Analysis of the amendments to the Law № 340-IX on counteracting raidingDear colleagues and partners!

On January 16, 2020, the Law of Ukraine “On Amendments to Certain Legislative Acts of Ukraine on counteracting Raiding” № 340-IX (hereinafter – the Law) was published and entered into force (except for some provisions). The legislator, among other things, aimed to improve the existing mechanisms for protecting the property rights of owners (and users) of land plots and prevent illegal takeovers and seizures of enterprises in the agricultural sector.

The new law introduces comprehensive changes in land, commercial and civil legislation, special laws governing the registration of real estate and business, notaries. In this article we will consider its main provisions and innovations.

Notarization of contracts

From now on, the owner of real estate has the right to establish (cancel) the requirement of notarization of the contract (amendments to the contract), the subject of which is such property or part thereof. Establishment (cancellation) of the claim is a unilateral transaction subject to notarization. Such a requirement is an encumbrance of real rights to immovable property and is subject to state registration in the manner prescribed by law.

As a result, landowners will be able to request a notarized form for the lease agreement. Obviously, this will lead to additional material and time costs. At the same time, such measures can protect the participants of the rental relationship from forged signatures and related litigation.

“Automatic” renewal of the lease

The law stipulates that the renewal of the contract (for the same period under the same conditions) may occur without any written execution of the contract by the parties. Previously, it was necessary to conclude an additional agreement on the renewal of the contract within a month.

From now on, the only condition for such a renewal is the absence of a statement from one of the parties to exclude from the State Register of Real Property Rights information about the renewal of the contract. The relevant application shall be submitted by the party to the agreement that wishes to refuse to renew the agreement no later than one month before the expiration date of such agreement.

Whose harvest?

Finally, the legislator mentioned the long-known problem of determining the proper owner of a harvest that grows on a disputed area. Thus, in case of expiration of the land lease agreement, before the harvest collection sown by the lessee, the lessee has the right to collect such a harvest. In this case, the owner of the land plot is entitled to compensation for damages related to the temporary occupation of the land by the former tenant, in the amount proportional to the rent from the date of termination of the contract to the date of harvest.

Retrospective reduction of rent

There is a new rule, according to which the fee for the use of state or communal land, defined in contracts for the right to use someone else’s land for agricultural purposes (emphyteusis) or the right to use someone else’s land for construction (superficies), concluded at land auctions, may not be reduced by agreement of the parties during the term of the contract, as well as in the case of its renewal.

Unfortunately, in practice there are cases when, contrary to the results of the auction, the parties reviewed the amount of rent after their completion. Obviously, this rule is designed to prevent such cases of abuse.

Corporate relations

The legislator did not ignore the regulation of the corporate side of the issue. Thus, a company participant can now establish the requirement of notarization of his signature when making decisions on the activities of the company and/or the requirement of notarization of the transaction, the subject of which is the share of such participant in the authorized capital of the company. Although this may cause some procedural problems, it will serve as a kind of safeguard to prevent raids on agribusiness.

Warning! The provisions on the requirements for notarization of the land easement agreement, payment for land use and renewal of the land lease agreement shall enter into force on July 15, 2020.

As a result, we want to predict that this law will not stop raiding in Ukraine. However, it can definitely be called a step in the right direction. Moreover, we strongly welcome the legislator’s comprehensive approach to regulating such complex issues. In our opinion, it is the unified reform of several related branches of law (such as land, corporate, etc.) that is the “right direction”.

If you need to receive legal advice on protecting your business or assets from unauthorized encroachment, please contact:

Andrii Martyniuk, Director of Business Development of Law offices of OMP
+38 098 244 6262; +380 44 391 30 01

Halyna Brun, Marketing Director of Law offices of OMP
+380 95 497 66 05; +380 44 391 30 01

Kyrylo Levterov (Partner)