10th Edition - vkp.ua · 36 Vietnam Gide Loyrette Nouel A.A.R.P.I.: Nasir PKM Abdul & Huynh Tuong...

The International Comparative Legal Guide to:

A practical cross-border insight into real estate law

Published by Global Legal Group, with contributions from:

Advokatfirman VingeAli Budiardjo, Nugroho, ReksodiputroAndreas Neocleous & Co LLCAusten-Peters & Co.Balčiūnas & GrajauskasBaşpınar & Partners Law FirmCapital Legal ServicesDebarliev, Dameski & Kelesoska Attorneys at LawDemarest AdvogadosDittmar & IndreniusFerraiuoli LLCFigueroa, Illanes, Huidobro and SalamancaGide Loyrette Nouel A.A.R.P. I.Gorrissen FederspielGreenberg Traurig, LLPGürlich & Co.Haxhia & Hajdari Attorneys at Law

Herbert Smith Freehills LLPHogan LovellsKG Law FirmLaw Office LacmanovićMarval, O’Farrell & MairalMcCann FitzGeraldMiranda & AmadoNishimura & AsahiOdvetniki Šelih & partnerji, o.p., d.o.o.Osler, Hoskin & Harcourt LLPPachiu & AssociatesPetrikić & Partneri AOD in cooperation with CMS Reich-Rohrwig HainzPortilla Ruy-Diaz y Aguilar, S.C.Schellenberg Wittmer LtdVasil Kisil & PartnersZiv Lev & Co. Law Office

10th Edition

Real Estate 2015

ICLG

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Further copies of this book and others in the series can be ordered from the publisher. Please call +44 20 7367 0720

DisclaimerThis publication is for general information purposes only. It does not purport to provide comprehensive full legal or other advice.Global Legal Group Ltd. and the contributors accept no responsibility for losses that may arise from reliance upon information contained in this publication.This publication is intended to give an indication of legal issues upon which you may need advice. Full legal advice should be taken from a qualified professional when dealing with specific situations.

The International Comparative Legal Guide to: Real Estate 2015

General Chapter:

Country Question and Answer Chapters:

1 The AIFMD and the Real Estate Sector: An Update – Scott Cochrane & Nish Dissanayake, Herbert Smith Freehills LLP 1

2 Albania Haxhia & Hajdari Attorneys at Law: Isuf Haxhiu & Elvina Haxhiaj 7

3 Argentina Marval, O’Farrell & Mairal: Santiago Carregal & Diego A. Chighizola 17

4 Australia Herbert Smith Freehills: David Sinn 25

5 Brazil Demarest Advogados: Adriana Khalil Daiuto 34

6 Canada Osler, Hoskin & Harcourt LLP: Heather McKean & Stella Di Cresce 45

7 Chile Figueroa, Illanes, Huidobro and Salamanca: Juan Eduardo Figueroa Valdés & Jose Manuel Figueroa Valdés 55

8 Croatia Law Office Lacmanović: Natalija Lacmanović 62

9 Cyprus Andreas Neocleous & Co LLC: Christos Vezouvios & Lefkios Tsikkinis 71

10 Czech Republic Gürlich & Co.: Richard Gürlich & Katerina Benasova 80

11 Denmark Gorrissen Federspiel: Hans-Peter Jørgensen & Jesper Avnborg Lentz 86

12 England & Wales Herbert Smith Freehills LLP: Kathryn Oie & Michelle Howie 95

13 Finland Dittmar & Indrenius: Antti Aaltonen & Raija-Leena Ojanen 106

14 Germany Herbert Smith Freehills Germany LLP: Johann Rumetsch & Stefanie Herkert 114

15 Greece KG Law Firm: Gus J. Papamichalopoulos & Elia Iconomidou 122

16 Indonesia Ali Budiardjo, Nugroho, Reksodiputro: Nafis Adwani & Agus Ahadi Deradjat 132

17 Ireland McCann FitzGerald: Shane Fahy & Denise Dockery 139

18 Israel Ziv Lev & Co. Law Office: Ziv Lev & Moshe Merdler 151

19 Japan Nishimura & Asahi: Hideaki Ozawa & Takahiro Yokota 160

20 Lithuania Balčiūnas & Grajauskas: Kazimieras Karpickis & Artūras Liutvinas 170

21 Macedonia Debarliev, Dameski & Kelesoska Attorneys at Law: Dragan Dameski & Jasmina Ilieva Jovanovikj 178

22 Mexico Portilla Ruy-Diaz y Aguilar, S.C.: Ivan Guerrero Sanchez & Gonzalo Eugenio Ruy-Díaz Benhumea 187

23 Nigeria Austen-Peters & Co.: Jide Ogundana & Jerry Okoye 195

24 Peru Miranda & Amado: Claudia Lucena Mayorga & Daniel Corzo Simons 203

25 Puerto Rico Ferraiuoli LLC: Eduardo Tamargo-Motroni & María del Rosario Fernández-Ginorio 211

26 Romania Pachiu & Associates: Ana-Maria Goga & Raluca Mustaciosu 218

27 Russia Capital Legal Services: Elena Stepanova & Vladimir Adelson 227

28 Serbia Petrikić & Partneri AOD in cooperation with CMS Reich-Rohrwig Hainz: Marija Marošan & Đorđe Popović 236

29 Slovenia Odvetniki Šelih & partnerji, o.p., d.o.o.: Blaž Ogorevc & Tilen Terlep 245

30 Spain Hogan Lovells: Emilio Gomez Delgado 253

31 Sweden Advokatfirman Vinge: Sofia Olsson & Anna Edström 262

32 Switzerland Schellenberg Wittmer Ltd: Yves Jeanrenaud & Amanda Burnand Sulmoni 270

33 Turkey Başpınar & Partners Law Firm: Kaan Gök & Adil Ali Ceylan 278

34 Ukraine Vasil Kisil & Partners: Alexander Borodkin & Volodymyr Igonin 285

35 USA Greenberg Traurig, LLP: Christina Braisted Rogers 295

36 Vietnam Gide Loyrette Nouel A.A.R.P.I.: Nasir PKM Abdul & Huynh Tuong Long 305

Contributing EditorMichelle Howie, Herbert Smith Freehills LLP

Head of Business DevelopmentDror Levy

Sales DirectorFlorjan Osmani

Commercial DirectorAntony Dine

Account DirectorsOliver Smith, Rory Smith

Senior Account ManagerMaria Lopez

Sales Support ManagerToni Hayward

Senior EditorSuzie Levy

Group Consulting EditorAlan Falach

Group PublisherRichard Firth

Published byGlobal Legal Group Ltd.59 Tanner StreetLondon SE1 3PL, UKTel: +44 20 7367 0720Fax: +44 20 7407 5255Email: [email protected]: www.glgroup.co.uk

