On 31 March 2020, the Ukrainian Parliament voted for the Draft Law "On Amendments to Certain Laws of Ukraine on Transactions with Agricultural Land" No. 2178-10* (the "Law"). After signing by the President, the Law will lift the ban (so called “moratorium”) on transactions with agricultural land that has been in place since 2001, while introducing a number of restrictions applicable to the launch of the new land market.

Current situation with agricultural land market

The current ban covers:

(i) Sale and purchase of state- and municipally-owned agricultural land, except where such land is seized (acquired) in the public interest;

(ii) A number of transactions involving privately-owned (a) agricultural land designated for commercial farming; (b) agricultural land allocated in kind to the owners of land shares (pai) for individual farming; (c) non-allotted land shares (pai) as follows:

  • Sale, purchase or another alienation (except where a land plot is seized (acquired) in the public interest or inherited), including in-kind contributions to business entities;
  • Re-designation, except in the context of production-sharing agreements;
  • Exchange, except for land plots located within the same land array and having a comparable estimated standard monetary value (with a permitted difference of up to 10 per cent).

Position after the expected entry into force of the new Law

(i)      With effect from 1 July 2021:

  • Ukrainian citizens will become entitled to acquire up to 100 ha of agricultural land into ownership;
  • Bank will be entitled to accept agricultural land into mortgage.

(ii)      With effect from 1 January 2024:

  • Ukrainian individuals and companies will become entitled to acquire up to 10,000 ha of agricultural land into ownership, provided that (a) individual participants (shareholders) of such companies will be deemed as holding land plots of such companies pro rata to their relevant shares in respective authorized (share) capital of the companies; and (b) the above threshold of 10,000 ha cannot be exceeded.

(iii)     The matter of foreigners’ ownership to agricultural land will be addressed through a referendum (which date and other details are not yet known);  

(iv)     Sale of state- and municipally-owned agricultural land remains banned;

(v)     Sale price of agricultural land will be subject to state regulation until 1 January 2030 (sale price cannot be lower than estimated normative monetary value);     

(vi)     Preemptive rights to purchase agricultural land will become transferrable;

(vii)    Below listed entities and individuals will not be entitled to acquire any agricultural land:

        A) Legal entities:

  • with non-identified beneficial owners;
  • with beneficial owners registered in offshore jurisdictions;
  • directly or indirectly (beneficially) owned Russian nationals or foreign governments;
  • controlled by individuals or organisations registered in any of the states on the FATF list of non-cooperative countries;
  • with direct shareholders or ultimate beneficiaries being not Ukrainian citizens, in respect of

             - state- and municipally-owned land plots;

             - land plots allocated in kind to the owners of land shares (pai);

             - land plots within a 50-km area from the state border of Ukraine (except for the state sea border of Ukraine);

B)          Individuals or legal entities which are subject to special, restrictive economic and other measures (sanctions), prohibiting them from entering into any transactions to acquire ownership of land plots, including their related parties.

C)          Persons that belong or belonged to terrorist groups.

In addition, two other draft laws — Nos. 2194 and 2195** — are being prepared for their second reading. If enacted, they will significantly influence the further reform of the land market.

To note, there may be further technical and substantive amendments to the text of the Law, as no final wording of the Law is available at the time of writing of this alert.     

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*The Draft Law is available in Ukrainian at:

http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=67059

** The draft laws are available in Ukrainian at:

http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_2?pf3516=2194&skl=10

http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_2?pf3516=2195&skl=10

LINK: https://www.asterslaw.com/press_center/legal_alerts/enactment_of_law_on_agricultural_land_market/