Due Diligence Checklist for Building Purchase in Ukraine

Foreign investors interested in acquiring residential or commercial property must first perform due diligence on the property in order to learn who the real owners are (legal entities and/or physical persons) and whether there are any potential liabilities (liens, arrests). This involves careful review of the land status under the building as well analysis of all documents related to the building itself.

Immediately below we provide you with a due diligence checklist for a building purchase in Ukraine.

I.         Land Status

Title certificate or certificate on right to lease the land should be carefully reviewed. In addition to documents issued before current reforms, the purchaser should require the seller to create new documents, including an extract from the State Land Cadaster and an extract from the State Register of Ownership Rights to and Encumbrances on Immovable Property;

The extract from the State Land Cadaster should indicate the full name of the owner and the land cadaster number. This information must be indicated in the notarized sale-purchase agreement in relation to the building along with the purposeful designation (zoning) of the land plot on which the building is located.

If the building was built for one zoned purposes (e.g., commercial), but the land plot has a different zoned purposes (e.g., residential), then this is an indication that the building was not properly accepted for use and legally put into operation (i.e., the building is not intended for its particular purpose). In many cases, the seller will attempt to avoid expenses on the building’s infrastructure and to put the building into operation via a court decision. However, a court decision cannot change the purposeful designation (zoning) of the land plot. Therefore, the buyer may need to take into account additional expenses required to change the zoning of the land plot.

The extract from the State Register of Ownership Rights to and Encumbrances on Immovable Property may also indicate the owner of the land plot under the building and whether there are any liens, bans or other encumbrances on the land plot. Importantly, if the building is zoned as residential and the residents created a co-owners association, then the co-owners association may be indicated as the owner of the land plot.

II.        Building Documents

1. Title document – the purchase agreement which established ownership rights and/or a certificate of ownership rights (for newly constructed buildings). These documents may have been issued for older buildings as well.

2. Extract from the State Register of Ownership Rights to and Encumbrances on Immovable Property – this is the document which confirms ownership rights to the building or a part thereof. The extract indicates the owner, the legal grounds on which ownership rights were acquired and the existence, if any, of liens, bans and other encumbrances on the building.

The State Register of Ownership Rights to and Encumbrances on Immovable Property is somewhat new and, therefore, not all buildings may be found in the register at this time. In this case, the seller will need to produce a certificate from the BTI (Bureau of Technical Inventory), which also confirms ownership rights, and the above-mentioned title documents for entrance into the State Register prior to the notarized sale-purchase transaction.

3. Technical passport – this document is created by the BTI and indicates the original layout or legally registered repair or reconstruction works. The BTI should issue this document just prior to the closing of the transaction. The technical passport contains a plan of the entire premises and the exact room and other measurements, including the zoning of the premises (i.e., commercial, residential, etc.).

4. If available, the purchaser should request the seller to product a certificate on the building’s fitness for operation/use. This document is issued by a commission of local controlling bodies which inspect the building for compliance with the building’s initial project plans and the state standards (fire safety, sanitary, etc.). In some cases, the local commission will issue a certificate without the participation of all required state bodies. In such case, the purchaser may be required to bring the building into compliance with the standards of the absent state bodies and receive their approvals at its own expense.

5. Finally, the seller should produce all agreements with utility companies (water, electricity, gas, heat, etc.) to prove that the building is connected to all of the necessary utility networks. The seller should also provide confirmation that it has no debts before these utility companies; otherwise, the purchaser may need to extinguish any such debts before it can plug into and turn on the relevant utilities.

In conclusion, investing in a Ukrainian building (residential or commercial) is no simple endeavor, and a positive outcome is always the result of careful analysis of the above documents. Please feel free to contact us at Этот адрес электронной почты защищен от спам-ботов. У вас должен быть включен JavaScript для просмотра. if you have any questions about Ukrainian property laws.

Новости

Frishberg & Partners 2012