Alex Frishberg, Esq.
Land ownership by foreign investors in Ukraine has always been a sensitive issue, especially when it comes to agricultural land. Fortunately, the rules of land ownership have changed since Ukraine’s independence, allowing foreign investors to develop land for construction purposes, and to own the buildings and land underneath them.
Below we describe the basic rules governing foreign ownership of Ukrainian land, availability of public land records, development of land for construction purposes and access to agricultural land.
- Foreign Ownership of Ukrainian Land
Both foreign citizens and legal entities may own Ukrainian land, including commercial, residential, industrial, and undeveloped land (for construction) with one notable exception: foreigners cannot own agricultural land until the moratorium is lifted by referendum. Specifically, Ukrainian legislation allows foreign investors to own non-agricultural land within city limits if they acquire real property or land for commercial development (construction) and beyond city limits if they acquire real property (houses, buildings, structures, etc.) located on the land in question.
Importantly, the Land Code of Ukraine does not specifically allow Ukrainian legal entities with 100% foreign ownership to own any land in Ukraine, stipulating that only Ukrainian legal entities that have been founded by Ukrainian individuals or legal entities may own land in Ukraine. Due to this limitation, and to avoid unnecessary risks, a two-tier corporate structure is often used by foreign investors to purchase land in Ukraine, where the foreign legal entity registers its Ukrainian subsidiary, which then registers the Ukrainian company that owns the land.
Title to a land plot can be transferrable if the land plot is registered in the State Land Cadaster. Also, as with any real estate transaction, the investor must obtain a tax ID before acquiring land and open a bank account to effectuate payment. After the investor purchases the land, its ownership must be registered with the tax authority where the land plot is located and in the Land Cadaster.
- Ukrainian Land Records
There are currently two real estate registers in Ukraine, which allow the investor fast and transparent access to property records:
1. The State Register of Property Rights to Real Estate (the “Register”), in which the ownership, lease and other property rights to land, as well as servitudes and encumbrances over land, are registered; and
2. The State Land Cadaster, in which the technical information about land is recorded (e.g., the area, zoning (designated use), owner and/or user, and restrictions and encumbrances). The operation of the State Land Cadaster is regulated by the Law of Ukraine “On the State Land Cadaster”, dated July 7, 2011.)
The Register and State Land Cadaster are electronically connected, and information contained in one of these registers must be automatically transferred to the other.
As a rule, all land plots in Ukraine must be registered within the State Land Cadaster, which contains information including the land’s cadaster number, owners, restrictions, boundaries and technical details of the land, etc. In fact, the sale or leasehold of land cannot take place until the land is duly registered and is appointed a cadastral number.
If ownership of land was acquired after January 1, 2013, the title to the land is confirmed by the extract from the Register in electronic or paper form. However, some land plots remain unregistered because they were acquired prior to implementation of mandatory registration procedures on January 1, 2013. In such cases, the ownership of land is confirmed by the state act on ownership rights to the land plot, and rights to such land plots are recognized despite the absence of registration. In any event, the land plot must be registered (both the land plot and ownership rights) before any other legal transactions take place.
- Land Development
Today, it is easy to obtain reliable up-to-date information about land rights. In fact, all property rights, leasehold rights and security interests to the land are registered and displayed in an electronic public register of property rights and encumbrances.
Land development is regulated by the Law “On the Regulation of City Development Activities,” and “On Architecture.” Such planning and zoning are carried out at the state, regional and local levels. Local municipalities typically control land-use and development through comprehensive plans of territorial communities, detailed plans of territories both inside and outside of cities and villages, master plans of cities and villages and land zoning. Failure to comply with zoning requirements leads to administrative liability, requiring the builder to rectify violations, pay fines and possibly demolish unauthorized construction.
At the local level, the local council of people’s deputies (City Council) prepares a comprehensive plan for development of territories and settlements. Together, these documents serve as a foundation for the development, planning, building and use of the territory, including any restrictions on land use, specific requirements for building and landscaping, etc. Unfortunately, development of zoning conditions can become a complicated, protracted and highly politicized process, which may require public consultations and amendments to zoning documentation.
The actual development and construction of real estate is regulated not only by a plethora of planning and zoning regulations, but also construction permits and licensing requirements. Before obtaining a construction permit, the developer must comply with all requirements for construction, from adhering to the local land zoning requirements to permissible maximum heights of buildings/structures. Moreover, the Ukrainian authorities will oversee the construction site before commissioning. They may visit the site, check compliance of used materials, on-site safety, qualifications of engineers involved, review licenses and construction permits, etc.
- Agricultural Land
After a 19-year moratorium on March 31, 2020, the Parliament approved the Law No. 552-IX “On Amendments to Certain Legislative Acts of Ukraine on the Conditions of Circulation of Agricultural Land”. This historic law lifted the moratorium on trade in agricultural land, setting in motion long-awaited agricultural land reform. For the first time in the history of independent Ukraine, owners of agricultural land had the right to sell their land. The law stipulates that from July 1, 2021, only citizens of Ukraine can acquire ownership of agricultural land up to 100 hectares.
The second stage of the land reforms started on January 1, 2024, when Ukrainian citizens as well as Ukrainian legal entities owned by Ukrainian citizens could acquire agricultural lands of up to 10,000 hectares.
The third stage will open the market for foreign individuals and legal entities. However, the question of whether to grant foreigner investors the right to purchase Ukrainian farmland will be decided through an all-Ukrainian referendum, which can only take place after the war, but the outcome of such referendum is unlikely to be favorable.
In the meantime, neither foreign citizens and legal entities nor Ukrainian legal entities owned by foreign citizens are allowed to own agricultural land plots. The only way a foreign investor can carry out agricultural production in Ukraine is by leasing or sub-leasing land plots from an existing farming operation (individual farmer landowners, a collective agricultural enterprise/cooperative, etc.).
- Conclusion
Ukrainian land laws are constantly evolving, allowing foreign investors to own land plots for residential, commercial and industrial purposes, with one notable exception: agricultural land. However, taking into consideration the scale of construction work that will be required after the war, and recent indications from Ukrainian Cabinet of Ministers that foreign companies may enter the market with simplified licensing requirements, there will be plenty of work in non-agricultural settings in Ukraine.
