{"id":82,"date":"2012-04-23T19:06:18","date_gmt":"2012-04-23T19:06:18","guid":{"rendered":"https:\/\/baron.yakimaxim.site\/article-ukraine-s-foreign-investors-and-the-lifting-of-farm-land-moratorium\/"},"modified":"2026-03-12T10:42:03","modified_gmt":"2026-03-12T10:42:03","slug":"article-ukraine-s-foreign-investors-and-the-lifting-of-farm-land-moratorium","status":"publish","type":"post","link":"https:\/\/frishberg.com\/uk\/article-ukraine-s-foreign-investors-and-the-lifting-of-farm-land-moratorium\/","title":{"rendered":"Ukraine\u2019s Foreign Investors and the Lifting of Farm Land Moratorium"},"content":{"rendered":"<div class=\"vgblk-rw-wrapper limit-wrapper\"><p style=\"text-align: justify;\"><span style=\"color: #000000;\">April 23, 2012 <\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"color: #000000;\">TO: Clients and Friends of the Firm\u00a0<\/span><br \/><span style=\"color: #000000;\">FR: Alex Frishberg, Esq. <\/span><br \/><span style=\"color: #000000;\">RE: <strong>Ukraine\u2019s Foreign Investors and the Lifting of Farmland Moratorium <\/strong><\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"color: #000000;\">Ukraine has long been called \u201cthe bread-basket of Europe,\u201d and for one excellent reason: its fertile,\u00a0black soil. The estimated value of this treasure is anywhere between 40 and 80 billion dollars. The\u00a0only problem with investing in such an obviously profitable business was an artificial\u00a0bureaucratic\/legislative barrier commonly known as the \u201cmoratorium on alienation of farm land\u201d\u00a0(the \u201cMoratorium\u201d).\u00a0<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"color: #000000;\">As a background, the Moratorium prohibits not only alienation of any land that is designated\u00a0(zoned) as \u201cfarm land,\u201d but it specifically bars all foreign citizens and foreign-owned companies\u00a0from owning such land. Consequently, foreign investors had no choice but to gain a foothold in\u00a0agricultural land by leasing it directly from farmers that could legally own their small parcels. The\u00a0lease term was usually either medium (up to 25 years) or long-term (up to 99 years), with an option\u00a0to buyout such land whenever the Moratorium was lifted.\u00a0<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"color: #000000;\">Using this set up, foreign investors registered wholly-owned Ukrainian companies, which would\u00a0sign literally hundreds or even thousands of lease agreements with private farmers, allowing them\u00a0to accumulate fairly large parcels of farmland. In one way or another, all of these foreign investors\u00a0planned to cash in whenever the Ukrainian government lifted the moratorium. Some hoped to sell\u00a0their Ukrainian companies, with valid lease agreements, to the highest bidder(s). Others invested\u00a0into the infrastructure (buildings, tractors) and planned to purchase their leased land so that they\u00a0could continue running their farming operations long-term.\u00a0<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"color: #000000;\">At long last it appears that the Moratorium will be lifted in 2013. Will these foreign investors\u00a0finally be able to buy the farmland they have been leasing all these years? Highly doubtful. After\u00a0all, this is Ukraine, where doing business has never been easy or predictable. Once again, an\u00a0unfortunate legislative tendency of creating unnecessary problems will probably repeat itself for the\u00a0following reasons.<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"color: #000000;\">The Land Cadastre Law is a very ambitious piece of legislation, which regulates the main principles\u00a0of forming and maintaining the land cadastre (the unified land register of all landholders in\u00a0Ukraine). A major portion of this law has come into force on January 1, 2012, while the remaining\u00a0provisions will come into effect only in 2013. Unfortunately, all too many if its provisions refer to\u00a0specific procedures necessary to register farm land in the cadastre that are yet to be determined by\u00a0sub-legislative acts of the Cabinet of Ministers of Ukraine.