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Cancellation of the moratorium on the land sales
Therefore, a revolutionary event in the legislative field of Ukraine happened! It can be compared with the adoption of the Constitution. Ukrainians eventually became full owners of their land. Legally was established the right not only to own land, but also to sale it. Yes, this is only the first reading, there is no necessary specific, procedural moments are not written out, there are references to the referendum. But the process has gone and there is no critical negativity in society. The first step was the decision of the European Court of Human Rights, where a moratorium on the sale of agricultural land was found to violate human rights in the Zelenchuk and Tsytsyura v. Ukraine case, which stated “The Court considers that the respondent State must take appropriate legislative and / or other general measures to ensure a fair balance between the interests of owners of agricultural land on the one hand and the general interests of society on the other, in accordance with the principle of protection of property rights. ” However, we suggest to reject the emotions and to analyze the legal aspects of this issue.
So, what changes does the draft Law propose?
- Cancellation from the 1 October 2020 year prohibition of expropriation of agricultural lands.
This opens up opportunities for owners to dispose of their land plots to the fullest extent – to conclude civil legal transactions, to use such land as collateral, etc.
- Clarification of the range of indfividuals that will be eligible to acquire agricultural land.
If now Article 130 of the current Land Code stipulates the possibility to become a buyer of agricultural land for citizens of Ukraine who either have a professional education or experience in agricultural activities, as well as for legal entities of Ukraine, the constituent documents of which provide for agricultural production, the new draft Law expands the range of recipients as follows:
The requirement for professional education and experience in farming for Ukrainian citizens is abolished,
The condition regarding the provision of agricultural production by the constituent documents of legal entities was removed.
- Restrictions on the concentration of agricultural land in ‘one hand’.
Part two of the Article 130 of the Land Code in the new wording restricts the right to acquire more than 35% of agricultural lands of the united community, 15% of agricultural lands of the region and 0.5% of agricultural lands of Ukraine by a citizen or legal entity, including related persons and legal entities. persons who have a common ultimate beneficial owner (controller). Such norms aimed at counteracting the monopolization of the land market exist in the legislation of other countries – for example, the legislation of Hungary stipulates a maximum size of such possession of 300 hectares. If you translate the norms specified in the draft into numbers, then within the limits of Ukraine one person will be entitled to own up to (approximately) 213 500 hectares of the agricultural land.
- The renter shall have a pre-emptive right to purchase the land.
The draft Law establishes the conditions of such pre-emptive right of the renter – the payment of the full price for which the land plot is sold or, if sold through an auction, if he makes a bid equal to the highest bid of the auction. In the current version of the Land Code, the pre-emptive right to acquire land was granted to citizens who reside permanently on the territory of the respective local council and the respective local self-government bodies.
- Preventing the acquisition by foreigners and foreign legal entities of ownership of agricultural land by January 1, 2024.
This rule applies to agricultural land of state and communal ownership, areas whose purpose is to conduct commodity agricultural production.
However, there are exceptions, and until the specified date, the enterprises, owners or ultimate beneficiaries of which are foreigners or stateless persons and who registered more than three years ago and lease land here, will be able to purchase such land, provided that the right of lease (emphitusis) came into force before the entry into force. of this provision. It is worth noting that the fragments of the opposite clauses in the bill do not exist, the preferential right of the tenant to purchase the leased land will extend in this case as well.
Potential foreign investors should pay attention to:
- In fact, agrarian enterprises with foreign owners who have been working in Ukraine for a long time will get a green light for land acquisition and they will have no problems to buy them. First of all, we are talking about transnational agricultural corporations.
- If agrarian enterprises with foreign owners have land banks which are formed not from the leased state lands, but from land units that have been “bought out” or leased from peasants under different schemes, then it is likely that they are waiting for lawsuits to protect their rights as conscientious purchasers. It can be assumed that the peasants will want to change the conditions of “sale” of their land shares due to the new conditions that have arisen. They will be stimulated by competitors.
- Certainly the first “latifundists” will be the local oligarchs who have the administrative capacity and access to inexpensive financial resources. They also have their own banks, and they can easily redirect their own financial flows from the steel market, which is now in recession, to more profitable land speculation. So, when the land market becomes available to foreigners, they are likely to be the main sellers of the land to non-residents.
- But now foreigners can actually prepare by October 1, 2020. Yes, a legal entity cannot directly buy land unless its final beneficiary is a resident of Ukraine. But this can be done by an affiliated Ukrainian non-resident company with a resident beneficiary, which will issue securities and derivatives secured by the land, or be released to raise funds for the purchase of the land by the non-resident. And it will be the only kind of its activity.