The Law of Ukraine “On Amendments to Certain Legislative Acts of Ukraine Concerning the Conditions of Circulation of Agricultural Lands” will enter into force on July 1, 2021.

UAC Land Lawyer Victoria Kipriyanova answers questions that agrarians are interested in.

Is the existence of a land lease agreement a barrier to sale or another way of alienation of land?

No, the existence of a lease agreement or emphitheism is not a burden on the land. Any owner will have the right to manage their site at their own request. Free circulation of agricultural land offers the owner many opportunities to dispose of it. In particular, it will be allowed not only to sell the land plot but also to give it as a gift, in a trust property, to change it, to pledge the bank for a loan or to enter into life-long-term contracts and an inheritance contract where the land is also alienated.

Is the land owner obliged to notify the tenant of the wish to sell or alienate his land otherwise?

The law provides that a tenant who, under the law, may own a leased land has the pre-emptive right to purchase it in the event of sale of that land, provided that he pays the price at which it is sold. In this case, the landlord is obliged to inform the tenant in the writing form of his intention to sell the land to a third party, indicating its price and other conditions under which it is sold.

At the same time, from July 1, 2021, only individuals of Ukraine and banks will be able to acquire agricultural land plots in the order of foreclosure. Most of the current tenants are legal entities that will not be able to acquire ownership of the "sub-land" land, so the question arises, but then how can the tenant exercise his pre-emptive right if the land owner is able to sell the land to any other individual without the tenant's knowledge. At present, the Law does not answer this question. However, it is hoped that this problem will be settled by other Bills, one of which was already adopted in the first reading under No. 2194, namely in this Bill the procedure for exercising the pre-emptive right of land purchase and transfer of this right to other persons will be described in detail. Therefore, as for me, there is no need to panic. Let’s just wait for the finalization of all mechanisms through the adoption of other laws.

What will happen to the existing leases of land and emphitheism after the full-fledged agricultural land market is operational?

According to the general rule, which is defined in the current legislation, the transfer of ownership of the land (including its sale, gift, inheritance), is not a basis for early termination of the lease or amendment to it at the initiative of the new owner. All rights and obligations under such a contract are transferred to the new owner, even if he does not wish to enter into an additional agreement in the contract of replacement of the party. However, unless the land lease agreement itself provides otherwise, the transfer of ownership may be grounds for early termination at the initiative of the owner. Therefore, task № 1 is to make sure that your leases do not contain the phrase that the transfer of ownership is the basis for early termination of the contract or amending it. In addition, in my practice, I have encountered many leases that contain other conditions for early termination of the lease, For example, termination of the contract unilaterally on the initiative of the owner or tenant subject to prior notice, late payment of rent for several months, change of the owner (founder) of the tenant.

In order to preserve the land bank, it is very important to make sure that your lease agreements do not contain any condition that could justify termination of the contract. In such a case, termination will be possible only in court and in some cases. In the next article, we will talk about the top 10 grounds for early termination of a lease in court.

Is it possible to conclude a preliminary land purchase agreement now?

Preliminary is a contract, the parties of which undertake to conclude a contract in the future (the main contract) within a certain period under the conditions established by the previous contract. However, the current law provides that agreements (including power of attorney) concluded during the prohibition of sale or other alienation of land and land shares, in part of their sale and other alienation, and so the very part of the transfer of the right to alienate these land plots and land shares for the future are invalid from the moment of their conclusion. Given the above, you can usually enter into a preliminary agreement with the landowner and make certain arrangements, but such an agreement will have more of a psychological factor than a legal one. 

What to do with land already purchased under the moratorium?

It's no secret that the shadow market for agricultural land has always existed in Ukraine. For this purpose, the most commonly used schemes of land exchange (when 1 hectare was exchanged for several hectares with or without surcharge) or the contract of emphitheism (this is a long-term right to use the land). If in the case of landmines the ownership of the exchanged land was transferred to the interested party, then in the case of emphysevis, only the right to use the land without acquisition of ownership is acquired. Therefore, after the free circulation of land begins, persons who have "acquired" land under the emphitheusis agreement will still have to officially buy or continue to use them on the basis of the emphitheusis agreement. 

Will state and communal agricultural land be sold?

The adopted Law provides for a direct ban on the sale of state and communal land. However, it is not prohibited to change the purpose of the subsequent sale and sale of land held by farmers under the right of permanent use or life inherited possession (including redeveloped on lease terms). In addition, it should be noted that with the current rate of free privatization of such lands until July 1, 2021 may not remain at all, so there will be nothing to sell.

Will there be an All-Ukrainian referendum on the land market and what issues should be addressed?

The law proposes that only the referendum should approve the issue of acquisition of agricultural land by foreigners, stateless persons, and then only by acquiring a stake in the statutory (composed) capital of a legal entity that owns agricultural land. At the same time, there is no Law on All-Ukrainian Referendum in Ukraine, so it must be drafted and adopted to begin with.

How the landowner should prepare for the land market? Top 7 recommendations by Victoria Kipriyanova.

1. Full audit of land lease agreements for compliance with the law and grounds for early termination of the contract.
2. Checking the correctness of the calculation and payment of rent for the last three years.
3. Financial and accounting audit to obtain further credit for the purchase of land.
4. Correct the identified deficiencies in the lease agreements either by renegotiating the leases or by entering into an additional amendment agreement.
5. Maximize the duration of the contract by amending it.
6. Urgently renew leases that expire in the next few years.
7. Continuous work with landlords and control of the situation.