\u00a0<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"color: #000000;\">The Land Cadastre Law has introduced a number of changes to the Law \u201cOn Land Lease\u201d and other\u00a0laws, requiring lessees (in many cases, foreign investors) to re-enter into their lease agreements with farmers. Pursuant to the amendments to the Law \u201cOn Land Lease\u201d, one of the material provisions\u00a0of a lease agreement is the cadastre number of a land plot. If a lease agreement fails to reflect one\u00a0of the required material provisions, then it may be deemed to be invalid (i.e., terminated). Also,\u00a0prior land valuation will have to be reconsidered in line with the indicative price of land leases.\u00a0These two factors will also need to be reflected in the land lease agreements with farmers.\u00a0<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"color: #000000;\">Presently, only the Land Cadastre Law has been passed, and the last barrier to lifting the\u00a0moratorium remains the passing of the law on the land market. In fact, the Ukrainian Parliament\u00a0has already adopted a draft law \u201cOn the Land Market\u201d No. 9001-1 in July, 2011, and even\u00a0published it on its website. On its face, this document permits the sale of agricultural land plots\u00a0starting on January 1, 2012, although the absence of other necessary legislation (and accompanying\u00a0instructions) made that deadline seem irrelevant.\u00a0<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"color: #000000;\">The initial draft law \u201cOn the Land Market\u201d provided that the acquisition of agricultural land by\u00a0foreign citizens and companies with non-resident shareholders holding over 10% of the authorized\u00a0capital is prohibited. Only Ukrainian citizens and farming businesses will be able to purchase\u00a0agricultural land; however, they will NOT be allowed to change the purposeful designation (zoning)\u00a0of such land plots for the duration of ten years (i.e., once labeled \u201cfarmland,\u201d one cannot re-zone\u00a0into, for example, \u201cresidential development\u201d for ten years).\u00a0<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"color: #000000;\">Other significant limitations existed, including: (a) the re-sale of agricultural land in this period will\u00a0be possible only upon payment of 30-100% of its normative value; (b) agricultural land plots may be purchased directly from the seller or at auctions; (c) a Ukrainian citizen may not purchase more\u00a0than 2,100 hectares in the steppes (temperate grassland\/prairie), 1,500 hectares in forest areas or\u00a0900-1,100 hectares in mountain regions.\u00a0<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"color: #000000;\">On December 9, 2011, the Ukrainian Parliament passed a yet another draft of law No. 9001-d \u201cOn\u00a0the Land Market,\u201d which also contains significant barriers to land ownership by foreign companies.\u00a0First, this law strictly prohibits all non-residents (foreign companies) from buying Ukrainian farm\u00a0land. Second, the law excludes all legal entities from the list of potential landowners, allowing only\u00a0various government agencies and Ukrainian citizens to own such land (even then, Ukrainian natural\u00a0persons cannot own more than 100 hectares of land).\u00a0<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"color: #000000;\">Another problem in the draft law is a rather strange tax on the potential farm land buyers: if\u00a0purchased during the first year permitted by the law, the buyer has to pay one hundred percent\u00a0(100%) of the land plot price. This number drops by 10% for the second year (90% tax), with\u00a0similar reductions in each following year. This provision assures that any interested buyer will have\u00a0to pay about twice the value of any land.\u00a0<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"color: #000000;\">Last, but not least, the looming threat of eminent domain (government take-over of land) is everpresent.\u00a0Under the current draft law, any lease agreement may be terminated if the lessee fails to\u00a0comply with the land designation (purpose) or somehow damages the quality of the leased land.\u00a0Such cancellation of lease agreements frightens many investors, existing and potential.\u00a0<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"color: #000000;\">Importantly, none of the above barriers apply to \u201cnon-agricultural land.