UK: Salans News Real Estate And Construction - September, 2009

Contents

1. Legal news on real estate and construction
2. The main new provisions of the regulatory legal acts on construction
3. The new legal provisions regarding registration of real estate rights

Legal news on real estate and construction

A number of regulatory legal acts were adopted during May-August 2009, providing for new regulations on construction, hotel certification and registration of the right of ownership to real estate.

Specifically, they include the following regulatory legal acts on construction and real property (buildings, structures):

• Resolution of the Cabinet of Ministers of Ukraine on "Approval of the procedures for submissions for urban planning projects" No. 489 dated 20.05.2009 ("Resolution No. 89");
• Resolution of the Cabinet of Ministers of Ukraine on "Amendments to the general terms of execution and performance of capital construction contracts" No. 601 dated 17.06.2009 ("Resolution No. 601");
• Resolution of the Cabinet of Ministers of Ukraine on "Approval of the procedures for execution of compulsory insurance agreements for construction installation works" No. 629 dated 17.06.2009 ("Resolution No. 629");
• Resolution of the Cabinet of Ministers of Ukraine on "Approval of the procedures for determining categories of hotels and other property designated for the provision of services of temporary accommodation" No. 803 dated 29.07.2009 ("Resolution No. 803"); and
• Resolution of the Cabinet of Ministers of Ukraine on "Approval of the procedures for sale of property subject to privatization together with publicly owned land plots" No. 689 dated 08.07.2009 ("Resolution No. 689").

New regulatory legal acts and recommendations regarding the methods of registration of rights to real estate include:

• Resolution of the Cabinet of Ministers of Ukraine on "Issuance of state documents for the right of ownership to a land plot" No. 774 dated 27.05.2009 ("Resolution No. 774");
• Decree of the Ministry of Justice of Ukraine on "Approval of the recommendations for methods of state registration of the right of ownership to real property which is the subject of court judgments" No. 914/5 dated 26.05.2009 ("Decree No. 914/5");
• Decree of the State Property Fund, entitled "Standard price set for services and works pertaining to property and land plot appraisal" No. 1170 dated 27.07.2009 («Decree No. 1170»);
• Decree of the State Committee for Land Resources of Ukraine on "Particular issues regarding execution of the provisions of the law of Ukraine on 'Amendments to particular legal acts of Ukraine regarding documents certifying rights to a land plot and procedures for division and merger of land plots' " No. 326 22.06.2009 ("Decree No. 326"); and
• Decree of the State Committee for Land Resources of Ukraine on "Approval of the instructions for filling in forms in respect of the state documents for the right of ownership and right of permanent use of a land plot" No. 325 dated 22.06.2009, registered with the Ministry of Justice of Ukraine on 06.08.2009 under No. 735/16751 ("Decree No. 325").

The main new provisions of the regulatory legal acts on construction

1. Resolution No. 489 replaced the resolution of the Cabinet of Ministers of Ukraine on "Procedures for submission of the architectural plans of a project and technical specifications for the engineering aspects of an architectural project and determining the respective fees for their issuance" No. 2328 dated 20.12.1999. Thus, from now on, in order to commence construction, the following documents must be obtained, instead of the plans for an architectural project: (1) town-planning terms and restrictions for the development of a land plot; (2) technical specifications; (3) plans for the project. Moreover, town-planning terms and restrictions for the development of a land plot located within a populated area must be set by the local development regulations. If there are no local development regulations or in the case of an intended development outside the populated area, town-planning terms and restrictions for development of a land plot must be set out by decision of the respective executive authority, based on town-planning rationale and subject to public discussion. Town-planning terms and restrictions for the development of a land plot and technical specifications must be provided to: (1) the owner / user of a land plot; (2) a person approved by a decision on the transfer (provision) of a land plot from public or communal ownership as prescribed by the land legislation; or (3) a person authorized by the owner / user of a land plot. If a public or communal land plot is put up for tender, townplanning terms and restrictions for the development of a land plot are included in the technical passport of the plot sold and must be delivered to the successful party.

2. Resolution No. 601 provides more detailed regulations for designer and technical supervision over the performance of works, risk insurance for accidental demolition of or damage to a construction project, control over the compliance of works and material resources with the established requirements, project documentation and contract agreement.

