On 31 March 2020, Parliament of Ukraine adopted a new law to open up the land market with unblocking moratorium rule on the sale of agricultural lands.
On the date of April 28, 2020, the new reform bill was approved by the President of the Country.
The main provisions envisaged by the new law may briefly listed as follows;
1. The moratorium on land sales will be staying valid until 01.07.2021 and people will not be able to sell or use those lands as a pledge on taking loans from banks and make future deals on these lands, etc., etc.
2. From the date of 01.07.2021 to 01.01.2024, restrictions will apply for up to 100 hectares – which means one person can buy only up to 100 hectares of agricultural land. However, by 2024, the restrictions will change and the amount will go up to 10,000 hectares per person for land purchase as the general limit.
3. From the date of 01.07.2021 to 01.01.2024, the right to purchase lands will only be available for real persons and legal entities are not eligible to buy agricultural land until 01.01.2024.
4.The privatization of the land that is in the state or municipal ownership is prohibited.
5. The following actors will still be prohibited from purchasing lands even after the new law has entered into force:
- foreigners,
- foreign companies,
- Ukrainian Companies with foreign investments or with having foreign founders and with foreign beneficiaries (including the cases where the beneficiary may not be determined).
In addition to this situation, a ban was imposed on the subsequent acquisition by foreigners of Ukrainian companies-owners of agricultural land.
The issue of granting the right to acquire lands to foreigners’, agricultural lands will remain open and this situation will be resolved at an all-Ukrainian referendum.
6.The land that lies closer than 50 km to the state border can’t be purchased by foreigners, regardless of considering the results of the referendum.
7. The tenant has a pre-emptive right to purchase lands. The tenant has the opportunity to transfer the pre-emptive right to another person who wishes to purchase the land with having the condition of notifying the owner in writing in advance.
8. The land cannot be bought for a lower price than the minimal price defined by the state until 2030, which will be not less than the normative monetary value.
9. Banks will be able to become owners of these lands only if they acquired the land as collateral in return for an outstanding loan. Such properties of a financial institution must be sold to land tenders within two years after obtaining the ownership.
Despite all of the above limitations, analysis of the new law allows us to grasp that the legislator has left at least one possible loophole (by its own will or by a mistake) for the foreigners, to acquire those lands.
The new law is imposing a complete ban on the acquisition of lands by the actors listed in the paragraph 5. Nevertheless, “acquiring land” is not identical to the concept of “having ownership / being an owner”. Based on the provisions of the new law, violation will be considered as:
- acquisition of a land by the company with a foreign beneficiary
or
- acquisition by a foreigner of a share in a company owning land,
BUT
- formally, it should not be considered as a violation to acquire a share or shares by a foreigner in a company which is already an owner of another company which is already (at the time of purchase of the share) an owner of agricultural land.
However, such an ownership scheme will carry certain risks until a positive judicial practice is formed in such types of cases, which will take at least a year after lifting the moratorium on land acquisition by companies.
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NAZALI TAX & LEGAL |