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Copyright © 2015Global Legal Group Ltd.All rights reservedNo photocopying

ISBN 978-1-910083-31-4ISSN 1749-4745

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Chapter 34

Vasil Kisil & Partners

Alexander Borodkin

Volodymyr Igonin

Ukraine

Ukraine is a party to the 1965 Convention on the Settlement of Investment Disputes between States and Nationals of Other States, and the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral.Ukraine is also a party to a number of bilateral inter-state treaties on promotion and mutual protection of foreign investments. Those treaties guarantee the observance of foreign investors’ rights relating to investment in real estate objects in Ukraine.Besides, Ukraine is a party to a series of bilateral double-taxation treaties governing, among other matters, taxation of profits gained from real estate.

2 Ownership

2.1 Are there legal restrictions on ownership of real estate by particular classes of persons (e.g. non-resident persons)?

Ukrainian law allows all Ukrainian and foreign natural persons and legal entities to freely own, lease or otherwise use real property other than land.The Land Code of Ukraine still provides for certain restrictions on ownership of land for foreign entities. Generally, Ukrainian individuals and legal entities may acquire ownership rights in private, state and municipal land in Ukraine. Foreign individuals, legal entities and foreign states are allowed to own, use and dispose of certain non-agricultural land in Ukraine, but are explicitly prohibited from owning agricultural land. Foreign legal entities may own only non-agricultural land: (i) within the boundaries of a settlement, where such land is vested for construction, or if they acquire immoveable property located on such land; and (ii) beyond the boundaries of a settlement only if they acquire immoveable property located on such land. Foreign legal entities may purchase non-agricultural land owned by the state from the Cabinet of Ministers of Ukraine with the approval of the Parliament of Ukraine, and non-agricultural land owned by a municipality from the relevant municipal council, with the approval of the Cabinet of Ministers of Ukraine. Therefore, it has become common practice to use two-tiered structures, whereby the foreign parent company establishes a controlled Ukrainian subsidiary, which, in turn, creates a second-tier Ukrainian subsidiary to hold the property.Ukrainian law provides for some additional limitations. For instance, a bank may own real estate with the total value not exceeding 25% of its equity, except for certain cases.

1 Real Estate Law

1.1 Please briefly describe the main laws that govern real estate in Ukraine. Laws relating to leases of business premises should be listed in response to question 10.1. Those relating to zoning and environmental should be listed in response to question 11.1.

The main laws that govern real estate in Ukraine are:■ Constitution of Ukraine dated 28 June 1996;■ Civil Code of Ukraine No. 435-IV dated 16 January 2003;■ Commercial Code of Ukraine No. 463-IV dated 16 January

2003;■ Land Code of Ukraine No. 2768-III dated 25 October 2001;■ Law of Ukraine “On State Registration of Property Rights to

Real Estate and their Encumbrances” No. 1952-IV dated 01 July 2004;

■ Law of Ukraine “On Regulation of the Town-Planning Activity” No. 3038-VI dated 17 February 2011;

■ Law of Ukraine “On the Lease of Land” No. 161-XIV dated 6 October 1998; and

■ Procedure for State Registration of Rights to Immovable Property and their Encumbrances, adopted by the Resolution of the Cabinet of Ministers of Ukraine No. 868 dated 17 October 2013.

1.2 What is the impact (if any) on real estate of local common law in Ukraine?

The Ukrainian legal system is closer to so-called continental law and does not allow common law under the general approach. However, additionally to central government regulations, local municipalities have certain regulatory authority in places. For example, they can grant certain public land in ownership or lease, define the property tax rates, approve local town-planning regulations, etc. However, they still have to comply with laws and central government regulations.

1.3 Are international laws relevant to real estate in Ukraine? Please ignore EU legislation enacted locally in EU countries.

Among others, Ukraine recognises and applies international conventions and bilateral treaties, to which Ukraine is a party. In many cases, Ukraine adopts its internal regulations to the effect of those international laws, but one may also apply them directly. Real estate relations usually fall under local regulations, although some international laws may have certain effect on them.

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4 System of Registration

4.1 Is all land in Ukraine required to be registered? What land (or rights) are unregistered?

All land plots and land rights in Ukraine are subject to mandatory registration. Land plots should be registered with the State Land Cadastre and rights to land plots should be registered with the State Register of Property Rights to Real Estate (hereinafter – the “Rights Register”).Rights to land plots and real estate acquired before launching mandatory registration procedure are recognised despite of their registration. However, any further legal transaction involving such unregistered land plot requires prior registration of both land plot and right thereto.

4.2 Is there a state guarantee of title? What does it guarantee?

The Constitution of Ukraine guarantees ownership right and the inviolability of the private ownership. A person may not be deprived of ownership right other than by the court decision. The Land Code provides for exhaustive grounds for terminating the right of ownership and use to a land plot. The Land Code also establishes the grounds for compulsory alienation of a land plot for public needs, subject to prior full compensation of its value to the landowner.

4.3 What rights in land are compulsory registrable? What (if any) is the consequence of non-registration?

All rights to land are subject to mandatory state registration. Rights become effective from their registration. The law recognises the effectiveness of non-registered rights when the law did not require their mandatory registration at the time of such rights origin. See also question 4.1.

4.4 What rights in land are not required to be registered?

See questions 4.1 and 4.3.

