as the inheritance,this property must be expropriated in not more than one year term.


The lands for housing and civil buildings:

In section "general considerations and principles" has already been mentioned the conditions of the acquisition of land sections by the nonresidents of Ukraine. In this case we showed differences in the procedure of the purchasing the rights of property to the land for private individuals - non citizens of Ukraine, and foreign companies.

In Summary:

The purchase of the land by foreign citizens at private proprietors is possible (except for the grounds of agricultural purpose) in accordance with general practice. The basis can be the conclusion of contracts:

  • Sale and purchase,
  • barters,
  • Donations

Besides the basis for purchase of the land by the private persons non citizens of Ukraine, is inheritance of the land, and as the
repayment of the land, under condition of accommodation on this ground area of the real estate which is taking place in their property. The same rule used for the cases, when a foreign investor(company) purchase the land.As we see, under the positions of the Ground Code of Ukraine in this case the question of construction of real estate object isn't considered as a reason for sale the land.

These principles of the regulation the rights of foreigners purchasing land in Ukraine, actually apply to all the remaining categories lands, such as:

1. Lands for nature reserves;
2. Lands for sanatoriums and health resorts;
3. Lands of recreational use;
4. Lands of historical and cultural designation;
5. Lands for forest resources;
6. Lands for water resources;
7. Lands used by the government for industry, communication
infrastructure, power generation, defense, etc.

However, although under the Ground Code all listed above 7 categories of the lands can be transferred to the property, in practice they are submitted only as the state or municipal property.

Thus, the private property on the ground in Ukraine is actually possible only in the relation only two categories of the grounds:

1. Lands of agricultural designation;
2. Lands of housing and civil building.

Thus, under the existing law, the lands of agricultural purpose are actually inaccessible to foreign citizens.

Practical recommendations.

Proceeding from all aforesaid, it may seem like the market of the land in Ukraine is practically inaccessible for foreigners. However thus, there are many foreign citizens and companies who, despite of such rigid restrictions are the proprietors of the land in Ukraine due to what have an opportunity to create highly profitable commercial projects.

How it to achieve?

1.Purchase from individuals

Getting the land of nonagricultural purpose from individuals as the private person, you can avoid numerous complexities with registration of the property rights for land.
In case you get the land from the state moreover as the foreign company, you will have to go through the way of reception of sanctions at the highest governmental level, and at a level of the local government.

2.Change of a special-purpose designation of the ground areas on the lawful bases

If you are interested with prospect of creation of the logistical center, and for this purpose is necessary to get the land of agricultural purpose, there is only one way.
First to get only the grounds OSG (set on the private person - the citizen of Ukraine) which local authorized company - the resident of Ukraine, will undertake "to transfer" on a special-purpose designation in a category of the lands of industrial purpose.

Question of change of a special-purpose designation of the land areas - a separate point of issue. For this purpose it will be better to find reliable partner in Ukraine who can be in charged with performance of this procedure, till the moment of reception of a ready product - a private property on the land area having a special-purpose designation - construction of a warehouse complex.

3. Creation of the companies with the certain legal form of the responsibility

It is possible to create the company as Open Company (a society with limited liability), set on the authorized representative-the citizen of Ukraine. Into structure of the company to enter the representatives managing financial resources of a new created company.

4. Cooperation with companies - partners in Ukraine.

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The following important economic developments are forecast to take place within the coming year:

  • Continued structural reform to encourage free trade.
  • Wholesale reforms in state administration to help curve corruption.
  • Continued growth in direct foreign investment.
  • Continued growth in tourism.
  • Decrease in the country's budget deficit.
  • Decline in PPI and CPI rates.
  • Stabilization of the Ukrainian currency. (The Hryvnia)
  • Admission into the World Trade Organization.
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