Article about usucapion in Ukraine. Specially for “Yurydychna gazeta” newspaper

Partner of law firm “Pravova Dopomoga” Volodymyr Gurlov and lawyer Andriy Buzynnyi prepared an article about special features of usucapion in Ukraine for “Yurydychna gazeta” newspaper.

The article was published on September 18, 2012 in issue number 38.

Unabridged text of the article (translation):

“Usucapion: the longer you hold the worst it will be!

The systemic error in judiciary practice takes away the rights of people of "previous millennium."

Usucapion was priori considered to be one of the most progressive innovations of the Civil Code of Ukraine 2004 (hereinafter – the Civil Code). The official mission of the innovation was to establish full equality of all forms of ownership while taking away from the state among other things the right to receive hereditary property for which there happened to be no heirs. However a more meaningful interpretation of the concept of “Usucapion” is to ensure that a person who lawfully took possession of property and continues to possess it openly is recognized as the owner of such property.

The new Civil Code described all the important aspects of usucapion rather succinctly. Thus Article 344 of the Civil Code stipulates that the open and continuous use must be ten years real estate and half of this term for real property. If the property rights are related to the moment of state registration of such rights (in particular regarding real estate) then respectively they appear since the moment of state registration under usucapion. And one more important point is that the usucapion for real estate, vehicles and securities requires court decision obtainment.

Moreover since the legislators apparently wanted to implement the progressive innovations as soon as possible they decided to define the procedure for the application of provisions of usucapion regarding relationships which had begun before the enactment of the new Civil Code. And to be honest they did not do a very good job.

Section 8 of final and transitional provisions of the Civil Code is related to the issue and states that: “Regulations of Article 344 of the Civil Code of Ukraine on usucapion shall also apply to cases when possession of property had begun three years before this Code entered into force.” The abovementioned criticism is addressed to the legislator and refers to the phrase "for three years before this Code entered into force" because due to it or due to wrong understanding of its meaning by representatives of the Ukrainian judicial system many bona fide holders have problems with the recognition of property rights.

Formal approach to this phrase allows us to find three possible options of interpretation. First - the provisions of usucapion apply to relations that appeared precisely three years prior to the entry into force of the new Civil Code. Taking into consideration the fact that the Code entered into force on January 1, 2004 then according to this interpretation usucapion would apply only to those persons who got another's property in possession exactly on January 1, 2001. This interpretation is quite absurd and one can hardly believe that the legislator wanted this rule to have such meaning.

Other two variants of interpretation: provisions of usucapion are applied to relationships arising either before or after January 1, 2001. In other words the phrase "for three years before this Code entered into force "changes into "three years prior to date if entrance into force" or "for the last three years prior to entrance into force date." If legislators used one of the modified variants there would be no questions asked but “It is what it is.”

Analysis of litigation practice shows that judges usually follow the last variant of interpretation without further explanation of reasons but simply following similar practice. In particular the Supreme Court of Ukraine in its judgment dated June 10, 2009 states that taking into consideration the provisions of Art. 5 of the Civil Code of Ukraine on action of laws though time and Section 8 of final and transitional provisions of the Civil Code of Ukraine according to which the rules of art. 344 of the Civil Code of Ukraine on usucapion apply to cases in which possessions began three years prior to the enactment of this Code and taking into account the fact that the Civil Code entered into force on January 1, 2004 the rules of Art. 344 are applied to legal relations arising since January 1, 2001. Similar position was taken by the Higher Commercial Court of Ukraine in particular in the resolution number 8/509-NM dated 22.01.2008: “Rules of usucapion can be extended upon cases in which possession (including real estate) began three years prior to the enactment of the Civil Code of Ukraine. So term referred to in Article 344 of this Code, including 10-year one, starts on 01.01.2001 but in no way since 1998 as the complainant believes.”

Based on the abovementioned position of courts one can come to two major conclusions. Firstly the recognition of ownership of real estate by Ukrainian court could not take place before January 1, 2011 (as this was the day when the minimally possible 10-year term of open possession ended if such possession took place exactly on January 1, 2001). And secondly those who started possessing property before January 1, 2001 do not qualify for the obtainment of ownership through usucapion. Thus persons who entered into possession closely to the brink of the millennium are unable to get ownership of the property, despite the fact that some of them have being using such property for fifteen, twenty or more years.

It should be mentioned that judiciary practice has some contradictory decisions, but there are much more rare, they are made on the level of courts of first instance and usually fail to pass successfully appeal. But many lawyers quite reasonably consider the position of higher judicial instances to be wrong. They have the following arguments.

First of all it is worth to pay attention to the fact of provision of retrospective power to stipulations of usucapion. Obviously the MPs wanted to implement such progressive regulation immediately after the adoption of the new Code. After all it is necessary to have at least 10 years term for the usucapion of real estate and in case of retroactive power had not been provided to provisions of usucapion such rule would have "come to life" only in 2014. However life changes and requires new regulation. As of today there are already more than six dozen amendments to the Civil Code and by 2014 there may be about a hundred. Considering such an activity in regulation the rule that would remain “dead” for decades seems to be illogical. And if lawmakers gave retroactive effect only for three years (as most courts believe) the rule would turn from "dead" to "less dead" (and this of course does not change the essence of the issue).

Secondly the three year term stipulated by Section 8 of final and transitional provisions itself deserves special attention. Why three years? The answer may not be obvious but it is well grounded. Three years term is a general period of statute of limitations. This means that if the property was taken from possession of the real owner during period between January 1, 2001 and January 1, 2004 ("over the last three years prior to the enactment date"), the owner can still sue for the return of property from unlawful possession. If the property was possessed before this period ("before three years prior to the enactment date") then the claim will be denied on the basis of limitation of actions regulations. Thus the legislator chose a period to which the provisions of usucapion are not applicable due to the fact that there is a possibility of dispute related to right to the property. This once again proves that the litigation has gone the wrong way.

And finally one more argument: following the point of view of courts one can conclude that the longer openly and honestly he holds the property the worse it will be. After all if such a possession began in the nineties and earlier, there will be no chance of recognition of ownership rights. And it is quite illogical since it is unlikely that persons who use other person’s property not for such a long time have more rights to it.

The Constitutional Court of Ukraine could clarify the situation by giving official interpretation of the Civil Code provisions related to usucapion. Until that moment the attitude of the Themis representatives will force applicants for registration of ownership usucapion prescription to adjust to the "court’s" vision of these relationships. Persons who got property in possession much earlier will have to prove that such continuous possession began only after 01.01.2001 or this was the date when open possession was started. And it would be much more secure to state that possession began only in the new millennium.

Thus we have such situation with usucapion in which it is simpler to adapt to already existing (though quite disputable) conditions than find the truth. For the last years the Constitutional Court of Ukraine was so busy solving political problems that its official interpretation of such an everyday issue can’t be expected soon. All we can do is to rely on ourselves and analyze current judiciary practice thoroughly so that when we go to court with a lawful request we do not get opinion that our possession of property is unlawful.

This material has been prepared by lawyers of Litigation practice of our firm.