Q: Does Ukrainian legislation contain any limitations on the acquisition of real estate in Ukraine by foreign legal entities or individuals?
A: According to Ukraine legislation, all subjects who are beneficiaries of property rights are equal before the law. However, the rights of foreign individuals and legal entities to acquire land located on Ukrainian territory remain significantly limited.
As a general rule of Ukrainian law, legal entities and individuals may acquire real estate, except where such is expressly limited or excluded by the law.
Foreign or Ukrainian legal entities and individuals accordingly may not acquire property rights to real estate that constitutes the exclusive "property of the Ukrainian people" or that are attributed "nation-wide value". Thus land resources, air space, water and natural resources of Ukraine's continental shelf and exclusive economic zone constitute exclusive property of the people of Ukraine and cannot become objects of private property rights. Likewise, due to their inherent nation-wide value, objects such as those among others required by the State to perform its functions, guarantee its defense, independence and national sovereignty, safeguard its economy, or preserve its cultural, scientific and social wealth, cannot be privatized.
Private real estate property rights of foreign legal entities or individuals are limited to certain categories of land and buildings that are not ascribed nation-wide value or do not constitute exclusive property of the Ukrainian people.
Property rights to land
Ukrainian legislation differentiates between agricultural and non-agricultural land.
According to the Land Code of Ukraine, agricultural land, i.e. land that is ordained for the manufacturing of agricultural products or for the realization of agricultural scientific or educational activities, cannot be transferred to foreign legal entities or individuals. This specific limitation for foreign persons is motivated by the vital economical and cultural importance of agriculture and agricultural land to the Ukrainian people.
Consequently, where a foreign legal entity or individual inherits agricultural land, it must be alienated within one year after the property transfer through inheritance. While such foreign legal entity or individual may alienate the inherited agricultural land at any given price and conditions, failure to alienate it within one year will result in coercive forced judicial renunciation of all property rights. The prohibition on retention of agricultural lands by foreign individuals or legal entities does not, however, limit their rights to lease such land.
Concurrently, the right of foreign individuals to acquire non-agricultural land is also significantly limited: the foreigner may only acquire non-agricultural land located (i) within the boundaries of urbanized settlements or (ii) outside the boundaries of urbanized settlements if a building in their ownership is located on the given land plot.
Foreign legal entities may only acquire property rights to non-agricultural land plots (i) within the boundaries of urbanized settlements, provided they acquire a building located on said land plot or intend to construct on the land plot a building for the exercise of their commercial activities, or (ii) outside the boundaries of urbanized settlements on which a building that they previously purchased is situated.
Acquisition of such non-agricultural land may occur through a civil acquisition contract, a buy-out of a land plot on which
a previously acquired building stands, or inheritance.
In the event that a foreign legal entity or individual acquires property rights to non-agricultural land in State or municipal property, such acquisition must result from an auction or competitive tender, unless the rights would be acquired on the basis of a buy-out of a land plot on which a previously acquired building stands. The transfer of property rights over State-owned land to a foreign legal entity must be approved by the Verkhovna Rada of Ukraine and carried out by the Cabinet of Ministers, while such transfer of municipal land to a foreign legal entity is carried out by the local Councils upon approval by the Cabinet of Ministers.
It must be noted however that an important limitation for foreign legal entities acquiring non-agricultural land from the State or municipalities is that in order to do so, they must previously have registered a branch office in Ukraine for conducting their commercial activities, i.e. established a commercial company under Ukrainian law. Whether such rule conversely applies to acquisition by a foreign legal entity of a privately owned land plot remains widely debated; however, jurisprudence predominantly answers this question negatively.
It can therefore be concluded that while foreign legal entities and individuals may not acquire agricultural land, their property rights to non-agricultural land are significantly limited, even more so in the case of privatized State or municipal land.
Property rights to buildings
Pursuant to Ukrainian legislation, acquisition rights to buildings are identical for foreign legal entities and individuals on the one hand and Ukrainian legal entities and individuals on the other hand, including the limitations regarding buildings of nation-wide value or belonging to the collective Ukrainian people.
ALEXANDER POELS, LL.M. is Director of the Kyiv office of Peterka and Partners, Bohdan Khmelnitskiy Street 17/52-A,
6th floor, Kyiv; Tel: 380-44-581-1120
www.peterkapartners.com
|