4.5 Where there are both unregistered and registered land or rights is there a probationary period following first registration or are there perhaps different classes or qualities of title on first registration? Please give details. First registration means the occasion upon which unregistered land or rights are first registered in the registries.

Since Ukrainian law requires mandatory registration of all land rights, the holders of unregistered rights may seek their protection before the court only.

4.6 On a land sale, when is title (or ownership) transferred to the buyer?

The ownership right transfers to the buyer at the moment of state registration of such right in the Rights Register.

3 Real Estate Rights

3.1 What are the types of rights over land recognised in Ukraine? Are any of them purely contractual between the parties?

The Land Code of Ukraine provides for the following types of rights over land:■ ownership right (private, state and municipal);■ lease right;■ right of permanent use; and ■ limited property rights to land, belonging to another owner:

servitude; emphyteusis; and superficies.The ownership right covers the right of the owner to possess, use and dispose of a land plot at the owner’s sole discretion. See question 2.1 for limitations of ownership right over land.A land lease right is a temporary contractual use right on chargeable basis. The right of a permanent use is the right to possess and use a land plot of the State or municipal domain. This right is available only for certain categories of legal entities. Among them are: State and municipal enterprises; institutions and organisations; social organisations of disabled persons of Ukraine; religious organisations of Ukraine; public joint stock companies of railway services for public use; and higher educational establishments.Servitude is a right of a landholder to use a land plot belonging to another person for specific purposes without acquiring ownership title over the land. Those purposes may include passing by foot or by vehicle, stretching utilities and communications, collecting the water, locating building equipment, etc. Land servitude survives transfer of the title to the land another person. It may be either contractual or established by court, law or testament.Emphyteusis is a right to use one’s land plot for farming, and superficies is a right to use land plot for construction purposes. Emphyteusis and superficies are purely contractual types of limited use rights over the land, but may also arise from testament.

3.2 Are there any scenarios where the right to a real estate diverges from the right to a building constructed thereon?

The right to a land plot in Ukraine may diverge from the right to a building located (constructed) thereon. The ownership right to a building not necessarily means the ownership right to a land plot under that building. Article 120 of the Land Code of Ukraine provides for the rule that in case of acquiring the ownership right to real estate, the new owner also acquires the right to the land plot under such real estate. However, in practice the procedure for such automatic conveyance of the right to the land plot to the acquirer of the real estate is not automatic. Generally, to construct real estate on the land plot, a person should have ownership, lease or other right to such land plot being developed. Practically, a person may also develop the land plot without such rights, but must have a kind of development or investment agreement with the person who has the relevant land rights.

Vasil Kisil & Partners Ukraine


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The law may require additional documents in specific cases.Information on ownership of registered real estate can be accessed electronically. Please see question 5.5.

5.4 Can compensation be claimed from the registry/registries if it/they makes a mistake?

Current Ukrainian regulations do not contain specific liability provisions, although a person who suffered damage because of the registry mistake may claim in court compensation from the State on general grounds.

5.5 Are there restrictions on public access to the register? Can a buyer obtain all the information he might reasonably need regarding encumbrances and other rights affecting real estate?

Any person may request and receive information from the Rights Register by an item of immoveable property and not by its owner.According to the latest amendments to the law, the information regarding the registered rights and their encumbrances, contained in the Rights Register, is open and publicly available, in particular, electronically.

6 Real Estate Market

6.1 Which parties (in addition to the buyer and seller and the buyer’s finance provider) would normally be involved in a real estate transaction in Ukraine? Please briefly describe their roles and/or duties.

The parties normally involved in a real estate transaction in Ukraine are:■ the real estate agent (realtor);■ lawyer(s); and■ a notary.The agents usually assist the parties in finding good market proposals. They monitor the market, search for the real estate meeting their clients’ requirements, connect the parties, negotiate the initial terms, and otherwise help the parties with arranging the transactions.The lawyers conduct the real estate due diligence, draft the documents, represent the parties in negotiations, etc. In major transactions usually both parties engage lawyers to represent their interests and negotiate complex agreements. In minor deals the seller may decide to manage without legal advisor.The notary verifies the compliance of the transaction documents with the requirements of the law, check the validity of the seller’s ownership and the registered restrictions (encumbrances) on real estate, verifies the parties’ capacity to enter into the transaction, certifies the agreement, registers the ownership right in the Rights Register and issues an Extract from the Rights Register to the buyer as a new owner of the real estate. If the seller’s ownership right to the real estate is not registered in the Rights Register, the seller first needs to approach the state registration authority to register its right to the real estate before the transaction. In certain cases the notaries may also assist with such initial registration.

4.7 Please briefly describe how some rights obtain priority over other rights. Do earlier rights defeat later rights?

In accordance with Ukrainian laws, such priorities may be applicable with respect to the rights of the mortgagee. Earlier registered mortgages shall have priority over subsequent mortgage(s) registered later in favour of other creditor(s).

5 The Registry / Registries

5.1 How many land registries operate in Ukraine? If more than one please specify their differing rules and requirements.

A land plot can be a subject of civil law rights only when it is formed. Forming a land plot involves defining its area and boundaries, and entering certain details of the land plot in the State Land Cadastre. A land plot is deemed formed once a cadastral number has been assigned to it.The Rights Register in Ukraine includes information on the rights over real estate including land plots as well as encumbrances of such rights. Property rights to a land plot, other than ownership, may be registered only after the registration of the ownership rights to such land plot.

5.2 Does the land registry issue a physical title document to the owners of registered real estate?

The registration of ownership right to the real estate in Ukraine is evidenced by the Extract from the Rights Register.

5.3 Can any transaction relating to registered real estate be completed electronically? What documents need to be provided to the land registry for the registration of ownership right? Can information on ownership of registered real estate be accessed electronically?

