OUTSMARTING LAND MORA­TO­RIUM

Kyiv Post Legal Quarterly - - Agricultura -

To de­scribe the pic­ture of Ukrainian agri­cul­ture lands in their en­tirety, it would be best to start with sim­ple num­bers. There are nearly 42.7 mil­lion ha of agri­cul­tural lands in Ukraine that con­sti­tute 71% of the coun­try’s ter­ri­tory. Out of that num­ber, al­most 96% of agri­cul­tural lands (41 mil­lion ha) fall un­der pro­hi­bi­tion of alien­ation and change of pur­pose des­ig­na­tion (“Land mora­to­rium”). Due to this fact, 69% of agri­cul­tural lands are used on the ba­sis of lease.

Prob­lems

The Land mora­to­rium de­scribed above bears a sig­nif­i­cant le­gal prob­lem. It vi­o­lates the rights of landown­ers, which are pro­tected un­der the Ukrainian Con­sti­tu­tion, as well as the es­sen­tial rights that are guar­an­teed un­der the Pro­to­col No. 1 to the Euro­pean Con­ven­tion of Hu­man Rights. More­over, on 22 May 2018, the Euro­pean Court of Hu­man Rights ( De­ci­sion in the case

of Ze­lenchuk and Tsyt­syura v. Ukraine, ap­pli­ca­tions Nos. 846/16 and 1075/16) held that the Land mora­to­rium is il­le­gal and that the Ukrainian Gov­ern­ment should take leg­isla­tive mea­sures to en­sure the re­quired fair bal­ance be­tween the gen­eral in­ter­ests of the com­mu­nity and the rights of the own­ers of agri­cul­tural land prop­erty. How­ever, the lo­cal agri­cul­tural pro­duc­ers have very mixed feel­ings re­gard­ing the can­cel­la­tion of the Land mora­to­rium. If the Ukrainian Par­lia­ment or the Con­sti­tu­tional Court of Ukraine de­cides to can­cel it, this may lead to the alien­ation of land plots by the landown­ers prior to or af­ter the ex­pi­ra­tion of lease rights. On the one hand, the can­cel­la­tion of the Land mora­to­rium opens up a pos­si­bil­ity for the lo­cal agri­cul­tural pro­duc­ers to pur­chase the leased land plot. If, how­ever, the lo­cal agri­cul­tural pro­duc­ers have no avail­able funds to pur­chase the land bank which they use un­der the lease agree­ments, their pri­or­ity right to pur­chase the land will not be of a mas­sive as­sis­tance to them, and the land may be ac­quired by the third par­ties. Such third party as a new owner of the land will be un­der no obli­ga­tion to pro­long the lease with the lessee, es­pe­cially if they plan to use such land plot by them­selves. There­fore, if the (1) Land mora­to­rium is can­celled and (2) the land plot is alien­ated to the third party, the lessee has rather small chances to con­tinue us­ing the land plot af­ter his lease agree­ment ex­pires. This might con­se­quently lead to very lit­tle or no agri­cul­tural land at all for lo­cal pro­duc­ers that cur­rently lease the land that they use.

So­lu­tion

The so­lu­tion to the ex­ist­ing prob­lems of the Land mora­to­rium is not an easy one. Those agri­cul­tural lands that fall un­der the Land mora­to­rium, can­not be alien­ated and their pur­pose des­ig­na­tion can­not be changed, ex­cept for ex­change in spe­cific sit­u­a­tions, buy-out for pub­lic needs, or cases of in­her­i­tance. There­fore, any agree­ments in vi­o­la­tion of the above (in­clud­ing pow­ers of at­tor­ney and pre­lim­i­nary agree­ments) are null and void. Con­sid­er­ing the above le­gal mech­a­nism of ac­qui­si­tion of rights to use a land plot, the most fea­si­ble op­tion apart from lease, is em­phy­teu­sis. Em­phy­teu­sis is a right to use a land plot of a third party for agri­cul­tural pur­poses. The main ad­van­tages of us­ing the em­phy­teu­sis rights are de­scribed be­low: • par­ties may agree any term of use of a pri­vate land plot, while the term of use of a state or mu­nic­i­pal land plot should not ex­ceed 50 years; • the user (em­phy­teuta) of a pri­vate land plot may alien­ate the em­phy­teu­sis right in any way, in­clud­ing pass­ing it into in­her­i­tance; • leg­is­la­tion does not con­tain any spe­cific re­quire­ments re­gard­ing the amount of pay­ments for the use of a land plot un­der em­phy­teu­sis agree­ment; and • the em­phy­teuta of a pri­vate land plot may use em­phy­teu­sis right as a col­lat­eral. The above con­di­tions may be set only once, when en­ter­ing into the em­phy­teu­sis agree­ment.

Con­clu­sions

Em­phy­teu­sis agree­ment may pro­vide a unique so­lu­tion for the ex­ist­ing prob­lems with the Land mora­to­rium, as they are ca­pa­ble of the fol­low­ing: • en­sur­ing long-term use of the land plot by em­phy­teuta, while re­leas­ing them from the ma­jor­ity of the re­stric­tions for the land use un­der the lease agree­ment, and set­ting ground for fu­ture ac­qui­si­tion of the land plot; and • sub­sti­tut­ing sale and pur­chase agree­ments of land plots with al­most iden­ti­cal ben­e­fits for the em­phy­teuta, as for the pur­chaser of a land plot. There­fore, in a way, they en­able to out­smart the pro­hi­bi­tion. 38 Volodymyrska St., 4 floor, Kyiv 01030, Ukraine; info@avel­lum.com, www.avel­lum.com +38 044 591 3355

MYKOLA STETSENKO man­ag­ing part­ner AVEL­LUM

MAKSYM MAKSYMENKO coun­sel AVEL­LUM

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