Aspects of buying residential, commercial and industrial real estate in Ukraine

The Civil Code of Ukraine, namely clauses 2 and 318 of the same, provide that the foreign corporate entities and foreign individuals have the same rights as Ukrainian citizens to purchase, own and dispose of real estate and other property in Ukraine. Earlier the same regulations were provided by the Law of Ukraine "On property", but later on with adoption of the new Civil Code of Ukraine, this law was canceled and instead the same regulations were included into the Civil Code of Ukraine as stated above.

So Ukrainian legislation allows foreign corporate entities and individuals to own almost any property in Ukraine (including the real estate) and use such property with personal and commercial (business) purpose and accordingly to rent, lease, sale, pledge and mortgage such property in Ukraine and to collect revenues, profits and fruits of such property in Ukraine.

In order to buy residential, commercial or industrial premises in Ukraine the buyer has to verify appropriate title documents form the seller (however even Ukrainian corporate entities and private persons in most circumstances have no enough legal knowledge and experience for doing this and normally this work is done by Ukrainian lawyers). Mainly there are should be at least three documents presented by the seller for verification as regarding the property, namely:

- appropriate title document for the real estate in the issue (it could by certificate of privatization, sale and purchase, exchange (barter), gift, etc. contract of valid form, a judicial award, etc.);

- appropriate reference (extract) from the Uniform State Registry of the Real Estate Rights showing that the seller is owner of the real estate in the issue (such extract can be received at the local Bureau of Technical Inventory (BTI));

- appropriate reference from the Unified State Registry of Encumbrances showing that the real estate is not mortgaged, arrested and has no other encumbrances.

Therewith should be mentioned that this is responsibility of the seller to provide the buyer with all the required and enough title and other documents as concerning the real estate in the issue in order to prove to the buyer and his lawyer his title of ownership and absence of encumbrances. In other words buyer and his lawyer do not have to collect such documents instead the documents are to be collected by the seller (or his lawyer) and presented to the buyer for check-up and verification.

Together with the above documents a wise buyer (and the lawyer at his side) would also require from the seller to present his valid passport and tax number (copies of these documents together with originals of the same in order to be sure that the copies are the exact copies of the originals) – if the seller is a private individual; and accordingly the above documents (valid passport and tax number) of their first manager and appropriate documents proving his powers to sale the real estate – if the seller is a corporate entity (a good lawyer knows exactly which documents are required in this regard).

Another very important aspect is the form required for the sale and purchase contract. Clause 657 of the Civil Code of Ukraine provides that sale and purchase contract for land plots, integral property complexes, residential house (flat) and other real estate is to be made in the written form with required notarization and state registration.

Therefore in order to make a real estate sale and purchase contract a foreign natural person is to have the following documents:

- passport (or other passport document) with a valid visa;

- tax payer number on the territory of Ukraine (natural (private) person is to have the personal Ukrainian tax number. This tax number has every Ukrainian citizen of the full age and the number is used to tax income, which is collected in Ukraine. Therefore if it is planed to make in Ukraine a contract or agreement, which requires notarization and state registration in Ukraine, a person (mostly non-residents of Ukraine) have to take care in advance of getting such tax number in Ukraine. Our Law Firm can get this tax number for you in advance.).

And accordingly in order to make a real estate sale and purchase contract a foreign corporate entity has to present the following documents (together with certified translation of the same into Ukrainian language):

- bylaw documents and appropriate references (i.e. charter, memorandum, articles of association, articles of incorporation, etc.) duly legalized for use in Ukraine (apostille or consular legalization is required and translation into Ukrainian language as well);

- a resolution on the appointment of appropriate official, who has the right to sign documents for and on behalf of the foreign corporate entity or appropriate valid power of attorney with the same powers. If the representative acts on the grounds of appropriate resolution his signature on the contract is to be certified with appropriate corporate seal of such foreign corporate entity.

Another one very important moment is the required state registration of a real estate sale and purchase contract as far as the Civil Code of Ukraine provides, that the title of ownership for the property (including real estate) appears at the moment of state registration of such contract, but not at the moment of signing and notarizing the same. Should be mentioned that the state registration of sale and purchase contract is made not at the notary's office, but at the special state bodies (if talking about registration of the real estate sale and purchase contracts in Ukraine, such state body is the Bureau of Technical Inventory (brief name of this body is accordingly BTI, abbreviation is the same even for Ukrainian spelling of its name – "Byuro Tehnichnoyi Inventaryzatsiyi") and accordingly this procedure requires some time to be performed.

And namely the problem in this regard is that an unconscientious seller may still, using duplicate title documents, sell the same real estate to another buyer(s) over a period of several days and arrange it before the first sale appears publicly in the state registry, which is kept by the Bureau of Technical Inventory. Therefore, in order to minimize this risk, a buyer needs to apply for the state registration of his real estate sale and purchase contract immediately after notarization of the same. Of course it’s better to stipulate that full payment is made only after the registration. In this regard rather helpful can be background check-up of the seller and the real estate in the issue as far as this allows refusing many un-honest intentions of the seller at very early stage and therefore escape of most risks related with such transaction for rather small amount of time and money.

Once have collected all the required documents from the seller we strongly recommend to make due diligence of these documents. Of course this is rather sophisticated work for a good Ukrainian lawyer, which accordingly costs some money, but is very required for every Ukrainian buyer and more then this for a foreign real estate buyer. A failure to do so may result in loss of full amount paid for such real estate or buying the "problematic" real estate with third parties claims. Of course it’s better to stipulate that full payment is made only after the registration. In this regard rather helpful can be background check-up of the seller and the real estate in the issue as far as this allows refusing any un-honest intentions of the seller at very early stage and therefore escape of most risks related with such transaction for rather small amount of time and money. Such due diligence is vitally important when buying the real estate on the secondary real estate market of Ukraine.

Due diligence of the real estate should also include appropriate check-up and verification procedures in order to be sure that the real estate in the issue is encumbrance-free. There is the special registry of encumbrances in Ukraine.

The basic property encumbrances in Ukraine are:

- lease (rent) contracts or documents with the similar legal meaning establishing third parties rights for the real estate in the issue;

- judicial award or writ, which prohibits alienation of such property by its title owner;

- contractual mortgage;

- tax lien (such liens are possible in the case if owner of the real estate has not paid in full his tax liabilities).

The above information is provided herein in educational and informative purposes only. It is provided that you have to get appropriate legal advice as regarding the legal and other issues of your interest in Ukraine in order to have the exact, extensive and up-to-date legal and other related information.

Do not hesitate to contact us if you have any questions or issues of legal nature, our Law Firm is working for you and our experienced legal specialists are always ready to help providing the client with appropriate legal consultations, legal reports and summaries, reasonable legal advices and all the other required legal support, assistance, coverage and protection.

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