Foreigners must dispose of agricultural land inherited in Ukraine

Lawyer of our firm Andriy Buzynnyi provided Jurliga with his opinion about letter of the High Commercial Court of Ukraine related to disposal of agricultural land by foreigners.

The comment was published on Jurliga website.

Unabridged text of the article (translation from Russian):

"Imperative approach"

Foreigners that own Ukrainian agricultural lands are obligated to dispose of them despite set moratorium.

Multiple prolongations of moratorium on disposal of agricultural lands are judged ambiguously: one side struggles not to allow sale of this type of land at all and another one is trying to turn Ukrainian black soils into a product. But both sides agree that state regulation is full of gaps and regulatory framework cannot be called perfect as of today. In this regard the judicial branch is trying to fill some gaps.

On January 16, 2013 the High Specialized Court of Ukraine for Civil and Criminal Cases explained some peculiarities of Land Code provisions application. In particular it pointed out that stipulations of Subsection 15 of Transitional provisions of the Land Code which are related to moratorium on sale of agricultural lands are not applicable to foreigners and stateless persons that inherited such lands since provisions of Section 4 of Article 81 of the Land Code of Ukraine which oblige foreigners and stateless persons to dispose of inherited land are of imperative nature.

The conclusion is quite reasonable and it makes sense that it was finally arisen after many years of moratorium. There have been plenty of cases of agricultural lands inheritance but there was no single understanding of the issue. However the problem was caused not only by contradictions between stipulations about obligatory disposal and moratorium. Another reason is that local bodies of the State Agency of Land Recourses of Ukraine in most cases agree to issue land certificates for foreigners only after “struggles”. It is also unclear whether persons who had Ukrainian citizenship at the moment of inheritance and later became citizens of foreign countries are required to dispose of it as well as which date is defined as the beginning of 1-year term for disposal. By the way the High Specialized Court of Ukraine for Civil and Criminal Cases answers the question about term defining in its letter which was mentioned above. It states that the year-term starts since the moment when ownership document was obtained (state certificate)

Several conclusions can be made taking into consideration the mentioned letter of the High Specialized Court of Ukraine for Civil and Criminal Cases. The first – Transitional provisions of the Land Code of Ukraine are not applied to those provisions of the Code which are of imperative nature. Such conclusion may result in a separate analysis of the Land Code but most likely such position of the High Specialized Court of Ukraine for Civil and Criminal Cases will be demanded. The demand may be exemplified by another conclusion according to which persons who received agricultural lands while being Ukrainian citizens and lost this status in future must “get rid” of the land since it is imperatively stipulated in Art.145 of the Land Code of Ukraine (it is indirectly confirmed by position of the Ministry of Justice of Ukraine: letter number С-14667-23 dated 09.06.2009).

Besides there is an opinion that the High Specialized Court of Ukraine for Civil and Criminal Cases unwillingly showed another way to omit the moratorium. It turns out that a foreigner who has an agricultural land plot can sell it absolutely legally. However schemes of such disposal may be quite unusual since they will be related to search of testator who is about to die. But it is quite possible that even such scheme will be used.

The foreigners in this situation may take into consideration the following advice. Since disposal is unavoidable (as a result of free will or coercive court decision) it would be better to avoid complicated mechanism of “acceptance of inheritance with following registration of ownership rights and obligatory disposal” using the right to reject inheritance. Under Art.1274 of the Civil Code an heir who is to receive inheritance under will can reject such inheritance in favor of other heir. There is a similar regulation for heirs who receive inheritance under law. However there is no opportunity to reject inheritance in favor of persons that do not belong to heirs. On the other hand if there is a will to use the land it is possible to apply rule which stipulates that 1-year term for obligatory disposal of land starts since the moment of land certificate registration. So all you have to do is to delay such registration for as long as possible.”