The reform has set out to overhaul the land management system. The better part of the reform is to be implemented in 2020.
What does the reform involve?
Land management deregulation
- An individual's personal contact with the State Service of Geodesy, Cartography and Cadastre ("SSGCC") official is to be minimized. Land management documents will only be audited at the final stage, when a record of the land plot is entered in the State Land Cadastre;
- Land management documents will be drafted and information submitted to the State Land Cadastre only electronically;
- Local government authorities will be given direct access to the State Land Cadastre;
- A simplified procedure for determining a community's boundaries will be established. The only consent a community will have to obtain is that of the neighboring community;
- Land management documents and the appraised value of land will be categorized as public, open, and publicly available information;
- Professional liability insurance for land management contractors will be introduced as an alternative to control by the government;
- Access to the professional practices of land managers and surveyors will be simplified.
Transfer of land to territorial communities
State-owned land outside populated areas (except land under state-owned objects) passes into communal ownership of territorial communities.
SSGCC loses its control functions;
Control functions are transferred:
in respect of unauthorized occupation of land plots — to village, town, city councils;
for environmental offenses — to the State Environmental Inspection;
other control functions — to regional state administrations.
Improvement of the tenant's right of first refusal in respect of land purchase
- The landlord has the obligation to give the tenant written notice of the intended sale of land to a third party by specifying the price and other conditions of sale by certified mail with return receipt and a description of enclosures;
- Giving as a gift to persons of only the 1st and 2nd degree of kinship (spouses, parents, children, siblings, etc.);
- Land may not be contributed to the authorized capital without the consent of the person given the right of first refusal;
- When notarizing land sale agreements, notaries have the obligation to verify whether the right of first refusal has been respected;
- If land is sold contrary to the right of first refusal, the tenant can file a claim requesting that the rights and obligations of the buyer should pass to the tenant.
Land monitoring and antitrust constraints
- Compliance with land concentration constraints will be monitored by the Anti-Monopoly Committee of Ukraine in a manner determined by the Cabinet of Ministers of Ukraine;
- A system for data collection and analysis, and for the monitoring of land relations based on information from the State Register of Real Rights to Real Estate, the State Land Cadastre, and the electronic auction system is introduced;
- The Cabinet of Ministers of Ukraine will be authorized to prohibit acquisition of ownership of agricultural land that is within 30 km of the State Border of Ukraine for juridical persons whose ultimate beneficial owner (controller) is a foreign or stateless landholder.
Creating a transparent e-Auction system
State- and community-owned land or related rights (lease, superficies, emphyteusis) may only be sold on a competitive basis through an electronic auction;
To minimize auction disruptions, the security deposit is increased and may not be less than:
30 percent of the opening bid of land;
30 percent of the starting annual fee for the use of the land.
The contract is signed automatically with digital signatures;
A bidding tenant has the right of first refusal;
The opening bid for state- and community-owned land cannot be less than its standard appraised value ("SAV");
The lot size for state- and community-owned land should not exceed 20 hectares, thereby enabling small and medium-sized enterprises to participate in auctions.
Cheaper loans for farmers
UAH 4.4 billion has been allocated for the program "Cheaper Loans for Agricultural Producers for the Purchase of Agricultural Land";
Cheaper loans of up to 3-7%;
Loan interest reimbursed to the extent of the NBU interest rate;
Principal reimbursed as a lump sum to the extent of the NBU interest rate.
Putting an end to raiding
- Terminating "accredited registration entities" (community- and state-owned enterprises). They accounted for about 80% hostile takeovers.
- Increasing liability for failure to follow the rules of registration and notarization of legal transactions;
- Enabling the property owner to demand notarization of a legal transaction;
- Improving collaboration between registers and providing more efficient access to government registers and registrars.
Introducing the land market
Who will be able to buy land?
- Citizens of Ukraine;
- Juridical persons established under the laws of Ukraine;
- Territorial communities and the government;
- There are constraints on the acquisition of ownership by juridical persons where the beneficial owner (controller) is a foreign or stateless person, a juridical person created under the laws of a country other than Ukraine.
Maximum area that may be owned (control of the ultimate beneficiary):
- up to 35% of the area of an amalgamated territorial community;
- up to 15% of the area of a region;
- up to 0.5% of the area of Ukraine;
- Registering prices of sale agreements and leases;
- Farms allowed to buy out land at SAV that they have permanent use of on installment with no bidding;
- Introducing a new type of sanctions such as "a prohibition on the acquisition of land ownership" to exclude ownership by citizens of the Russian Federation;
What will the reform change?
Land is actually sold in Ukraine, but in an informal and distorted market. There are many loopholes around the land moratorium, including long-term lease, emphyteusis, pro forma will and testament, pledge, power of attorney, change of the intended purpose of the land plot, foreclosure on account of debt, and many more options. This is demonstrated by thousands of online ads to the search request "want to buy a land share." The shadow market means losses for villagers, the government, and legal investors.
The reform will:
improve the business climate and boost economic growth
restore the villagers' property rights and increase their income
introduce fair play for legal investors
develop farming and small-scale agricultural production
produce money for rural roads, schools, and hospitals
generate taxes for pensions and salaries of government employees
replace corruption prices for land with market prices.
The law should come into force on October 1, 2020.