Publication

Property right

The Chapter is prepared by M. Shcherbatyuk, UHHRU, featuring Olha Shevchuk-Klyuzheva.

Ukraine has already risen in a ranking of the World Bank of Ease of Doing Business for the second time in a row in 2015. Ukraine ranked the 83rd, having improved its position by 16 points. Research showed that simplification of registration procedures and, in particular, improvement of registration system of the rights to real estate became the key reform, which promoted increase of a rating of 2015: the number of registration procedures has decreased from 8 to 7, their average duration – from 45 to 23 days. [1]

The expansion of a circle of subjects that have been granted the authority to receive and issue documents in the sphere of the state registration of the rights to real estate was important in 2015. Now, the possibility to exercise these powers is fixed at the legislative level by the officials of local government authorities, administrators of the Administration Service Centre and notaries. The Draft Law “On the State Registration of the Rights to Real Estate and Their Encumbrances” No. 2982 was prepared in order to implement these changes, which was adopted in the first reading on July 14, 2015.

Decentralization is necessary in this sphere, as the significant burden on the authorities of the registration department is the main problem for today that gives rise to corruption factors (to pass out of turn, to receive the corresponding piece of paper for remuneration, etc.).

The positive is the fact that the State Register of Proprietary Rights to Real Estate is the single state information system, containing information on the rights to real estate, their encumbrances, as well as objects and subjects of these rights. The Register contains information on the registered rights and encumbrances, subjects of the rights, objects of the real estate, documents, based on which the state registration of the rights is carried out, and cartographical (graphical) information. The database about registration of applications and requests, as well as the registration files is the integral component of the State Register of Proprietary Rights to Real Estate.

There are still some issues associated with the fact that some real estate objects from the old registers have not yet been transferred to the new register, but these are issues of more technical nature that are specific to the transition period.

The electronic form of issue of the state registrar decisions, extracts from the Register, has been introduced at the same time; the shortened terms for provision of services and the amount of payment for them in such terms have been established.

Increase of transparency of the proprietorship registers became the break, in particular because of the possibility to obtain information on owners of real estate in the open access. Thus, the President signed the Law of Ukraine “On Amendments to Some Laws of Ukraine concerning Strengthening of Transparency in the Sphere of the Property Relations in Order to Prevent Corruption” on August 2015, which provides for simplification of access procedure to the information, contained in the State Register of Proprietary Rights to Real Estate, provision of the free access to the State Land Cadastre and the Unified State Register, which holder is the State Automobile Inspectorate of the Ministry of Internal Affairs of Ukraine.

The problematic issues may include inconsistency, when reforming the land relations at earlier stages, the poor material support of the state registration authorities and the software imperfection. Both the business representatives and the ordinary citizens suffer from this, and the agricultural producers are included, unfortunately, in the high risk group. The last mentioned conclude lease contracts on shared land plots in the greatest number, and the registration procedure of the lease right drags on for many months and even years.

In addition, there is problem of registration of the real estate rights, located in the territory of temporarily occupied Autonomous Republic of Crimea and in areas of ATO.

 

  1. Guarantees of Judicial Protection of the Property Rights

The cases on claims for protection of the property rights belong also to the most common categories of civil cases, though the guarantee of property right exercise and its protection is enshrined in the domestic legislation. However, the court practice demonstrates that courts do not always adhere to the common approach to application of the legislation in this category of cases.

This concerns, for example, problems during the interpretation and application of provisions of Art. 331 of the Civil Code of Ukraine (hereinafter referred to as the CC of Ukraine) on recognition of the property rights to the real estate newly created and the construction in progress, their separation on disputes between spouses that are rather widespread for today. Amendments to Art. 331 of the CC of Ukraine do not provide the recognition of the property right to construction in progress in judicial proceeding as the real estate, which has special legal regime according to the law. At the same time, Article 331 of the CC of Ukraine does not prohibit the recognition of the property right to construction in progress in judicial proceeding as the thing.[2]

Absence of the regulation in the law, which would allow recognizing the property right to construction in progress in judicial proceeding creates a number of questions, as the dispute between subjects of the civil legal relationship may occur before introduction of the construction in progress in operation and prior to its state registration. The concept “construction in progress” is interpreted ambiguously in the Ukrainian legislation that complicates to protect the rights of subjects of civil legal relationship.

In order to eliminate the specified problems, plenum of the Superior Specialized Court of Ukraine for Consideration of Civil and Criminal Cases adopted the resolution No. 5 “On Court Practice in Cases of Protection of the Property Right and other Proprietary Rights” dated February 7, 2014, in order to ensure the correct and uniform application of the legislation on the origin, termination, protection of the property right and other property rights by courts. The lawyers stated a certain positive impact of this resolution, noting that judges have begun to apply the Resolution of plenum quite often, and the appeal courts correct mistakes of the courts of the first instances, using this Resolution.[3]

In addition to the above, violation of reasonable times of hearing of cases by courts complicates the protection of the property rights. It follows from the analysis of the information provided by courts that their inadequate preparation, poor preliminary court hearing, shortcomings in deciding on the appointment of the forensic examination are the main reasons of violation of reasonable times of civil proceedings.[4]

Therefore, despite certain positive moments, we cannot speak about the significant improvement of situation in judicial protection of the property rights, in many respects because of problems, which are in judicial system in general, mistrust of the population to this institution, low authority of courts in Ukraine.