Transactions relating to registered real estate should be in writing and often require notarisation. The law allows transactions completed electronically to be notarised, although no procedure regulating such notarisation exists. Transactions which do not require notarisation may be completed electronically if the parties have electronic digital signatures. Still, this option is not common in practice.The basic documents for registration of the ownership right with the Rights Register are the following:■ an application on registration of ownership right;■ a copy of the document confirming the applicant’s identity:

passport, etc.;■ a copy of applicant’s registered number of the taxpayer’s

record card;■ a document confirming payment for obtaining Extract from

the Rights Register;■ a document confirming payment of state duty; and■ documents confirming origin, transfer or termination of title

to immoveable property: purchase agreement; court decision; certificate, etc.



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6.5 Have you observed a shift in the approach of investors towards residential as an asset class and, in particular, towards what were historically viewed as its specialist subsectors such as affordable housing, student accommodation and retirement living?

Investment in affordable housing, student accommodation and retirement homes have been discussed; however, no major projects have been realised yet in Ukraine.Due to the annexation of Crimea and the military conflict in the east of Ukraine, many people have left their homes in the occupied territory and urgently need an affordable accommodation. This problem has not yet been resolved.

7 Liabilities of Buyers and Sellers in Real Estate Transactions

7.1 What (if any) are the minimum formalities for the sale and purchase of real estate?

Sale and purchase agreements of real estate in Ukraine require the following formalities:■ a sale and purchase agreement is subject to mandatory

notarisation and State registration;■ the validity of the seller’s ownership should be confirmed.

The notary or the register accordingly check the registered right in the Rights Register; and

■ the ownership right of the buyer must be duly registered.

7.2 Is the seller under a duty of disclosure? What matters must be disclosed?

Pursuant to the Civil Code of Ukraine, the seller must inform the buyer of all existing third party rights to the property. In the event of non-disclosure, the buyer may demand a reduction in the purchase price or termination of the agreement, provided that buyer did not and could not know about the third party rights when entering into the agreement. However, the law does not detail any specific matters to disclose.

7.3 Can the seller be liable to the buyer for misrepresentation?

Article 230 of the Civil Code of Ukraine provides for a general approach: that if one of the parties to a transaction purposely deceived the other party with regard to circumstances that are of significant importance, such transaction can be invalidated by a court. Deceit takes place both in cases where a party denies the existence of circumstances that might hinder the conclusion of a transaction, and when it withholds knowledge of their existence. A deceiving party should compensate the other party for any losses and for moral damage caused in connection with the transaction.So, if the court finds a deceit in the seller’s actions, the seller can be held liable to a buyer for misrepresentation.

7.4 Do sellers usually give contractual warranties to the buyer? What would be the scope of these? What is the function of warranties (e.g. to apportion risk, to give information)? Are warranties a substitute for the buyer carrying out his own diligence?

The sellers usually give contractual warranties to the buyer. The

6.2 How and on what basis are these persons remunerated?

The agents usually receive remuneration for completed transactions only. Their commission usually constitutes some percentage of the contract value. Usually it is the buyer who pays the agency fee, but the parties may agree otherwise.The lawyers usually structure their fees depending on the scope of services they provide and irrespectively of the transaction price. Their form is usually subject to an agreement with the client: either a cap on fees, or hourly rates basis or otherwise. Each party pays its lawyers as a rule.Public notaries charge a State duty in an amount prescribed by law – 1% of the contract price. Private notaries’ fees often depend on the contract price and are, in most cases, negotiable. Besides, the notaries charge fees for additional services they provide, like register searches, certifying the waivers and statements and rights registration, etc., the amount of which may vary depending on the place and on the overall volume of the transaction.State registration fees are determined by the Decree of the Cabinet of Ministers of Ukraine “On State Duty”. The State duty for the registration of ownership right amounts to UAH 119.00 (approx. EUR 6.10), and for the registration of other rights – UAH 51.00 (approx. EUR 2.60).

6.3 Has the real estate market in Ukraine seen an increase in the availability of real estate finance during recent years? What trends (if any) are emerging as to different categories of finance providers beyond traditional lending banks?

During the last year the availability of real estate financing through lending has substantially decreased. Most developers faced the lack of bank financing for their projects. In the year 2014, the hryvnia devaluated dramatically. This affected the business environment and buying activity of potential buyers in the real estate market. As a result, the developers sell real estate premises with a discount and offer their own financial programmes for investors, like hire-purchase for a few years. On the other hand, due to instability in banking sector some people decided to invest their deposits and free funds in acquisition of real estate, mainly residential.

6.4 How strong is development activity in Ukraine? What were the most significant development transactions in Ukraine in the past year?

The development market remains rather affected by the economic crisis, armed conflict and social instability in two border regions in the East, the disputed status of Crimea, heavy currency fluctuations, lack of liquidity in the banking sector and other adverse tendencies in 2014.The most important transactions in 2014 were in the area of residential real estate. Among the most significant development projects started up during the past year are: Hoffmann House; residential compound “Brooklyn”; commercial apartment building “Elyseum”; club house “Chornogoria”; and “Stoletoff”, etc. Pechersk Hills residence, Renaissance residence, and the IQ Business Centre are among the most significant projects commissioned in the year 2014.



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The main rules regulating credit relations in Ukraine are set forth in the Civil Code of Ukraine. There are some specific rules for the cross-border loans. Any loan agreement with a non-resident is subject to mandatory registration with the National Bank of Ukraine (hereinafter – the “NBU”). The interest rate for cross-border loans may not exceed the thresholds set by the NBU, which, for the moment, constitute 11% in hard currency. Additionally, there is a temporary moratorium on pre-term loan repayments applicable to loans in a foreign currency, subject to a few exceptions.Rules for individual persons and corporate entities are mostly the same, save for different taxation regime.

8.2 What are the main methods by which a real estate lender seeks to protect itself from default by the borrower?

Methods by which a real estate lender seeks to protect itself from default by the borrower depend on the relationship between the parties. In most cases, the real estate loans are secured by mortgage of the real property. For commercial property, the parties may consider pledge of rent proceeds from such property.As far as the property under development is concerned, the borrower may secure the loan by mortgage on the land plot under development, which under the law also covers the mortgage of property under construction located thereon. Another option is to transfer the shares in the project SPV of the borrower for the maturity period of the loan with a call option to buy it back upon the loan repayment. The equity rights may also be pledged.Other collaterals, like surety, bank guarantee, etc. are also used.

