Many Australian individuals, commercial entities and not for profit organisations participate in various private, commercial and non-commercial property dealings in Ukraine. Such property dealings are completed in accordance with Ukrainian law and established practice which are very different from conveyancing protocols in Australia. Inadvertently, property dealings in Ukraine may be subject to extra risks and costs.
At the recent OzUke2015 Australia-Ukraine Business Forum held in Melbourne on 25-26 November 2015, a number of participants both private and commercial were interested in buying, transferring by sale or gift in particular land in Ukraine.
What follows is an overview of legal and practical aspects of buying, selling or dealing with real estate, in particular land, in Ukraine, for either private or commercial use.
Non-Ukrainian Entity Ownership of Real Estate in Ukraine
Generally under Ukrainian law, non-Ukrainian citizens and legal entities may own non-agricultural land and other real estate in Ukraine. In particular, the Land Code of Ukraine prohibits acquisition of agricultural land by non-Ukrainian entities.
Non-agricultural land located within the boundaries of a populated locality (city, town, village, etc.) can be purchased by non-Ukrainian citizens. If they own on-land structures outside the boundaries of a populated locality, they may also buy non-agricultural land on which such structures are erected.
Non-agricultural land located within the boundaries of a populated locality (city, town, village, etc.) can also be purchased by non-Ukrainian legal entities in case of acquisition of on-land structures and for construction of objects related to carrying on a business in Ukraine. If you are acquiring on-land structures outside the boundaries of a populated locality, you may also buy non-agricultural land on which such structures are erected.
Furthermore, the Land Code of Ukraine provides for a moratorium on the purchase of the following categories of agricultural land (Moratorium):
- state and municipal agricultural land;
- private agricultural land designated for commercial agricultural production; and
- land parcels which were allocated to the owners of land shares for carrying out private agricultural households, until commencement of an act on circulation of agricultural land.
On 7 December 2015 Ukraine’s government passed legislation to extend the Moratorium for another year, until 1 January 2017. The Moratorium was originally introduced in 2002 under the transitional provisions of the Land Code of Ukraine and has been continuously extended by the Parliament since then. Act of Ukraine No. 767-VIII commenced on 9 December 2015 resulting in little or no dealings in agricultural land in Ukraine for both Ukrainian and foreign nationals.
Nevertheless, the Cabinet of Ministers of Ukraine must submit a new Bill by 1 March 2016 in respect to dealings in agricultural land, signalling Ukraine may finally be ready to open its vast agricultural resources for business.
Registration of Rights to Real Estate in Ukraine
Unlike Australia, land parcels, houses, buildings, structures erected on them, units in a building are all separate objects of real estate in Ukraine, title to which is evidenced by separate title documents.
The title and encumbrances in respect to real estate must be registered. Ukraine has a centralised system of registration of real estate rights based on the Act of Ukraine “On State Registration of Property Rights to Immovable Property and Their Encumbrances”.
Since 1 January 2013, one unified register covers both the land and real estate other than the land: the Nation-Wide Register of Property Rights to Immovable Property. One authority also administers the nation-wide registration of rights to immovable property: the State Registration Service of Ukraine assisted by the local departments of the Ministry of Justice of Ukraine. The owners of the property have to register their property rights in the new register before the property can be sold.
The new register can be searched by a registered person. Property searches can be done by specific property address, registration number of particular property, cadastre number of particular land or the owner.
Ukrainian notaries are authorised to act as special state registrars. It will only be necessary to have transfer of the property rights registered in the new register by a notary who certifies a sale and purchase agreement.
How to Buy, Sell or Deal in Property in Ukraine
Power of Attorney
You can either elect to formally attend to your property dealing in person or appoint an attorney under power to attend to the formalities of your property dealing. This could be a person in Ukraine who you know and trust or you can authorize a reputable local legal firm in Ukraine to act on your behalf. You will then need to execute a Power of Attorney in Australia and then have it notarised, legalised and posted to your attorney in Ukraine. In this respect we can assist you by drafting a Power of Attorney and assisting you with its execution, as well as any dealings with your appointed attorney under power.
Such a Power of Attorney should:
- be correctly drafted both in English and Ukrainian;
- include specific powers and directions in accordance with Ukrainian law and practice;
- correctly reference Ukrainian property purchase documents to be executed; and
- reference your identity as required by Ukrainian law.
