Concluding Agreements on the Alienation of Immovable Property under Martial Law: Proposed Opportunities

In times of war, both citizens and businesses suffer financial losses, which may necessitate the alienation of their immovable property for monetary funds. In addition, there are currently a large number of internally displaced persons in the country. Some of them have lost their homes, so the issue of purchasing immovable property in the rear areas is also relevant for such persons. Below, we consider the possibility of concluding agreements on the alienation of property (sale, exchange, donation) during the war.

The Civil Code of Ukraine stipulates for the following:

– the contract of sale of a land plot, a single property complex, residential building (apartment) or other real estate is concluded in writing and is subject to notarization, except for contracts of sale of property that is in tax lien (Art. 657);

– each of the parties to the contract of exchange is the seller of the goods which they transfer in exchange, and the buyer of the goods which they receive in return (part 2 of Art. 715). The general provisions on purchase and sale, provisions on the contract of delivery, the agreement of contracting or other contracts which elements contain in the contract of exchange, if it does not contradict the essence of the obligation (Art. 716). Therefore, given the provisions of Art. 657 of the Civil Code of Ukraine, if the subject of the exchange is real estate, such an agreement is also concluded in writing and is subject to notarization.

– the contract of gift of immovable property is concluded in writing and is subject to notarization (part 2 of Art. 719).

Therefore, immovable property alienation agreements are concluded in writing and are subject to notarization.

In addition to the notarization of immovable property transactions, the legislation provides for the need for state registration of real rights to immovable property. According to part 1 of Art. 182 of the Civil Code of Ukraine, the right of ownership and other real rights to immovable property, encumbrance of these rights, their origin, transfer and termination are subject to state registration. The registration is carried out in accordance with the Law of Ukraine “On State Registration of Immovable Property Rights and Encumbrances” in the State Register of Immovable Property Rights.

The issue of state registration of property rights in wartime is regulated by the Resolution of the Cabinet of Ministers of Ukraine of March 6, 2022 No. 209 “Some Issues of State Registration during Martial Law and Amendments to the Resolution of the Cabinet of Ministers of Ukraine of February 28, 2022 No. 164”, according to which the state registration:

– shall be carried out by state registrars included in the list of state registrars and officials approved by the Ministry of Justice who are granted access to the State Register of Immovable Property Rights and/or the Unified State Register of Legal Entities, Individual Entrepreneurs and Public Associations during martial law;

– shall be carried out regardless of the location of the immovable property;

– access to the State Register of Immovable Property Rights will be available in administrative and territorial units not included by the Ministry of Justice in the list of regions in which users’ access to this register is terminated.

According to the Ministry of Justice of Ukraine, it has approved the List of administrative and territorial units within which users’ access to unified and state registers held by the Ministry of Justice of Ukraine is suspended under martial law (the order enters into force on April 8, 2022). The text of the List has not been published yet. It is noted, however, that changes have been prepared to exclude Kyiv, Chernihiv, Sumy regions and the city of Kharkiv from the specified List, the adoption of which will be announced later.

Thus, while there is some understanding about the issue of state registration of property rights regarding the access of state registrars to the State Register of Immovable Property Rights, the possibility of the access of notaries to this register is not currently provided. In this regard, objectively, in accordance with the law, a notary may neither certify the contract of alienation of real estate, nor conduct state registration of property rights.

Since the alienation of immovable property requires both notarization of the contract and state registration of the right, it is not possible to conclude such a contract at the moment.

Is It Possible to Conclude a Preliminary Agreement?

According to part 1 of Art. 635 of the Civil Code of Ukraine, the preliminary agreement shall be concluded in the form prescribed for the main agreement. Therefore, immovable property agreements are concluded in writing and are subject to notarization.

Thus, the possibility of concluding a preliminary agreement is currently not available as well.

Is It Possible to Conclude an Agreement in a Simple Written Form?

Lawyers warn against concluding agreements on the alienation of immovable property in writing with the condition of further notarization and state registration of the agreement. This is primarily explained by the fact that it is not possible to verify the real owner of the property, the presence of encumbrances on the property, etc., as a notary usually does when notarizing the agreement. In particular, in preparation for the conclusion of an immovable property transaction, the notary performs a number of actions, among which are:

– verification of the absence of tax lien, prohibition of alienation or seizure of property by direct access to the State Register of Immovable Property Rights (par. 2.2 of the Procedure for Notarial Acts by Notaries of Ukraine, approved by the Order of the Ministry of Justice of Ukraine of February 22, 2012 No. 296/5);

– verification of the absence of encumbrance of immovable property by mortgage by the direct access to the State Register of Immovable Property Rights (par. 2.4 of the Procedure for Notarial Acts by Notaries of Ukraine, approved by the Order of the Ministry of Justice of Ukraine of February 22, 2012 No. 296/5).

In any case, if during the conclusion of such an agreement there are no legal consequences for the acquisition of immovable property owned by another person, and in case of refusal of the owner in the future to enter into a notarized agreement, one will have to defend the rights of the acquirer in court and recognize the agreement as valid. According to part 2 of Art. 220 of the Civil Code of Ukraine, if the parties agreed on all material terms of the agreement, which is confirmed by written evidence, and there was full or partial performance of the agreement, but one of the parties has evaded its notarization, the court may declare such an agreement valid. In this case, the following notarization of the agreement is not required.

In the future, lawyers of the “Prime” Law Firm will monitor the notifications and regulations of the Ministry of Justice of Ukraine on granting notaries access to the State Register of Immovable Property Rights.