Information message
Dear colleagues!
The first week after the opening of the land market has already given its results and finally got the ball rolling. As market practices began to take shape, additional issues began to arise that needed to be clarified (including at the legislative level).
In the end, our clients have encountered quite controversial positions of notaries, which we would like to draw attention to in this message.
Myth number 1:
A person will not be able to buy all 100 hectares if he/she already owns land
The first and most obvious myth we heard from notaries, in particular, in Kharkiv and Chernihiv regions.
To dispel this myth, it is enough to read the provisions of paragraph 15 of the Transitional Provisions of the Land Code of Ukraine. The fact is that it clearly states that the temporary restrictions on 100 (one hundred) hectares that may be owned by one person do not apply to land acquired before July 1, 2021.
Thus, for the purposes of setting limits, only land plots acquired after July 1, 2021 are taken into account.
Myth number 2:
In order to confirm the receipt of funds, buyers must submit a declaration
Current legislation does not limit the list of possible sources of funds. Thus, in the latest explanations for its subordinates, the Notary Chamber proposes the following:
• wages (cash collateral);
• fees and other payments in accordance with civil law transactions;
• income from entrepreneurial or independent professional activity;
• income from the alienation of property;
• dividends;
• interest;
• royalties;
• insurance payments;
• winnings (prizes) in gambling, winnings (prizes) in lotteries or other draw games, in a bookmaker pair, in a betting pair;
• prizes (winnings) in cash, received for winning and/or participating in amateur sports competitions;
• charity;
• pension;
• heritage;
• gifts;
• funds received on loan (credit);
• acquisition of the right to find or treasure; and
• other sources not prohibited by law.
To confirm the mentioned sources of origin of funds, Buyers can provide the notary with the relevant document. Such a document, for example, may be an agreement on the provision of financial assistance (loans), despite the fact that such an agreement is not directly provided.
At the same time, some notaries require documents on the origin of funds from the person who provides such funds to the buyer (for example, on loan or assistance). In our opinion, this approach and requirements are controversial, as such actions go beyond customer verification.
Myth number 3:
Legal entities cannot buy agricultural land
This is not quite true. Let’s start with the fact that we are talking about legal entities founded by citizens of Ukraine without any “foreign element” in the ownership structure. In addition, the focus is, for example, on land plots “for personal farming” obtained in the course of free privatization. In fact, such transactions were allowed during the moratorium.
Therefore, as a conclusion, provided that:
• the legal entity has no foreign element; and
• the relevant land plot was not under a moratorium, such purchase and sale is allowed by law.
In fact, such transactions were allowed during the moratorium (with some restrictions on the definition of a foreign element compared to previous eras).
Note. The legislator still set the maximum allowable amount of land owned by one legal entity. Thus, the limit for a legal entity is tied to the amount of land that all its participants can own. That is, if the company has one participant, then it can own no more than 100 hectares until January 1, 2024, and if there are 2 such participants, then – 200 hectares.
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We hope you find this information useful. If you need advice or a detailed explanation of the above material, please contact:
Andriy Martyniuk,
Business Development Director of Law offices of OMP
+38 098 244 6262; +380 44 391 30 01 a.martyniuk@omp.ua
Halyna Brun,
Marketing Director of Law offices of OMP
+380 95 497 66 05; +380 44 391 30 01 g.brun@omp.ua