The basic laws governing land relations and transactions in Ukraine are the Civil Code, which focuses on contracts, ownership and agreements as such, and the Land Code, which provides the specifics regarding land. In legal practice, these acts are applied consentaneously. It is important to keep in mind Article 79 of the Land Code, because a land plot is treated as "a part of the surface with fixed boundaries, a certain location and rights determined thereto." A land plot may be owned by people and legal entities, community councils that hold municipal property and the state, represented by its respective authorities. This article focuses on private agreements governing the sale and purchase of land plots.
Who owns the plot?
Since a land plot is immovable property, Ukraine's Civil Code sets forth a special regime for transaction, and any agreement is subject to mandatory notarisation and state registration. These processes are performed by either state or private notaries. An agreement is deemed executed at the moment of its state registration by the notary. Part 4 of Article 334 of the Civil Code specifically provides that the ownership title is accrued by the purchaser on the moment of state registration of the respective agreement as well. In other words, the purchaser of a land plot acquires ownership the moment the documentation is completed.
The Land Code notes two ways of procuring land, depending on the market. If the land is owned by a municipality or the State, then a public decision adopted by the local council or state administration gives what is called an initial allotment - the land has in effect been privatised. Land changing hands between private entities is seen as a secondary transfer of title. The differences are important. Receiving land from a government source requires the allotment of the land plot and the elaboration of a land management project by a specialised licensed organisation. These activities could take up to six months depending on local practice. The second option, i.e. acquisition of land plots under private agreements on the secondary land market does not require elaboration of the land management project as long as the land plot's boundaries and intended use do not change.
Legal loopholes
Lawyers and notaries differ on defining the moment when the buyer technically accrues the title to their respective land plot. There is a reason for this. Part 2 of Article 131 of the Land Code backs up the process mentioned above. It sets forth that civil-law agreements on the acquisition of land plots are entered into in compliance with the Civil Code considering the requirements of the Land Code. Taking into account all the foregoing provisions of both codes, it could be assumed that should the respective agreement be duly executed, the title to a land plot is acquired on the day the notary notarises and records the agreement.
However, this runs counter to the peremptory provision of Part 1 of Article 125 of the Land Code, which states that "ownership title to a land plot arises upon the obtaining by its owner of the document certifying the ownership title to a land plot, and registration thereof." Moreover, the land cannot be used until this document is obtained. Part 3 of the same article forbids this. What remains unclear, though, is who owns the land during the interim. Here we should also mention that the old state act for the right of ownership to the land plot of the land plot's seller is kept by the notary certifying the land transaction. This means that neither the seller nor the purchaser may evidence their right to the transacted land plot within the period of state act's creation, which could last for almost six months. The law does not even clearly show who owns the land in the meantime.
Procedural risks abound
The above problem impacts the purchaser of a land plot in different ways. On the one hand, there can be complications in respect to using the land plot and protection of related ownership rights until the respective state act is obtained. On the other hand, some land purchasers intentionally delay to avoid paying land tax.
Thorough systemic research leads to the conclusion that the provisions of Article 125 of the Land Code regarding the accrual of an ownership title by the purchaser simultaneously should apply to land plots acquired on the primary market only, and should not apply to land purchases on the secondary market under private agreements. Since the said viewpoint is not sufficiently corroborated on the legislative level and, thus could be challenged, choosing the appropriate wording of land purchase agreements is especially important.
Fortunately, should the opposing provisions of the Land Code still be applied by a controlling authority, the use of a land plot without a state act is not treated as squatting, which is a punishable land law infringement, provided the respective land purchase agreement was duly executed. This is based, in particular, on the definition of infringements contained in the Law of Ukraine "On State Control over Use and Protection of Lands." Using a land plot before obtaining the state act is unlikely to lead to any liabilities at all. In practice, Article 125 of the Land Code does not apply for secondary land acquisitions, though it does in the primary market. The salient point is the nonexistence of any title at all in primary sales, whereas one does exist already in the secondary market.
Most risks to land title during this period are associated with potential claims of third parties or even from the seller. The purchaser is open to any attacks to its land title until it obtains the document duly proving its right. Of course, the land purchase agreement could be presented to the court as evidence of land title acquisition. However, it is advisable to make sure that no third party rights or other title risks exist before entering into an asset deal with regard to a land plot. Due diligence is therefore a must.