3. Resolution No. 629 sets out the mechanism for entering into compulsory insurance agreements for construction installation works. In particular, Resolution No. 629 prescribes that an insurance contract must be made by a developer or his contractor for the benefit of a trustee upon his preliminary written agreement with an insurer licensed to provide compulsory insurance for the construction installation works and who is a member of a "Construction Insurance Pool" (hereafter – Insurer), subject to the insurer's written application containing all the required information about the subject matter of the compulsory insurance agreement and all the circumstances of considerable significance for determining the degree of an insurance risk, in the form stipulated by the Insurer. The subject matter of an insurance contract must be the construction installation works, to be insured for the main period of project construction.

4. Resolution No. 803 provides that categories of hotels and other buildings designated for the provision of temporary accommodation services must be determined pursuant to the rules of compulsory certification for temporary accommodation services, as approved by the State Consumer Standard. Hotels shall be classified according to the following categories: "five stars", "four stars", "three stars", "two stars" and "one star". The category for other facilities designated for the provision of temporary accommodation services, including motels, boarding houses, tourist bases, sanatoriums and camp sites, shall be set based on the standard of service in them (first, second, third, fourth and fifth, respectively). However, the resolution does not specify which of the service standards is the best: first or fifth. The compulsory certification shall be made by the certification authorities appointed by the State Consumer Standard for performing certification works in the UkrSEPRO state certification system. Categorization shall be evidenced in the form of a certificate, issued for a maximum period of three years or upon availability of a quality management system in the hotel, for a maximum period of five years. Resolution No. 803 became effective as of August 10 2008, thus no experience of its practical application is available.

5. Resolution No. 689 approved the procedures/process for selling the buildings subject to privatization, together with public land plots. Attention should be paid to the fact that previous legislation determined a building/structure and its land plot as two separate lots. Resolution No. 689, inter alia, stipulates that public property buildings are classified as group А, Д or Ж and integral property complexes of groups В and Г under the classification of the Program of State Certification together with public land plots as prescribed by auction. Stock (participation interests, shares) in the state-owned business entities must be sold pursuant to laws on privatization upon the including by the state privatization authority of public land plots in the charter capital of such business entities. The state privatization authority must act as the arranger of the auction.

The state privatization authorities, taking into account the approved lists of state property subject to privatization, shall prepare and present on their web site the list of auction items and list of business entities with the land plots included in their charter capitals. Thereafter, such lists are forwarded to the respective state authorities for land resources together with an inquiry regarding the necessity to prepare technical documentation for the land plots. The state authority for land resources shall prepare and provide this information to the state privatization authority within a ten-day period. The auction takes place upon approval of the requisite experts' estimates of the real estate and publication of the information regarding the auction. The auctioned items shall be sold at an open meeting of the auction commission formed by the state privatization authority by involving specialists from and representatives of the state authority for land resources, local self governing authority, asset holder, and personnel of the enterprise to be privatized (in case of privatization of its integral property complex). The auction commission sets forth the conditions, including the primary value of the auction item and term of the auction.

In order to participate in the auction, the participants in the auction must pay a registration fee as established by the state privatization authority; the amount of such fee shall not exceed one month's non-taxable standardized minimum income, and a guarantee fee equal to 10 per cent of the primary value of the auction item.

Registration and guarantee fees must be deposited in the accounts of the privatization bodies, opened in the bodies of the State Treasury and in authorized banks.

Applications for participation in the auction submitted by a foreign legal entity, or joint venture founded with participation of a foreign legal entity or individual, shall be reviewed by the state privatization authorities upon agreement with the Cabinet of Ministers of Ukraine. The results of sale of the auctioned item must be executed in the form of a sale purchase agreement to be certified by a notary registered with the state authorities.

The new legal provisions regarding registration of real estate rights

1. Resolution No. 774 prolonged the term for issuing state documents for a land plot form, approved by resolution of the Cabinet of Ministers of Ukraine dated 02.04.2002 No. 449 "Approval of the forms for the state document concerning the right of ownership and the state document concerning the right of permanent use of the land plot" until all the produced forms of such documents as amended have been used. However, state documents concerning the right of ownership to a land plot issued after the entry into force of the Resolution of the Cabinet of Ministers of Ukraine dated 12.11.2008 No. 1019 "Amendments to the resolution of the Cabinet of Ministers of Ukraine dated 02.04.2002 No. 49" by the form, approved by resolution of the Cabinet of Ministers of Ukraine dated 02.04.2002 No. 449, remain valid and effective. This resolution of the Cabinet of Ministers is preconditioned by the following factors: (1) a considerable number of the previous forms remains unused; (2) printing of new forms is time-consuming and costly; (3) prior to the issuance of new forms, the regions refused to issue state documents, causing a great number of complaints against the actions of the bodies of the State Land Cadastre.

