New procedure for registration of rights to real estate in Ukraine

Andriy Buzynnyi, lawyer of law firm “Pravova Dopomoga” prepared the material about new procedure of registration of rights to real estate. The comment was published in issue number 15 of “Law and Business” newspaper (1105) 13.04-19.04.2013.

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Unabridged text of the material:

“Contractual” dilemmas

Majority of notaries are not ready to register ownership rights to real estate objects

New procedure of state registration of rights to real estate was supposed to simplify and speed up the process of transfer of ownership rights to apartments, premises, constructions and other objects of real estate. The goal was generally reached: from now on it is possible to enter into sale contract of real estate other than a land plot and theoretically one can register ownership right to it in one day even though previously it would take 2 to 3 months. But practice cannot always keep us with theory. Legal support of transactions shows that when entering into sale contracts both buyers and sellers frequently face a number of difficulties.

Extracts of documents

Acceleration of procedure of sale contracts formalization and transfer of rights to real estate was partially possible due to provision of powers related to registration of rights to real estate to notaries (both state and private). In particular this is possible when notarizing apartment or premise sale contract which is still obligatory.

Due to this the procedure of extract obtainment from the Register of ownership rights to real property was supposed to be simplified and it had to prove ownership rights of a seller to the object he was planning to dispose of. Previously one had to go to the bureau of technical inventory which first of all performed technical inventory of real property object and only after this issued the extract. Issuance of the extract by the bureau of technical inventory would take 14 business days excluding the time of technical inventory completion. From now on a notary has access to the State Register of rights to real property and can obtain an extract from it personally.

However since the legislation does not provide automatic transfer of information from the Register of ownership rights to real property, Unified register of prohibitions on disposal of real property and State register of mortgages to the State Register of property rights to real property, the latter is almost empty. Thus, in order to notarize sale contract and register buyer as an owner a notary has to check data from all the mentioned registers. In this regard one may face a number of practical difficulties.

First of all not all the notaries managed to get connected to the Register of property rights and the Register of ownership rights and therefore they are unable to find the required information in them due to technical reasons.

Secondly, there is no regulatory framework which could set the procedure of information obtainment from the register of ownership rights, unified register of prohibitions on disposals of property and register of mortgages by notaries. The order number 1844/5 of the Ministry of Justice of Ukraine dated 14.12.2012 set only procedure of access to the registers by state registrars. Notaries were omitted. And even though the State Registration Service of Ukraine and the Ministry of Justice of Ukraine unanimously state that notaries have the right of access to these registers (letter of the  State Registration Service of Ukraine number 397-06-15-13 dated 3.01.2013 and letter of the Ministry of Justice of Ukraine number 13.1-17/4b dated 15.01.2013), notaries are not completely sure that their actions will be lawful. This is based on the fact that these letters show the clash between the State Registration Service of Ukraine and the Ministry of justice of Ukraine in regard of whether notaries have right of access to these registers when issuing inheritance affidavits or not.

Besides, data from the electronic version of the Register of ownership rights to real property is not complete. Connection of bureaus of technical inventory to the register which began in 2002 was very slow and unevenly. The bureaus in many regions of Ukraine were connected quite recently (in particular the Bureau of Technical Inventory of Kiev was connected only in mid 2010). As the result information about many real property objects is still kept in paper-based form in registration books and registration profiles that are owned by the bureaus of technical inventory. At the same time bureaus of technical inventory are not obligated to provide extracts from them to anybody. And definitely not free of charge. As the result a seller has a burden of dealing with a problem of extracts obtainment from documents that are kept by BTIs. And often the bureaus set payments for issuance of these extracts.

As the result majority of notaries are not ready to register ownership to real property objects due to different reasons. And those who are ready to do the job charge significant payments for their services.

Difficulties with certificates

When talking about registration of ownership to real estate notaries can be substituted by the state registrars of the Ministry of Justice of Ukraine. Unlike notaries they do have access to all the required electronic registers and the official cost of registration performed by them is only 239 UAH (119 UAH of the state duty and 120 UAH of payment for issuance of an extract from the State Register of rights to real property).

However, first of all they usually do not obtain paper-based documents so obtainment of such documents becomes a burden for parties of a contract. Secondly the term of ownership registration is 14 business days during which a seller can sell his property to a couple of other buyers. In this situation the person who is the first to submit documents for registration will be registered as the owner. Finally the ability of ownership registration by a state registrar doesn’t influence the requirement about contract’s notarization.

The latter can cause difficulties as well. Besides the mentioned difficulties related to obtainment of information from registers it is also complicated to obtain certificate of family members. Subsection 1.9 of Section 1 of Chapter 2 of the Procedure of conduction of notarial actions by Ukrainian notaries requires this certificate to verify absence of rights of under-age children to the real estate that is disposed of. But due to amendments to the law “On freedom of movement and free choice of residence in Ukraine” functions of passport clerks who used to work at housing offices and issued such certificates were transferred to the State Migration Service of Ukraine. From now on in accordance with the order number 1077 of the Ministry of Internal Affairs of Ukraine dated 22.11.2012 it will provide information about place of living/staying of persons. And housing offices often refuse to issue such certificates.

Mentioned actions of the latter are unlawful since they have an obligation to issue certificates about family members. It was set by the resolution number 870 of the Council of Ministers of Ukrainian Soviet Socialist Republic dated 11.12.84 and resolution of the Cabinet of Ministers of Ukraine number 682 dated 23.07.2008. These documents provide that certificate of place of living and family members is  issued by the head of organization that manages a residential building. And since the procedure of notarization requires this certificate a buyer should demand it from his housing office (or condominium) very persistently.

Of course each of the mentioned difficulties can be dealt with: either by means of persistence or additional reward. However they must be solved prior to the moment when you and buyer/seller go looking for a tractable notary.