Land rights of foreign investors in Ukraine: modern realities and future

Ukrainian land reform that a lot of people connect with adoption of laws “On state land cadastre” and “On land market” is getting closer and closer. The first law has already been adopted and signed by the President. Bill “On land market” was drafted by the Ukrainian government and registered in the Verkhovna Rada under number 9001-1. While awaiting access to our |”national wealth” foreign investors raised an issue related to perspectives of their land rights. That is why our law firm decided to compare current regulation of foreigners’ land rights and its most possible implementation after the 1^st of January 2012.

Please notice, that this material shouldn’t be considered as a legal advice.

In accordance with Section 2 of Article 82 of the Land Code of Ukraine foreign legal entities can own land plots of non –agricultural use in case if they acquire real estate objects and for construction of objects related to conduction of business activities within local administrative unit’s limits. Foreigners can acquire any plot of non-agricultural use within local administrative unit and plots of non-agricultural use outside such a unit where a real estate object is located. Neither foreign legal entities nor foreigners can own lands of agricultural use and when they inherit them it is required to dispose of them within one year.

These prohibitions will (in large scale) remain after adoption of the bill number 9001-1 in its current version. Moreover prohibition for obtainment of agricultural lands may become even stricter since it will be applied not only to “pure” foreign persons who are non-residents but also to legal entities that are residents of Ukraine but charter capitals of which include at least 10 percent of foreign investments. As of today in accordance with Article 82 of the Land Code of Ukraine not only legal entities that were founded by Ukrainian citizens or legal entities but also joint enterprises can own lands of any use type.

However at the same time the bill number 9001-1 provides unambiguous definition of prohibition of agricultural lands obtainment in which it is stated that foreigners cannot acquire agricultural lands by means of civil agreements (so one can come to conclusion that it can be done by means of court decision).

The procedure of land transfer into foreigner’s possession also may be amended. As of today in accordance with Article 129 of the Land Code of Ukraine special procedure of land sale to foreigners is provided only for sale of state owned and municipal lands. Decision about sale of such state owned lands is made by the Cabinet of Ministers of Ukraine and approved by the Parliament while sale of municipal lands is performed by local authorities after obtainment of approval from the Cabinet of Ministers of Ukraine.

If the bill umber 9001-1 is adopted as a law it will be required to receive approval of the Cabinet of Ministers of Ukraine in order for a foreigner to dispose of any land despite form of ownership, including private ownership. Moreover the Cabinet of Ministers of Ukraine will be entitled to set limitations on sale of land to foreigners or prohibit such sale on certain territories.

So purchase of land by foreigners will become even more complicated and require more sophisticated mechanisms of purchase control.

At the same time right to use land by foreigners will not undergo any amendments. Section 2 of Article 93 of the Land Code of Ukraine which provides that land plots may be rented, including by foreign citizens and stateless persons, foreign legal entities is not planned to be amended.

This comment was prepared by lawyers of Kiev law firm “Pravova Dopomoga” within practice of Real estate, construction and land law.