Following the adoption of the Law of Ukraine “On Ensuring the Proprietary Rights to Real Property That Will Be Erected in the Future” in 2022, the Ukrainian government has set up a system of initial registration of special proprietary rights (SPRs) for future real estate objects (FREOs).
In October 2023, registrars registered the first SPRs to FREOs in three properties, according to the Ministry for Communities, Territories and Infrastructure Development of Ukraine.
As described in this previous Law-Now article, FREOs represent parts of a designed apartment block, which will become separate real property items after the completion of construction (e.g. apartment, garage box, non-residential premises, parking space). The law also states that a SPR entitles its holder to hold and dispose of a FREO and to claim from the developer the completion of the construction and the commissioning of the whole building.
Previously, the Cabinet of Ministers of Ukraine (CMU) adopted “Resolution on Determining the Minimum Size of the Guaranteed Share for the Construction of Real Estate Objects” No. 8 dated 3 January 2023. The resolution sets a size for the minimum guaranteed share in “to-be-built” buildings or complexes that cannot be disposed of until construction is completed. This protects investors from the non-commissioning of the building containing FREOs since the developer will be interested in completing the construction to be able to sell the guaranteed share.
Registration of SPR to FREO
Registration of special rights to FREOs gives developers a right to legally dispose of FREOs. Non-registration, in turn, renders the disposal of this type of property invalid.
A developer can apply for the registration of rights by including the relevant information in an application for obtaining a right to perform construction works. Otherwise, a developer may apply by submitting a separate paper or e-application, but only after obtaining the right to perform the construction works.
To be eligible for SPR registration, a developer must first acquire land rights, and then secure a document allowing construction works. Notably, there is a ban on registering a SPR if the construction authority has suspended building works.
Finally, a SPR ceases simultaneously with the commissioning of a building. The latter entails automatic registration of the ownership title to the relevant real property item (e.g. apartment, garage box, non-residential premises, parking spaces).
Guaranteed share
The CMU established a minimum size of the guaranteed share for (i) Kyiv, Dnipro, Lviv, Odesa and Kharkiv at 10% and (ii) other settlements at 5%. A share represents a portion of FREOs in a building that a developer cannot dispose of or encumber until the construction is completed.
This serves as a safeguard against “non-bona fide” developers who might face financial or other challenges preventing the completion of the construction. In such cases, a new developer has the right to use the allocated percentage of the building to finalise construction by selling it once the court allows the release of encumbrances over the guaranteed share.
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Links to laws, by-laws and governmental updates (in Ukrainian language):
Law of Ukraine On Ensuring the Proprietary Rights to Real Property That Will Be Erected in the Future.
Resolution of the Ukrainian government On Determining a Guaranteed Share.
Update of the Ukrainian government on the first SPR registration.
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