New Ukrainian laws transfer land plots for transactions involving buildings

Ukraine

On 28 October 2021, the Law of Ukraine No. 1174-IX “On Amendments to Some Legislative Acts of Ukraine About the Single Legal Destiny of the Land Plot and the Property Located on It” (Law No. 1174 IX) went into force. This law eliminated gaps in regulations on land use and the transfer of rights to a land plot in connection with the transfer of rights to buildings and structures (except for condominiums) or facilities under construction located on such land plots. However, being a ground-breaking improvement from the previously existing framework for conveyancing real property, Law No. 1174-IX still failed to establish the rules for:

  • transferring the ownership right to land plots to the state and territorial communities given the acquisition of buildings and structures (except for condominiums) located on such land plots;
  • transferring the permanent right of use to a land plot to the legal person that acquired the 'right of operational management' (право оперативного управління) or 'the right of economic management' (право господарського відання) over buildings and structures (except for condominiums) located on the land plot in question; and
  • registration of the right to a land plot acquired as a result of the acquisition of buildings and structures.

To eliminate the above-mentioned gaps, lawmakers passed the Law of Ukraine No. 1720-IX “On Amendments to Some Legislative Acts of Ukraine About Transfer of Rights for a Land Plot in Connection with Transfer of Rights to Real Estate Object Located on It” (Law No. 1720-IX), which went into force on 10 December 2021. This law eliminates legal conflicts in the realm of transactions with buildings and land that existed previously and unifies conveyancing procedures.

When does the title to a land plot transfer to the buyer of a building or structure?

Law No. 1720-IX stipulates that the buyer of a building automatically obtains the ownership right to a land plot if the seller owns the latter. In particular, a land plot will be transferred in the following cases:

  • if such real estate is located on the privately owned land plot (if the seller owns only a share in joint ownership to the land plot, the buyer will acquire this share);
  • if the buyer acquires a share in joint ownership of real estate, the buyer also obtains the right to the relevant share in joint ownership to the land plot located beneath the building.

If a seller of a building or structure holds the right to use it, this right automatically transfers to the buyer. For example, purchasing real estate located on the land plot used under the right of lease, the superficies right, or the emphyteusis right entails transferring such rights to the buyer. The scope of entitlement and conditions of use established earlier for the seller remains the same. In case the buyer acquires a share in ownership to a real estate object, then it has the right to request the amendment of the lease, superficies or emphyteusis agreement. This amendment will make the buyer a co-user of the land plot. If the other party disagrees with including the buyer in the land use agreement, the buyer might bring a case to court.

An exception, however, applies to land plots, which sellers hold under the title of permanent use. Under the Land Code, only limited types of companies or organisations are entitled to such rights (e.g. state enterprises, religious organisations, educational facilities, etc.). If a buyer is not eligible for obtaining the right of permanent use to a land plot, automatic transfer does not happen. The acquirer of a building, however, may apply to the relevant state or municipal authority to buy or lease such land.

Essential terms of the agreement on the acquisition of real estate

Law No. 1720-IX sets forth that the agreement on the acquisition of buildings or structures (except for condominiums) must include a land plot as its subject matter. Additionally, the law states that the following terms are essential for these types of agreements:

  • cadastral number of the land plot; and
  • condition on the simultaneous transfer of right to the land plot.

Moreover, the conclusion of an agreement providing for the acquisition of the right of ownership to buildings or structures (except for condominiums) connected with the transfer of the right to a part of the land plot can only be made after this part is allocated into a separate land plot and a cadastral number is assigned to it.

Registration of rights to a land plot

Law No. 1720-IX introduces unconditional registration of rights to a land plot acquired in connection with the transfer of rights to buildings and structures (except for condominiums). A registrar must register a buyer’s right to land simultaneously with its right to real estate located on it.

Finally, the law clarifies the transfer of the lease to a land plot in connection with the enforcement of the mortgage in favour of the mortgagee (satisfaction of claims under the relevant mortgage clause provided in the mortgage agreement). In this case, the mortgagor’s lease right to a land plot located beneath mortgaged real estate also transfers to a new owner of this real estate. The lease rights must be registered in the name of the mortgagee under the relevant agreement on the satisfaction of the mortgagee’s claims or under the relevant mortgage clause provided in the mortgage agreement.

For more information on the development of real property regulations in Ukraine, contact your regular CMS advisor or local CMS experts: Natalia Kushniruk, Anna Pogrebna.

Legislation:

The Law of Ukraine No. 1174-IX “On Amendments to Some Legislative Acts of Ukraine About the Single Legal Destiny of the Land Plot and the Property Located on It”;

The Law of Ukraine No. 1720-IX “On Amendments to Some Legislative Acts of Ukraine About Transfer of Rights for a Land Plot in Connection with Transfer of Rights to Real Estate Object Located on It”