Unless the above guidelines are followed, your Power of Attorney may not be accepted that may result in additional costs and wasted time.
Normally, non-Ukrainian purchasers will open a bank account in Ukraine with a local bank and have the purchase money transferred in preparation for settlement. This money can then be used to pay the purchase price, associated costs and disbursements. Special instructions will need to be given to release moneys upon settlement.
In the event of depositing cash to such account, the bank will require evidence of its overseas origin including a custom’s declaration, bank receipts regarding exchanging cash or travellers checks, bank receipts regarding withdrawing cash in Ukraine from a credit or debit card.
In Ukraine, exchange of contracts and settlement occurs at the same time in the office of a local Ukrainian notary or in the office of outgoing or incoming mortgagee with the notary attending.
A sale and purchase agreement in respect to real estate must be certified and registered by a Ukrainian notary.
To purchase real estate in Ukraine, non-Ukrainian citizens have to produce the following documents:
- Ukrainian tax file number, which can be obtained in Ukraine by their attorney under power;
- if they are married, a marriage certificate, passport of their spouse and notarised consent of their spouse to buy property in Ukraine;
- power of attorney, if their attorney signs the agreement.
Non-Ukrainian legal entities have to produce the following documents:
- passports of their legal officers or attorney;
- extract from the company register;
- constitution, if available;
- power of attorney, if their attorney signs the agreement.
To be accepted by the notary, non-Ukrainian documents of the purchaser have to be legalised by apostille (except passports) and then translated into Ukrainian by a qualified Ukrainian translator.
In addition to the purchase price, expenses of Australian clients to purchase real estate in Ukraine normally include Australian public notary fees for attesting a signature under a power of attorney, Australian apostille fees for single or multiple paged document, legal fees, real estate agent fees, Ukrainian notary fees, Ukrainian state duty on the transfer of 1% of the property value, payment to the State Pension Fund of Ukraine of 1% of the property value.
Following notarial certification of the sale and purchase agreement, the notary will register purchaser’s title to the property in the Register of Property Rights to Immovable Property and will issue an extract from the register evidencing the purchaser’s title.
Other Considerations Affecting Purchase of Real Estate in Ukraine
Annexation of Crimean Peninsula by Russia
After the territory of Crimean Peninsula in the South of Ukraine was taken over by Russia earlier this year, Russian legislation and real estate registration system, even though not recognised by Ukraine, has been introduced in the Crimean Autonomous Republic. Therefore, the requirements of both Russian and Ukrainian law need to be considered if a property is located in the Crimean Peninsula. In particular, title documents need to be re-issued in accordance with the requirements of Russian law in the first instance before a property can be purchased and respective property dealing recognised by Russian authorities controlling the Crimean Peninsula.
Frozen position in the Eastern Regions of Ukraine
Some areas of Donetsk and Lugansk regions in the eastern Ukraine are still affected by the ongoing war resulting in a ‘frozen position’ of property transactions in those territories. There are practical difficulties to complete a purchase with respect to the real estate located in the frozen areas where there is still no access to the Ukrainian property registers, which were temporarily closed for access from the frozen areas to prevent illegal transfers.
Purchase of real estate in Ukraine and completion of Ukrainian procedural requirements are daunting tasks. Business Lawyers Sydney at Pavuk Legal we can provide you with a full range of property legal services, including the property register searches, checking all paperwork and ownership rights, encumbrances over the property and sale and purchase agreement, liaising with a local Ukrainian notary. We can assist you with property transfers, other property dealings and estates in Ukraine, advise and direct you and prepare necessary documentation in English and Ukrainian as required, correctly prepare Powers of Attorney to deal with the property in Ukraine, assist you with engaging a local Ukrainian attorney, if required, as well as provide assistance and advice on other issues of Ukrainian law. We have established referral arrangements with reputable Ukrainian attorneys who specialise in the real estate transactions focusing on purchases by non-Ukrainian citizens and legal entities.
The key issues of cross-border private and business transactions with or in Ukraine from Australian clients’ perspective are outlined in our publication “Australia and Ukraine Cross Border Private and Business Transactions”