8.3 What are the common proceedings for realisation of mortgaged properties? Are there any options for a mortgagee to realise a mortgaged property without involving court proceedings or the contribution of the mortgagor?

The Law of Ukraine “On Mortgage” provides for judicial and extrajudicial proceedings for realisation of mortgaged properties.Among the options for a mortgagee to realise a mortgaged property without involving court proceedings or the involvement of the mortgagor are:■ sale of mortgaged property by the mortgagee or conveyance

of ownership title of the mortgaged property to the mortgagee under agreement on satisfaction of the mortgagee’s claims, provided that such remedies are envisaged in the respective mortgage agreement; and

■ enforcement under a notary writ pursuant to the Law of Ukraine “On Notariat”.

If a mortgage is enforced by court decision or under a notary writ, the mortgaged property is being sold on public auction according to the specific procedure.

8.4 What minimum formalities are required for real estate lending?

As a systematic activity, real estate lending is a financial service. Only a bank or a financial institution licensed by the National Commission for State Regulation in the Sphere of the Financial Services Market may provide such services.Other business entities and private persons may extend singular private loans as well.

scope of warranties usually depends on the complexity of the transaction. Among the most common and basic are as follows:■ the seller’s capacity to enter into the transaction;■ the seller’s due title to the real estate;■ absence of any encumbrances or third party rights; and■ absence of technical or other defects in the property, etc.The buyer would normally seek protection against possible damages when asking for the warranties. The seller would usually like to disclose certain information in giving the warranties, and thus avoid potential responsibility for damages before the buyer.In complex transactions, the seller’s warranties are not a substitute for the buyer’s own due diligence and are used in addition to the due diligence. The warranties may, in particular, address risks revealed within the due diligence, which cannot be remedied by the closing of the transaction.

7.5 Does the seller warrant its ownership in any way? Please give details.

The seller grants to the buyer a contractual warranty of its ownership right to real estate with specification of the title document. However, the notary, while certifying the sale and purchase agreement, requests the document confirming the seller’s title and checks it. Furthermore, the notary has full access to the Rights Register and verifies the seller’s ownership right and all registered encumbrances of it. Since recently the buyer may individually approach the Rights Register and check the seller’s registered ownership title as well as its encumbrances, if any. See question 5.5.

7.6 What (if any) are the liabilities of the buyer (in addition to paying the sale price)?

Under the law, the buyer pays a contribution to the State Pension Fund of Ukraine, which amounts to 1% of the contract price. The buyer also pays the finder’s fee if the agent engaged, unless the parties agreed to split it. Usually the parties pay the notary fee in equal parts.

8 Finance and Banking

8.1 Please briefly describe any regulations concerning the lending of money to finance real estate. Are the rules different as between resident and non-resident persons and/or between individual persons and corporate entities?

There are some special laws in Ukraine concerning the lending of money to finance real estate:■ Civil Code of Ukraine No. 435-IV dated 16 January 2003;■ Law of Ukraine “On Mortgages” No. 898-IV dated 05 June

2003;■ Law of Ukraine “On Mortgage Credits, Operations with

Consolidated Mortgage Debt and Mortgage Certificates” No. 979-IV dated 19 June 2003;

■ Law of Ukraine “On Pledge” No. 2654-XII dated 02 October 1992;

■ Law of Ukraine “On Securing Creditors’ Claims and Registration of Encumbrances” No. 1255-IV dated 18 November 2003; and

■ Procedure for Obtaining by Residents of Foreign Currency Credits and Loans from Non-Residents and Provision by Residents to Non-Residents of Loans in Foreign Currency No. 270 dated 17 June 2004.



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for those land plots located under VAT-able real estate and included into the value of their sale.

9.5 What other tax or taxes (if any) are payable by the seller on the disposal of a property?

State duties for notarising the sales agreement and registering the buyer’s title apply. The buyer should also pay 1% charge to the Pension Fund on acquisition of real property other than land.

9.6 Is taxation different if ownership of a company (or other entity) owning real estate is transferred?

If the transaction is structured as share deal, there is no VAT or Pensions Fund charge. Unless the parties chose to notarise the sales agreement, the State duty for notarisation does not apply either. In such a transaction the title to property does not require re-registration in the buyer's name, since the target company remains its owner. Only the corporate profit tax will apply to the seller on the difference between the sale and acquisition prices of such shares. Specific rules and double-taxation treaties would normally apply if the seller or both parties are non-residents of Ukraine.

10 Leases of Business Premises

10.1 Please briefly describe the main laws that regulate leases of business premises.

The following laws regulate leases of business premises:■ Civil Code of Ukraine No. 435-IV dated 16 January 2003;■ Commercial Code of Ukraine No. 463-IV dated 16 January

2003;■ Law of Ukraine “On Lease of State and Municipal Property”

No. 2269-XII dated 10 April 1992; and■ Law of Ukraine “On State Registration of Property Rights to

Real Estate and their Encumbrances” No. 1952-IV dated 1 July 2004.

10.2 What types of business lease exist?

Ukrainian law applies the same regulation to all types of business lease. Effectively, it distinguishes among short-term and long-term leases. Property lease agreements of less than three years do not require notarisation and rights arising out of them do not require state registration.Although, in practice, the agreements contain certain specific conditions depending on the purpose of leased real estate, whether it be:■ office premises;■ retail premises; or■ warehouse premises, etc.

10.3 What are the typical provisions for leases of business premises in Ukraine regarding: (a) length of term; (b) rent increases; (c) tenant’s right to sell or sub-lease; (d) insurance; (e) (i) change of control of the tenant; and (ii) transfer of lease as a result of a corporate restructuring (e.g. merger); and (f) repairs?