2. Decree No. 914/5 establishes that judgments on the recognition of ownership rights to real property, on the establishment of ownership rights to real property and the transfer of ownerless real estate to communal property are constitutive documents, which serve as a basis for state registration of the right of ownership to real property. The term "judgment" refers to a sentence, decision, resolution or decree made (taken) by courts in criminal, civil, economic cases, in cases of administrative jurisdiction and cases regarding administrative violations, and also to a court order rendered in the course of a writ proceeding in civil cases. Moreover, Decree No. 914/5 provides that the resolutions taken by arbitration in cases outside the jurisdiction of the arbitration pursuant to the law, including disputes regarding real estate, and made before the law came into force and yet not executed by March 31, 2009 (in particular, if state registration of the right of ownership to real estate has not been performed), shall not be grounds for state registration of the right of ownership to real estate.

3. Decree No. 1170 approved the price list for appraisal works regarding: real property, integral property complexes, shareholdings and contributions to the charter capitals of companies.

4. Decree No. 326 provided a more detailed interpretation of the provision of the law of Ukraine on "Amendments to particular legal documents of Ukraine regarding documents certifying the ownership rights to a land plot and procedures for the division and merger of land plots" and the resolution of the Cabinet of Ministers of Ukraine regarding procedures for marking transfer of the rights of ownership to a land plot, dated 06.05.2009 No. 439. It sets out a form of application to be submitted by a transferee of the land plot to the land cadastre regarding registration of the rights to the land plot and provides for a detailed registration procedure of the land plot to be performed by the local bodies of the State Land Cadastre. Please note that Decree No. 326 is not registered with the Ministry of Justice of Ukraine and thus it is exclusively of an advisory nature.

5. Decree No. 375 establishes procedures for filling in the forms of the state documents to establish the ownership rights to a land plot and rights of permanent use of a land plot, approved by resolution of the Cabinet of Ministers of Ukraine dated 02.04.2002 No. 449 "Approval of the forms of state document to establish ownership rights and the state document determining the right of permanent use of a land plot" (as amended by the resolution of the Cabinet of Ministers of Ukraine dated 12.11.2008 No. 1019).

The state documents for the right of ownership to a land plot and for the right of permanent use of a land plot must be completed in two counterparts, one is for a land owner or land user, and the other with a mark "archived" in the top left corner of the first page together with the respective land tenure documents must be filed with the main department of the State Land Committee in the city of Kyiv, city of Sevastopol, department of the State Land Committee in the region (city), or the interdistrict, inter-municipal or inter-regional department of the State Land Committee.

The following significant new standards on filling-in the state documents include:

• The state document must contain: the name, date and number of the documents pursuant to which the right to the land plot is granted; the name of the body issuing this document (resolution of the local selfregulating or executive authority, of the court, sale purchase agreement, gift deed, certificate of inheritance right, decision to contribute a land plot into the charter capital, other civil agreements).
• The area of a land plot is indicated with a value up to 0, 0001 he.
• If the right of ownership is acquired subject to a court judgment, sale purchase agreement, lease agreement, gift deed, other civil agreement and in other cases prescribed by the legislation, the state document for the right of ownership to the land plot must be signed by the respective director of the territorial body of the State Land Committee and executive body, if such land plot is outside a populated area. If the land plot is located in a populated area, such state document must be issued by the respective director of the territorial body of the State Land Committee and the local self-regulating body.
• Correction of spelling or technical errors in the form or state document is not permitted.
• In case of loss (damage) of the state document, the landowner (land user) must be given a new state document.
• Forms spoiled when filling-in, damaged documents and documents in a spoiled state must be written off and destroyed by the territorial bodies of the State Land Committee as prescribed by the State Land Committee, pursuant to the legislation on accounting and recording documents of high importance.
• If a landowner (land user) detects any spelling or technical errors in the issued state document, the landowner (land user) must apply to the territorial bodies of the State Land Committee, requesting that a new state document be issued.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.