After the verdict of the European Court of Human Rights in the case Zelenchuk and Tsytsyura v. Ukraine, the working group for land reform stepped up its game. The Agrarian Committee of the Verkhovna Rada began laying the groundwork for a free land market. The abolition of the moratorium is just a matter of time now.
In the meantime, however, while selling of land is still prohibited in Ukraine and lease contracts severely limit the participants, farmers and investors are looking for alternative ways to get rid of surplus land or obtain the plots they want. To do this, they use special forms of ownership transfer. From the legal point of view, this, of course, is not sale of land. However, when transferring rights in this fashion, the land is effectively sold. What about a 300 year old lease with a one-time fee for the whole period of use?
Emphyteusis
Emphyteusis is a long-term, alienable, inheritable right to use someone else’s land for agricultural purposes. The terms of emphyteusis are largely determined by the parties to the contract. Ownership rights remain with the land owner.
Its main advantage is the absence of restrictions on the duration of lease and the schedule of payments. The lease contract for agricultural land lasts at least 7 years but no longer than 50 years. Emphyteusis, on the other hand, can last even 500 years. Such a contact can also be of indefinite duration, and in this case the parties will be able to terminate it by notifying each other one year prior to the desired date of termination.
If the issue of payment is already decided for lease agreements, under emphyteusis the rent can either be a one-time fee – the whole sum at once – or regular payments. Moreover, the sum is not based on land evaluation, and its maximum and minimum are not set. In addition, the owner has the right to remuneration for signing the contract. These terms are particularly attractive to those more interested in monetary compensation than in the land itself.
Here’s what the parties should pay attention to, so as not to get ripped off with emphyteusis:
The user should:
1) provide in the contract for the pre-emptive right to purchase the plot, as well as for penalties for violating this right;
2) make it a fixed-period contract. In the case of an indefinite contract, the user risks losing the right to use the land even after having paid in full for the emphyteusis.
The owner should:
1) take into account that it is the owner’s obligation to pay land tax, even if the land is leased out for 300-400 years. It is possible to transfer this obligation to the user via the contract, but in the event of a conflict between the parties, the court may deem the contract invalid;
2) in the contract, set the amount of interest on the sale price of the land, which you will receive should the user decide to sell it.
Emphyteusis is done in writing. It is not mandatory to notarize it, but it will give you some insurance for the future – the owner might later claim that they never signed any agreement or that their signature is invalid. The contract must be registered with the state register of real rights to immovable property and their encumbrances.
Easement
Easement is the right to use land with certain restrictions established by law or contract. Easement can be personal or a land one (right of passage, travel by bicycle, movement of vehicles, passage of animals to natural bodies of water, the right to collect water from natural reservoirs, the right to store building materials for the purpose of construction or repairs, etc.). In light of the moratorium in our country, however, it is used in a broader fashion.
Compared with the lease of land, easement has no time limit. While land lease is 7 years minimum, easement can last a year or 300 years.
Easement is based on a contract, a will or a court verdict. It is done in writing and does not require notarization. It is important to make sure, however, that the person granting the right of easement has that power. The contract comes with a layout of the plot that sets the boundaries of the section on which restrictions are imposed. Easement can be permanent or have a fixed term; it can be free of charge or require a fee – it’s for the parties to decide.
Superficies
It is a limited right to use land for construction, and is established by contract or will. Once again, notarizing the contract is not necessary, but it helps mitigate future risks. State registration, however, is mandatory. The contract can be fixed-term or of indefinite duration.
Superficies may not be free of charge – the owner of the land gets paid for providing another person with the right to use the land for construction.
Benefits and limitations:
1) The right of superficies is an asset that can be sold, bequeathed or mortgaged (however, this right, with a few exceptions, does not apply to state or municipal land plots).
2) The intended purpose of the land is construction, and it may not be changed.
Thus, as long as the moratorium remains, land owners and users are taking advantage of more convenient and flexible contracts as an alternative to excessively formalized lease.