Typical length of lease term constitutes five to seven years. However, taking into account that lease agreements for three years

The loan agreement should be in writing and contain certain, quite common, conditions. It does not require any specific registration or other formalisation, save for loans attracted from non-residents, which should be registered with the NBU, as mentioned in question 8.1 above.A mortgage agreement securing real estate lending, however, is subject to mandatory notarisation. The mortgage as an encumbrance of real estate should be registered with the Rights Register.Attraction of financing for construction of residential real estate from natural persons is subject to certain specific requirements, in particular to the type of agreements allowed for such investments, as specified in Article 5 of the Law of Ukraine “On Investment Activity” dated 18 September 1991.

8.5 How is a real estate lender protected from claims against the borrower or the real estate asset by other creditors?

The mortgagee has priority in satisfying its claims from the mortgaged property, in particular in case of insolvency of the mortgagor.

9 Tax

9.1 Are transfers of real estate subject to a transfer tax? How much? Who is liable?

The corporate sellers should pay corporate profit tax from sales proceeds at a rate of 18%. For taxation of individual sellers, please refer to question 9.3 below.There is no specific transfer tax for the transfer of real estate under Ukrainian law.

9.2 When is the transfer tax paid?

Please see question 9.1 above.

9.3 Are transfers of real estate by individuals subject to income tax?

Transfers of real estate by individuals are subject to income tax.The first sale during a calendar year of a residential building, apartment, garden house, including land plot underlying such house and other structures on such land plot, if such real estate was not acquired within the last three years, is not subject to income tax.For each subsequent sale, an individual shall pay 5% income tax from the contract price, but not less than the market value of the real estate.Sale of other real estate is charged by income tax at the 5% rate in all cases.

9.4 Are transfers of real estate subject to VAT? How much? Who is liable? Are there any exemptions?

Transfers of real estate are subject to VAT if the seller is a VAT-payer. VAT is charged at a rate of 20% on the transfer value, and is collected from the buyer and is payable by the seller. Second and all subsequent resales of residential premises as well as any sales of land plots and land shares are not charged by VAT, save



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The tenant who duly fulfils its duties under the lease agreement after its expiry has pre-emptive right to renew the lease for another term. For this purpose the tenant should notify the landlord on such intention within the period specified in the agreement or, if not specified, within reasonable time. If the parties fail to agree on the conditions in the agreement, lease agreement terminates after the expiry date.If a tenant uses the premises after the lease expiration and the landlord has no objection, the lease agreement is deemed renewed for the same term and the same conditions. The tenant may demand compensation for costs incurred for the improvement of the leased premises if such improvements cannot be removed without damaging the premises and were made at the landlord’s consent.

10.6 Does the landlord and/or the tenant of a business lease cease to be liable for their respective obligations under the lease once they have sold their interest? Can they be responsible after the sale in respect of pre-sale non-compliance?

Every party is responsible before the other for breach of its obligations, which occurred before assignment of its rights under the lease agreement. However, they are usually not responsible for misconduct of their assignee, unless the agreement provides otherwise.

10.7 Green leases seek to impose obligations on landlords and tenants designed to promote greater sustainable use of buildings and in the reduction of the “environmental footprint” of a building. Please briefly describe any “green obligations” commonly found in leases stating whether these are clearly defined, enforceable legal obligations or something not amounting to enforceable legal obligations (for example aspirational objectives).

The lease agreement would usually provide for the tenant’s duties to generally comply with laws, including environmental, as well as for specific duties regarding use or storage of hazardous materials, waste disposal, etc. The tenant may in turn ask for environmental warranties from the landlord. Such provisions may be even more detailed in cases when the tenants’ activities are related to foods, medicine, industrial production or other environmentally sensitive spheres.

11 Public Law Permits and Obligations

11.1 What are the main laws which govern zoning and related matters concerning the use and occupation of land? Please briefly describe them and include environmental laws.

The main laws of Ukraine governing zoning and other related matters concerning the use and occupation of land are:■ Civil Code of Ukraine No. 435-IV dated 16 January 2003;■ Land Code of Ukraine No. 2768-III dated 25 October 2001;■ Law of Ukraine “On Regulation of Town-Planning Activity”

No. 3038-VI dated 17 February 2011;■ Law of Ukraine “On Land Management” No. 858-IV dated

22 May 2003;■ Law of Ukraine “On the Lease of Land” No. 161-XIV dated

6 October 1998;

or more are subject to notarisation and rights arising out of these agreements require state registration, they usually sign several subsequent agreements for a lease term of less three years.Usually, the rent is calculated in USD, EUR or other hard currency and paid in Ukrainian hryvnias. The parties usually recalculate the UAH rent each time upon payment. The landlord would normally ask for a right to increase the rent annually by some 3-5%, depending on the market situation. Besides, the parties sometimes agree to index the rent by CPI, rate of inflation or other acceptable coefficient.A tenant may usually not assign its lease rights, either by sale or sublease or otherwise. It may assign or sublease the premises only with the landlord’s consent in writing.The landlord usually asks for property insurance from the tenant. Sometimes they agree that the tenant compensates the cost of insurance to the landlord. This is specifically true for the properties in use of many tenants, like shopping malls, office centres, etc. The landlord may also require tenant’s liability insurance.Change of control of the tenant and transfer of lease as a result of a corporate restructuring (e.g. merger) do not usually influence the lease agreement unless the parties specifically set forth otherwise in the lease agreement. Under the Civil Code the tenant is responsible for current repairs of leased premises at his own expense, while the landlord is responsible for capital repairs. The latter must be conducted within the agreed term. If no such term is stipulated in the lease agreement or capital repairs are caused by urgent need, the repairs must be conducted within a reasonable time.

10.4 What taxes are payable on rent either by the landlord or tenant of a business lease?

The profit gained by the landlord from the rent is subject to 18% corporate profit tax or 15-20%, depending on the taxable basis amount, personal income tax, as relevant, and 20% VAT, if the landlord is registered as a VAT-payer.

10.5 In what circumstances are business leases usually terminated (e.g. at expiry, on default, by either party etc.)? Are there any special provisions allowing a tenant to extend or renew the lease or for either party to be compensated by the other for any reason on termination?