\u201d Obviously, one loophole that many foreign lessees will seek to employ involves having the farmers (lessors) change the socalled \u201cpurposeful designation\u201d (zoning) of the land thereby selling to buyers land with another purposeful designation (private, commercial, etc.). How is that done? GosZemAgency gave its consent in several regions for scientific research institutes in the fields of land use and land improvement to issue conclusions regarding the nature of certain lands and their unsuitability for use in agricultural business. Any land judged to be \u201cimpoverished or bare\u201d is by definition considered to be poorly adapted for agricultural use\/business, thereby allowing the local authorities (Regional Councils) to change the \u201cpurposeful designation\u201d due to their unsuitability for agricultural use. After this change, the owners (farmers) may sell such land without any limitations\u00a0set on the sale-purchase of agricultural land.\u00a0<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"color: #000000;\">For those who elect to change the \u201cpurposeful designation\u201d of their land, time is of the essence.\u00a0They must do so before any information in the land cadastre will be transferred from paper to\u00a0electronic form and published on the website of GosZemAgency and other internet sources. While\u00a0the information from the land cadastre has not yet been published on the Internet, there is still an\u00a0opportunity to change purposeful designation (zoning).\u00a0<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"color: #000000;\">In conclusion, it appears that the long-awaited lifting of the moratorium on sale of farmland will\u00a0take place in 2013. Nobody can predict the final rules that will eventually emerge. Although the\u00a0necessary laws and instructions, which will regulate this complex process, are yet to be passed, one\u00a0thing is certain: the initial transfer of land will be problematic for numerous legal and bureaucratic\u00a0(administrative) reasons, some of which were outlined above. At that point, the assistance of\u00a0experienced lawyers will become indispensible.<\/span><\/p>\n\n\n<div class=\"wp-block-buttons is-layout-flex wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link wp-element-button\" href=\"https:\/\/www.mondaq.com\/inward-foreign-investment\/193400\/ukraines-foreign-investors-and-the-lifting-of-farm-land-moratorium\" target=\"_blank\" rel=\"noreferrer noopener\">Also read on mondaq<\/a><\/div>\n<\/div>\n\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n<\/div><!-- .vgblk-rw-wrapper -->","protected":false},"excerpt":{"rendered":"<p>April 23, 2012 TO: Clients and Friends of the Firm\u00a0FR: Alex Frishberg, Esq. RE: Ukraine\u2019s Foreign Investors and the Lifting of Farmland Moratorium Ukraine has long been called \u201cthe bread-basket of Europe,\u201d and for one excellent reason: its fertile,\u00a0black soil. The estimated value of this treasure is anywhere between 40 and 80 billion dollars. The\u00a0only&#8230;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_links_to":"","_links_to_target":""},"categories":[65,117],"tags":[],"class_list":["post-82","post","type-post","status-publish","format-standard","hentry","category-legal-analysis","category-real-estate-and-construction"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.9 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Ukraine\u2019s Foreign Investors and the Lifting of Farm Land Moratorium - Frishberg &amp; Partners\u200b<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/frishberg.com\/uk\/article-ukraine-s-foreign-investors-and-the-lifting-of-farm-land-moratorium\/\" \/>\n<meta property=\"og:locale\" content=\"uk_UA\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Ukraine\u2019s Foreign Investors and the Lifting of Farm Land Moratorium - Frishberg &amp; Partners\u200b\" \/>\n<meta property=\"og:description\" content=\"April 23, 2012 TO: Clients and Friends of the Firm\u00a0FR: Alex Frishberg, Esq. RE: Ukraine\u2019s Foreign Investors and the Lifting of Farmland Moratorium Ukraine has long been called \u201cthe bread-basket of Europe,\u201d and for one excellent reason: its fertile,\u00a0black soil. The estimated value of this treasure is anywhere between 40 and 80 billion dollars. 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RE: Ukraine\u2019s Foreign Investors and the Lifting of Farmland Moratorium Ukraine has long been called \u201cthe bread-basket of Europe,\u201d and for one excellent reason: its fertile,\u00a0black soil. The estimated value of this treasure is anywhere between 40 and 80 billion dollars. 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