 

  1. Failure to Execute the Decisions of Judges that Protect Property

The failure to execute the decisions of the domestic courts is the essential issue for protection of the right to peaceful ownership of the property.

Despite some attempts of the state to improve the procedure of such decisions execution, the problem is still extremely important and concerns a large number of people, who face inability to protect the property right.

According to the Government, the state allocated and paid 76.96 million UAH in 2014 to execute the decisions according to the Law of Ukraine “On the State Guarantees of Execution of Court Decisions” and 4,005 court decisions have been executed. 150 million UAH of the state budget are provided in 2015 for these purposes.[5]

Nevertheless, it is important to note in this context that the same government statistics suggest the fact that the debt on failure to execute the decisions of the domestic courts, where a defendant is the state, was 7,544,562,370 UAH as of January 1, 2015.[6] And, if you compare the amount of debt and funds, allocated for its discharge, then the huge difference between these two figures is obvious. Thus, 150 million UAH is only 1% of the total amount of the debt. This is only if we take the official statistics of the amount of debt, in reality the amount of debt may be much bigger and then a difference becomes even more critical. Considering this difference, execution of decisions of the domestic court may take decades.

Considering this situation, the state offered to solve a problem of lack of financing through the implementation of an opportunity of the debt repayment by means of bills of exchange. In particular, such opportunity was provided in the Law of Ukraine “On State Budget of Ukraine for 2015”. However, there are essential shortcomings even in this version, related to the fact that it is possible to receive only 10% of a debt in cash within the project, as well as the 2-year period is set, during which there will be no execution according to the decision, and the 7-year period of debt restructuring is too long delay of execution of the judgment.

Furthermore, the percentage, which the state plans to pay in case of failure of execution (3%), is too low and does not cover even an annual inflation rate. The weak securities market in Ukraine exacerbates the problem, which significantly complicates the use of bills of exchange, as the effective mechanism; therefore, it is too early to speak about this tool as a real and effective way to solve the problem.

If you concern the procedural aspects of this problem, then the Cabinet of Ministers of Ukraine adopted the Resolution No. 440 in August 2014 that has introduced the new procedure for execution of judgments, where the state is a defendant and execution of such decisions was directly assigned to the State Treasury. The relevant register of unsatisfied judgments was also created, which this state authority should perform by turns.

However, there were also the problems, since this procedure caused many technical problems during the transfer of such judgments for execution. The statistics show that according to the procedure, introduced by the Resolution No. 440, 19,920 judgments have been submitted to the territorial departments of the State Treasury Service. But only 8,910 such decisions have been accepted for execution by the State Treasury. Other decisions either were in processing or were returned back to the relevant executive service. It means that nearly 60% of judgments were not acceptance by the State Treasury. These are only judgments, which were transferred to the State Treasury by the public executive service.

The presence of moratoriums on claims to property in Ukraine is the essential negative aspect of providing the right to peaceful ownership of the property. Thus, the moratorium on forced sale of property has continued to be in force. The Law of Ukraine “On Introduction of the Moratorium on Forced Sale of Property” was amended on July 26, 2015, but these amendments concerned the removal of this moratorium only for one organization, namely it has been determined that the moratorium does not apply to the forced sale of property for debt repayment to “Naftohaz” and its subsidiary companies, supplying gas according to the license. Such selective approach in removal of the moratorium for the certain public companies shows once again the significant problem of these moratoriums to establish the same guarantees for the various forms of ownership in Ukraine.

At the same time, the moratorium on initiation of bankruptcy proceedings for the entities of fuel and energy complex introduced on June 23, 2005, has been partially stopped since September 1, 2015. Application of this moratorium did not allow recovering debts from the insolvent debtor in bankruptcy proceedings, instead, it allowed some number of persons on the basis of sector profile (“the entities of fuel and energy complex”), not to pay debts legally for their obligations, to evade paying taxes, to distort a competitive environment that negatively affected the level of contract performance in Ukraine, the level of protection of the rights of creditors, worsened the investment attractiveness of the domestic economy and created enormous corruption risks. However, this moratorium has not been removed for the State Enterprise “Energoatom” National Nuclear Energy Generating Company”, for which this moratorium has been prolonged until January 1, 2016.

It should be also noted that there were attempts to introduce new moratoriums in 2015, which would complicate the execution of judgments, which protect property. Thus, the Verkhovna Rada adopted the Law of Ukraine “On the Moratorium on Alienation of Property of Citizens of Ukraine, Provided as Collateral for Loans in Foreign Currency” on December 28, 2014. The President of Ukraine vetoed this law.

 

  1. Guarantees of the Protection of Right for Peaceful Ownership of the Property in the Temporarily Occupied Territories

The issue of property rights protection in the temporarily occupied territories is very serious. In this regard, there are several aspects that attract attention:

  • problem of obtaining the compensation for the property damaged as a result of armed conflict;
  • problem of obtaining the compensation for property, taken away from citizens illegally, who left it in the occupied territory under pressure;
  • problem of preserving remained property from unlawful seizure by unknown persons.