As a general approach, lease agreements terminate when their term expires, unless prolonged. The parties may also terminate agreement prematurely subject to their mutual consent.Under the law, the landlord is entitled to demand early termination of a lease, if:■ the tenant fails to pay rent for three months in a row; ■ the premises are used contrary to the terms of the agreement

and the premises’ designation;■ the premises are sub-leased without the landlord’s consent;■ the tenant creates a risk of damaging the premises; or■ the tenant failed to begin capital repair of the leased premises,

if the tenant is in charge for such repair under the lease agreement.

The tenant is entitled to demand early termination of a lease, if:■ the leased premises do not comply with the terms of the

agreement and the premises designation; or■ the landlord fails to perform capital repair of the premises.



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commence construction of less complex works, a developer should file declaration for the commencement of construction works to a competent authority for registration.A building finished by construction requires commissioning before its use. After construction works are finished, the developer obtains a certificate on readiness for operation for most complex buildings. Less complex buildings may be used upon registration of declaration of readiness for their operation with the competent authority.

11.5 Are building/use permits and licences commonly obtained in Ukraine? Can implied permission be obtained in any way (e.g. by long use)?

Permits for performance of construction works and certificates on readiness for operation, mentioned in question 11.4 above, are commonly obtained in Ukraine. State authorities have little formal grounds to refuse them in case the application and attached documents are in order.Declarations for commencement of works and readiness for operation, mentioned in question 11.4 above, also require registration. However, in case the authority fails to register them within the established time or provide any refusal, the developer may start the works or operate the building. They are deemed registered in such case.Use of buildings without the above certificate or declaration, as the case may be, is prohibited and may be penalised if revealed by the regulatory authorities.Over the past years, the Government has also, on several occasions, allowed so-called “building amnesty”, which effectively meant the right to register ownership title to individual houses and small buildings that were constructed without permits.

11.6 What is the appropriate cost of building/use permits and the time involved in obtaining them?

Permit for performance of construction works is issued within ten days on a free-of-charge basis. Declaration for commencement of building works is registered within five days, also free of charge. The competent authority registers the declaration of readiness for operation of a real estate item on a free-of-charge basis within ten days.The certificate of readiness for operation is issued within ten days and costs up to UAH 6,300 (approx. EUR 320) depending on the complexity of the building.

11.7 Are there any regulations on the protection of historic monuments in Ukraine? If any, when and how are they likely to affect the transfer of rights in real estate?

The Law of Ukraine “On Protection of Cultural Heritage” No. 1805-III dated 8 June 2000 regulates the protection of historic monuments in Ukraine. In particular, listed monuments and their parts cannot be demolished, altered, replaced, and/or moved (transferred) to other places.Transactions with real estate listed as a cultural heritage monument are subject to prior approval with the cultural heritage protection authority. Furthermore, the authority has a pre-emptive right to purchase such listed real estate, if the owner intends to sell it.Within one month from the date of acquisition the new owner of a cultural heritage monument should:

■ Law of Ukraine “On State Control over Use and Protection of Lands” No. 963-IV dated 19 June 2003; and

■ Law of Ukraine “On Environmental Protection” No. 1264-XII dated 25 June 1991.

11.2 Can the state force land owners to sell land to it? If so please briefly describe including price mechanism.

The State can force owners to sell land to it for social needs. The list of social needs is set forth in the Law of Ukraine “On Alienation of Land Plots and Other Items of Immoveable Property Located on Them in Private Ownership for the Social Needs and on the Ground of Social Necessity”, as follows:■ defence and national security protection;■ construction of transport and energy infrastructure objects

and other facilities for their maintenance; ■ allocation of diplomatic and similar representative offices of

foreign countries and international organisations;■ allocation and exploitation of objects for the extraction of

minerals; ■ creation of nature protection objects; and■ creation of city parks, recreation sites and other objects of

public use for servicing the population, etc.A landowner who disagrees to alienate the land plot for the public needs can be forced to sell it by the court decision. The land plot price is determined based on monetary valuation of the land plot calculated in accordance with methodology approved by the Regulation of the Cabinet of Ministers of Ukraine No. 1531 dated 11 October 2002. If the landowner disagrees with the proposed land plot price, the dispute should be transferred to the court.

11.3 Which bodies control land/building use and/or occupation and environmental regulation? How do buyers obtain reliable information on these matters?

The following bodies control land or building use or occupation and environmental regulation:■ Cabinet of Ministers of Ukraine;■ State Agency for Land Resources of Ukraine;■ Ministry of Ecology and Natural Resources of Ukraine;■ Ministry of Regional Development, Construction and

Municipal Housing Economy of Ukraine;■ public prosecution authorities; and■ local self-government authorities.However, the mentioned authorities usually operate on a case-by-case basis and hardly any of them possesses aggregate information on use, occupation and environmental matters related to particular property. Buyers can obtain certain information on these matters from the official websites of the authorities, mass media, press-releases of the associations and other sources. The most effective way is to conduct due diligence and request specific warranties and obtain relevant disclosures from the landlord.

11.4 What main permits or licences are required for building works and/or the use of real estate?

Сonstruction activity is subject to licensing in Ukraine.Design documentation for most complex developments is subject to approval by the competent authorities. To commence construction of the most complex buildings one must first obtain a permit for performance of construction works. To



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12 Climate Change

12.1 Please briefly explain the nature and extent of any regulatory measures for reducing carbon dioxide emissions (including any mandatory emissions trading scheme).

Since 2004, Ukraine has been a party to the international Kyoto Protocol, which extends the 1992 United Nations Framework Convention on Climate Change – regulating the reduction of greenhouse gas emissions. According to the Resolution of the Cabinet of Ministers of Ukraine No. 206 dated 22 February 2006, which approved the Procedure for Preparation, Consideration, Approval, and Realisation of Projects Aimed at Reduction of Anthropogenic Emissions of Greenhouse Gases, Ukrainian companies possessing facilities causing greenhouse gas emissions may earn emission reduction units by participating in joint implementation projects and attracting foreign investments aimed at greenhouse gas emission reduction.

