Ukraine: Law protecting investment in future real estate comes into effect

11 Oct 2022    2 minute read
Investment Protection Real Estate Ukraine Investor Rights

In brief

On 10 October 2022, Law of Ukraine No. 2518-IX "On guaranteeing property rights to real estate to be constructed in the future" ("Law") came into effect. 

Originating from draft bill No. 5091, which had been under discussion since February 2021, and made into law on 15 August 2022, the Law aims to offer more protection to real estate investors.

Contents

Highlights

The Law intends to secure the rights of real estate investors (particularly those investing in residential real estate) on the primary market by introducing a series of measures.

Of particular note is a new requirement that a special property right to the property and its future construction must be registered in the State Property Rights Register before obtaining finance. 

Detailed overview

Among other changes, the Law introduces:

  • The concept of a future real estate object, being part of a property under construction which, after commissioning, will become a separate real property item (apartments, other residential or non-residential premises, parking lots, etc.). 
  • A requirement on developers to obtain all necessary construction permits and register a special property right to all future real estate objects in a property under construction before selling any part of the property to investors.
  • Developers must reserve the "guaranteed share" of future real estate objects. Only after the property is commissioned can the developer alienate the guaranteed share. The minimum amount of guaranteed shares is determined by the Cabinet of Ministers of Ukraine.
  • A requirement on developers to disclose and publish information about the construction project, including: the anticipated year of commissioning, construction documents, construction progress with photos, future real estate objects and the terms of their purchase, etc. Failure to comply with such disclosure obligations incurs an administrative liability (in a form of penalty).
  • Any changes to the project documentation will be subject to the consent of the investors if the investor is affected by those changes.
  • Sale and purchase termination rights are granted to the investors if the developer delays the commissioning for more than six months or amends the project documentation without the investors' consent.
  • The developer must obtain all permits and rights necessary to commence construction before advertising to raise funds for the development.

The Law will apply only to properties where the construction permit was obtained after the Law became effective.

Click here to access the Ukrainian version.
 

Contact Information
Serhiy Piontkovsky
Partner
Kyiv
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serhiy.piontkovsky@bakermckenzie.com
Lina Nemchenko
Partner
Kyiv
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lina.nemchenko@bakermckenzie.com
Elmaz Abkhairova
Associate
Kyiv
elmaz.abkhairova@bakermckenzie.com

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