The Ukrainian officials do not extend their jurisdiction to the temporarily occupied territory; this deprives of the opportunity to protect the legitimate rights and interests. Obtaining compensation from the state for the losses, caused by military operations, is possible only if there are proofs of the causing, cause and effect relationship, as well as the financial assessment of damage. It is impossible to make all this, that means actually the impossibility to succeed in a courtroom. Accordingly, we can speak not about protection of the violated right, but rather that this right is violated.

The property, located in the ATO zone, can be sold. There are two ways to solve this issue: the general power of attorney for disposition of property, which can be received in the occupied territory, as the notarial register of powers of attorney is accessible for notaries, or registration of agreement in the territory controlled by Ukraine. But the market of sales and purchase of the real estate is outdated and almost stopped for today. There are not many persons, who want to sell the only property for next to nothing, without having opportunities to purchase the real estate in other region of Ukraine.

However, there is an opinion that it is better to sell it for three kopeks, than to give just for a thank you, as you cannot protect the property by any legal method, since there are no mechanisms of such protection today. However, the state demands from immigrants to pay the real estate tax in the ATO zone (as evidenced by the recent clarification of the State Fiscal Service), forgetting the basic theoretical principles – the property right has three powers: right of possession, use and disposal. On the one hand, only availability of all three components gives the full right, protected by Art. 42 of the Constitution of Ukraine, on the other – the owners objectively have no opportunity to use property in the ATO area.[7]

 

  1. The Moratorium on Sale of Agricultural Land

Setting the moratorium on the agricultural lands, the state pursued the purpose of consolidation of the agricultural lands in hands of their owners and, thus, the guarantee of use of this category of lands for the intended purpose. However, this purpose has been unattainable during 2015. Using the land plots by their owners is economically unprofitable; the commodity agricultural production on 4 hectares of the area averagely is inefficient that stimulates shadowing of the land market. The question arises – is “the common interest”, which the state sets itself, reached, despite the fact that the practice shows the actual bypass of moratorium?

The Ministry of Agrarian Policy and Food of Ukraine registered the Single Complex Strategy for Development of Agriculture and Rural Territories for 2015-2020. According to this program, the working group aims to prepare the implementation of the public and transparent market of agricultural lands, including the pilot implementation of different models of economic turnover of agricultural land in certain districts based on the state and legal experiment. We can assume that start of such project is important for achievement of an ultimate goal; however, its effectiveness can be estimated only over time.

Nevertheless, the state has made objectively not enough to form the public land market in this year since January 1, 2016. Statements of the President on the need of the public land market remain at a first-priority stage of implementation. As a result, the Verkhovna Rada of Ukraine once again adopted the law on November 10, 2015 that prolonged the moratorium.

 

Recommendations

1. Create the transparent and efficient system of the state registration of the rights to real estate.

  1. Improve the protection of the rights of landowners, create mechanisms for combating forced seizure of these lands, and adopt legislative acts, which would regulate the fundamental aspects of the land market functioning.

3. Ensure the existence of effective judicial protection of the rights of owners and, in particular, take the measures for the problem resolution of non-execution of decisions of domestic courts protecting property, including the judicial control over the execution of court decisions, as well as terminate the moratorium on the enforced sale of property of the state enterprises. In addition, ensure the prompt implementation of provisions of the Law of Ukraine “On State Guarantees of Execution of Court Decisions” and allocation of sufficient financial resources for its implementation.

4. Improve the system of control over the compliance with the law during privatization procedure of the land plots and promote transparency of such procedures.

5. Abolish the moratorium by stages on alienation and change of the assigned purpose of the agricultural land plots. Promote adoption of the Law of Ukraine “On the Land Market”.

6. Improve the mechanism for changing the assigned purpose of the land plots and establish the clear criteria, by means of which the possibilities or restrictions of the land plots use will be determined.

7. Promote transparency and simplification of procedures for housing construction, as well as enforce the rights of investors in this sphere.

8. Regulate the problem of seizure of lands and housing for reasons of social necessity in clear compliance with the Constitution and the international commitments, undertaken by Ukraine.

 

[1] http://www.doingbusiness.org/data/exploreeconomies/ukraine/#registering-property

[2] The members of the High Council of Justice A. Oliynyk and A. Miroshnychenko participated in the international conference “Property Right: European Experience and Ukrainian Realities” http://www.vru.gov.ua/news/1130

[3] Judicial practice: Case of property http://jurist.ua/?article/869

[4] Justice with failures http://zib.com.ua/ru/print/119114-samimi_rasprostranennimi_oshibkami_yavlyayutsya_nesoblyudeni.html

[5] It is determined in the proposal of the Cabinet of Ministers of Ukraine to the Committee of Ministers of the Council of Europe on case on implementation of the pilot decision “Yuriy Mykolayovych Ivanov v. Ukraine” dated 2015

[6] Law of Ukraine “On State Budget for 2015”

[7] Judicial practice: Case of property http://jurist.ua/?article/869

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