Land Reform: So Far It Looks Like This

The saga with the issue of opening the land market ended rather abruptly with the adoption of Bill 2178-10 on the night of March 31.

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The bill, originally adopted in the first reading on November 13 of the past year, caused a public outcry and was criticized, especially in the part that concerned the possibility of acquiring agricultural land by foreigners and stateless persons, as well as the limit of land that can be concentrated in “one’s hands”.

In December, parliamentary factions and committees of the Verkhovna Rada signed the Memorandum on the Preparation of a Law on the Land Market. The latter provided for the procedure for considering the bill without the use of “turbo mode”. Among the rest, the parties agreed that the amendments will be considered before the start of voting in the sessional hall at the meetings of the Agrarian Committee on December 26, 27, 28, as well as on January 2, 3, 6, 8, 9 and 10, 2020 with the possibility of attending meetings by representatives of parliamentary factions. However, ignoring these agreements, the Committee headed by M. Solskyi already on December 28 recommended 9 amendments out of 4018 received. It should be noted that the authorship of the adopted amendments belongs to members of the same party of the Head of the Committee P.V. Khalimon, A.O. Chornomorov and M.V. Nikitina.

Interestingly, the Head of the Committee, Mykola Solskyi, is a co-founder of Ukrainian Agrarian Holding, a company that specializes in growing grain, dairy farming, and also provides elevator services and is engaged in rail transportation, with a land bank of 51 thousand hectares.

On January 3, 2020, the text of the bill for the second reading with a comparative table appeared on the government website, and on January 11, Notes of the General Legal Department were published; however, it was decided not to consider the bill of 9 amendments, but to vote with consideration of all 4000 amendments submitted by the subjects of the legislative initiative. This is why the consideration of the project was delayed for another three months, and as a result, the Verkhovna Rada made a decision on the night of the last day of March at the height of quarantine, having voted for 9 initial amendments with some adjustments.

What Changes Await Us in the Near Future?

1. Firstly, the market for agricultural land in Ukraine will actually begin to function from July 1, 2021, but so far in a mode that provides for some restrictions, in particular:

– Until January 1, 2024, only citizens of Ukraine with a total area of ??up to 100 hectares will be able to acquire ownership (in the usual mode, a limitation of 10,000 hectares per person is provided). However, this restriction of 100 hectares does not apply to land that was acquired in ownership before the entry into force of this law.

In the same period (until January 1, 2024), legal entities will not be able to acquire agricultural land plots, with the exception of banks, which, as we recall, have the right to acquire land by way of mortgage. Moreover, preliminary agreements on the transfer of rights to land plots in the future in favor of a legal entity concluded during this period will be considered invalid from the moment of their conclusion.

2. As usual, the right to acquire agricultural land will be received by the citizens of Ukraine, Ukrainian legal entities, the participants of which are Ukrainians, territorial communities or the state, and the state with territorial communities.
3. The issue of granting the right to acquire land by foreigners, as well as their participation in the authorized capital of Ukrainian companies that own land will be resolved through a referendum.
4. The limitation on the total area of ??agricultural land “in one’s hands” is set at 10,000 hectares. Moreover, with regard to legal entities, a rule has also been established according to which a company cannot own more land than can be owned by all its participants (with a limit of 10,000 hectares). That is, if a company has two founders, and each of them already owns 8 thousand hectares, their joint company will not be able to acquire more than 4 thousand hectares. To monitor compliance with these restrictions, it is envisaged to ensure the exchange of information between the State Land Cadastre, the Register of Property Rights to Real Estate and the State Registers of Legal Entities and Individual Entrepreneurs. Also, if the specified limit is bypassed, land plots whose area exceeds the specified limit may be confiscated by a court decision with their subsequent sale at auction with the return of the proceeds to the former owner.
5. An interesting point in this law is the special status of banks, which are not subject to the rules on limiting the amount of agricultural land, the rules on participation in the authorized capital of foreign persons, and, what is more, on a par with individuals, they will be able to acquire land (by collecting the collateral) until January 1, 2024. However, for banks there is a time limit for owning land, often of two years, during which they must sell such a plot at land auctions.
6. All payments of the price of agricultural land plots under contracts are carried out by bank transfer.
7. It will also be necessary to document the sources of origin of the funds for which the agricultural land plot is purchased.
8. Sale of agricultural land in state and communal ownership is banned.
9. Completely prohibited, regardless of the results of the referendum, is the acquisition of rights to agricultural land by a certain circle of persons, including: legal entities whose participants or ultimate beneficiaries are citizens of the occupying country; persons who belong or previously belonged to terrorist organizations; legal entities whose participants or ultimate beneficiaries are a foreign state; legal entities whose beneficial owners cannot be established, as well as the beneficial owners of which are registered in offshores, as well as other cases.

It is necessary to remember that from the launch of the land market in July 2021 to January 2, 2024, there will be two types of participants in the agricultural land market: individuals – citizens of Ukraine with the maximum possible amount of acquired land of 100 hectares and banks, which can be acquired by collecting an item collateral for an unlimited number of land plots. And it is possible to predict a situation in which, in two and a half years, banks will be able to concentrate a significant amount of land in their hands, and in the future, when the time comes to sell them through land auctions, and other participants will be able to enter the market, banks will find themselves in an advantageous position and will be able to dictate land prices.

Anyway, the adopted law has fulfilled its main function: the moratorium has been lifted, albeit in this form, and the land market has a chance to launch and one of the main assets in our country to receive a clearly defined legal status. And we will go further from there.