12.2 Are there any national greenhouse gas emissions reduction targets?

According to the Kyoto Protocol, Ukraine undertook to reduce greenhouse gas emissions to 1990 levels. As the current level of greenhouse gas emissions is low, Ukraine exceeds its greenhouse gas quotas.Furthermore, according to the Ukraine-European Union Association Agreement Ukraine undertook an obligation to implement Directive 2003/87/EC of the European Parliament and of the Council establishing a scheme for greenhouse gas emission allowance trading.

12.3 Are there any other regulatory measures (not already mentioned) which aim to improve the sustainability of both newly constructed and existing buildings?

Since 2010 Ukraine has been a party to the Energy Community Treaty. After ratification of respective law, Ukraine undertook to implement a number of directives in the sphere of renewable energy, gas, power engineering and environment. Within recent years Ukrainian parliament considered the draft law on energy efficiency of buildings, but has not adopted any.To the newly elected Parliament a draft law on energy efficiency of buildings has been already presented. The draft provides for conduct of a comprehensive analysis of energy efficiency of residential buildings and further measures to improve energy efficiency. The draft law is being considered by the Parliament at the moment.

■ execute an agreement on the protection of the respective cultural heritage with the cultural heritage protection authority; and

■ protect the monument in compliance with the Law of Ukraine “On Protection of Cultural Heritage” and respective protection agreement.

11.8 How can e.g. a potential buyer obtain reliable information on contamination and pollution of real estate? Is there a public register of contaminated land in Ukraine?

There are no specific public registers of contaminated lands or pollution of real estate in Ukraine. The Land Code of Ukraine requires polluted and contaminated lands to be conserved, which result in temporary termination of economic activity on such lands. Land conservation is performed after a decision of the local authority of the State Agricultural Inspectorate of Ukraine or the State Ecology Inspectorate of Ukraine. Such decision is a ground for elaboration of a land management project for conservation of certain land plot, which covers types, methods and the term of land plot conservation. All land management projects are kept by local authorities of the State Agency for Land Resources of Ukraine. So, the relevant information on contaminated lands may be available with local authorities of the State Agency for Land Resources of Ukraine. Independent searches before transactions with land or other real property are strongly advisable as well.

11.9 In what circumstances (if any) is environmental clean up ever mandatory?

Environmental cleanup is mandatory when the soil is damaged as a result of construction or other works. Use of the land plot in a way contravening requirements of environmental protection (ecology regulations) is a basis for early termination of the right to use the land.

11.10 Please briefly outline any regulatory requirements for the assessment and management of the energy performance of buildings in Ukraine.

Design projects for the construction of most complex buildings are subject to mandatory State Energy Saving Expertise. Positive conclusion of this expertise is required to obtain a permit for performance of construction works on the respective building. Less complex buildings are subject to such expertise only on the developer’s demand.



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Alexander BorodkinVasil Kisil & Partners17/52A Bogdana Khmelnytskogo St.Kyiv 01030Ukraine

Tel: +38 044 581 7777Fax: +38 044 581 7770Email: [email protected]: www.kisilandpartners.com

Volodymyr IgoninVasil Kisil & Partners17/52A Bogdana Khmelnytskogo St.Kyiv 01030Ukraine

Tel: +38 044 581 7777Fax: +38 044 581 7770Email: [email protected]: www.kisilandpartners.com

Vasil Kisil & Partners is a leading independent multi-disciplinary Ukrainian law firm with a thriving international and national practice.

Founded in 1992, the firm has assembled a talented team of experienced and skilled lawyers dedicated to the highest standards of legal excellence and true to internationally accepted professional ethics. VKP is consistently recognised by independent international legal directories, such as Chambers Global, Chambers Europe, Chambers Europe, Legal 500, IFLR1000, International Tax Review and Best Lawyers.

As a multidisciplinary law firm, VKP is well known, both locally and internationally, for its experience and practice in the following areas: Antitrust & Competition; Banking & Finance; Corporate/M&A; Energy & Natural Resources; Intellectual Property; International Arbitration; International Trade; Labour & Employment; Litigation; Private Client; PPP, Concession & Infrastructure; Real Estate & Construction; and Tax.

Our industry expertise includes Agriculture & Food, Chemicals, Consumer Goods & Retail, Financial Institutions, Hotels & Leisure, Insurance, Oil & Gas/Mining, Pharmaceuticals, Raw Materials, Real Estate & Construction, Shipbuilding, Steel, Telecommunications and Transport.

Alexander Borodkin, a partner of the Real Estate, Construction & Land Law Practice Group, has been a member of Vasil Kisil & Partners’ team since 2005.

Alexander advises foreign investors, Ukrainian developers and other real estate market operators on a wide range of cross-border and domestic transactions involving purchase and development of construction projects, mergers and acquisitions and investment, etc.

Alexander Borodkin is an experienced specialist in the field of transactions and projects in the public sector. His practice in the given fields covers matters relating to transaction structuring, tax planning, corporate, antimonopoly, FX, regulatory and other aspects of transactions implementation, and risk assessment and management.

Alexander is the author of a range of articles on construction and land matters; and an active participant and speaker at real estate and construction conferences.

Volodymyr Igonin, counsellor, has been working at Vasil Kisil & Partners since 2007. Mr. Igonin specialises in the areas of real estate and construction, land law, agriculture. He also works on complex support to projects in the fields of energy and natural resources, concessions, infrastructure projects and Public Private Partnership (PPP). His work, inter alia, involves legal due diligence, transaction structuring and support, drafting and negotiating complex agreements, tax planning, advising on project finance, regulatory and other actual business matters.

Another pole of Volodymyr’s practice is corporate matters of doing business in Ukraine, in particular, establishing legal entities in Ukraine as well as holding structures using tax-beneficiary jurisdictions, legal assistance to M&A transactions, and advising on corporate governance issues.

Volodymyr regularly contributes to professional editions as the author of articles focused in particular on real estate and land matters, and has been lecturing at the AgriSchool of the Ukrainian Agribusiness Club.


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