In Ukraine,\u00a0land\u00a0belongs to citizens only within the limits allowed not by the law but the authorities, and the problem of ownership is inherited from the totalitarian times.\u00a0By the way, the moratorium on\u00a0selling\u00a0land operates in Venezuela, Congo, Tajikistan, North Korea, and Cuba, in addition to our country\u2026<\/p>\n
Law and\u00a0Practice<\/strong><\/p>\n Neither the Verkhovna Rada nor the Constitutional Court has\u00a0seen violations\u00a0of Article 41 of the Constitution of Ukraine for many years.\u00a0According to\u00a0this Article,\u00a0everyone has the right to own, use and dispose of\u00a0their\u00a0property. Moreover, the decision of the European Court of Human Rights (ECHR) from May 22, 2018, recognizes the prohibition of purchasing\u00a0and selling\u00a0agricultural land\u00a0as a\u00a0violation of citizens\u2019 rights.<\/p>\n A\u00a0difficult\u00a0path\u00a0of the domestic land market began during the first years of Independence when about seven million Ukrainians became owners of agricultural land after the destruction of collective and state farms. However, a moratorium was imposed on its sale\u00a0in 2001, allegedly to protect the owners from venturers. Although 17 years have passed, the moratorium still operates, literally burying the hopes of almost half a million landowners who have not\u00a0used\u00a0the right to\u00a0freely\u00a0dispose of\u00a0this land.<\/p>\n Nevertheless, anyone can\u00a0purchase\u00a0land for agricultural purposes, and lawyers\u00a0can\u00a0provide legal schemes. Meanwhile, irresponsible tenants deplete the soil, sowing them with sunflower and corn\u00a0by rotation. Thus, the shadow market imitates\u00a0some market mechanisms for land, but the lack of an\u00a0owner only hurts\u00a0this land. This kind of \u201cshadow\u201d is large\u00a0but\u00a0not\u00a0homogeneous.<\/p>\n The\u00a0Shadow of the Market<\/strong><\/p>\n The country\u2019s land market can be divided into black and gray\u00a0parts. The first\u00a0one\u00a0concerns the illegal use of land that has no legal status.\u00a0It\u00a0commonly\u00a0refers to state lands, lands\u00a0of former collective property, field roads and uncalled units, which are processed without\u00a0any\u00a0contracts. Additionally, the land property whose owners have died is being processed; this property can\u2019t be\u00a0transferred to anybody, so farmers continue\u00a0using\u00a0it.<\/p>\n The gray zone of the land market\u00a0contains\u00a0transactions for\u00a0land\u00a0sales\u00a0through judicial decisions and emphyteusis contracts.\u00a0The\u00a0absence of open bidding\u00a0forces\u00a0interested citizens\u00a0to\u00a0find an alternate\u00a0way to formally circumvent the ban. However, in such circumstances,\u00a0a\u00a0seller can\u2019t get a\u00a0good\u00a0price, and\u00a0a\u00a0buyer risks\u00a0to\u00a0lose land due to the inferiority of\u00a0their\u00a0transaction. What is the appropriate price?<\/p>\n Price\u00a0Issue<\/strong><\/p>\n The highest rents for land are in the traditionally agrarian and metropolitan regions \u2013 Cherkassy, Poltava and Kyiv\u00a0districts. The average annual cost of renting a hectare\u00a0is\u00a0\u00a0$84\u00a0for the\u00a0Cherkassy region, and\u00a0$80 and $62 for the\u00a0Poltava and Kyiv regions, respectively.<\/p>\n If the land market started\u00a0its functioning, the\u00a0shares\u00a0owners\u00a0in\u00a0the Cherkasy region could receive $1,670 per hectare,\u00a0in\u00a0Poltava \u2013 $ 1,600, and\u00a0in\u00a0Kyiv \u2013 $ 1,240.\u00a0Still, in Polissya, a significant part of the land in the swampy area, and the demand for land near the zone of armed Donbass conflict is low, therefore, sellers could get $564 per hectare in the Volyn region, $613 in Zhytomyr, and $665 in Lugansk.<\/p>\n After the increase in\u00a0the overall cost, the\u00a0rent\u00a0prices\u00a0will rise. In addition, experts point out that land prices can be 2-5 times higher,\u00a0as\u00a0the\u00a0rent prices\u00a0are\u00a0lowered\u00a0on average fivefold\u00a0due to\u00a0the moratorium and local monopolies!<\/p>\n What Will Happen if\u00a0Market\u00a0Opens<\/strong><\/p>\n In countries experiencing the land market opening, its value grew by an average of 15-25% during the first two-three years, and then\u00a0the growth became\u00a0slower.\u00a0The process took place within the limits of general denationalization of property. The situation in Ukraine is different as the accumulated offer has been created\u00a0during\u00a0the years of the moratorium.\u00a0We mean that in\u00a0normal market conditions, there are up to 1.5-3% of the land\u00a0in circulation each year due to the change of owners. In Ukraine, 7-11% of landowners are considering the possibility of selling it\u00a0at the moment.<\/p>\n Due to\u00a0this\u00a0and the fact that\u00a0land prices are substantially underestimated, the increase in value will\u00a0be sharper\u00a0than elsewhere before when the restriction disappears. Therefore, the land market is\u00a0highly\u00a0interested in speculators.<\/p>\n The growth will continue but\u00a0powered by\u00a0another source \u2013 investments that should go into the agricultural sector\u00a0due to the opening of the land market.\u00a0After this,\u00a0Ukraine will need another 5-7 years to catch up with its neighbors\u00a0under favorable conditions.<\/p>\n A Gap\u00a0in the\u00a0Moratorium<\/strong><\/p>\n To circumvent the discriminatory law, many citizens use the emphyteusis\u00a0to freely dispose of their land. This is\u00a0an agreement on the acquisition of rights to use land which belongs to another person for agricultural purposes. It can be both timely and indefinite.<\/p>\n This refers to the right to use another\u2019s land for agricultural purposes, which can be resold, pledged to the bank or inherited. For lands of\u00a0the\u00a0state and communal property, the period of emphyteusis can\u2019t exceed 50 years. Additionally, the state and communal land under emphyteusis may not be alienated, included in the authorized capital of\u00a0an\u00a0enterprise or transferred to\u00a0a\u00a0bank.<\/p>\n Emphyteusis\u00a0differs from\u00a0rent\u00a0by the fact that\u00a0a\u00a0contract does not specify time limits,\u00a0but there is a\u00a0possibility of sale and inheritance of the right to use\u00a0the land. In fact, the owner can\u2019t sell the land\u00a0itself\u00a0but can sell the right to manage and handle it.<\/p>\n According to the analyzed data on the inventory of all arable land in the cadastre within the World Bank project\u00a0framework, only\u00a0in\u00a02016, new owners\u00a0got\u00a011,2 thousand\u00a0pieces of\u00a0agricultural land with the total area of 40 thousand hectares\u00a0under emphyteusis schemes.<\/p>\n First of all, this is beneficial\u00a0to owners of gardens, vineyards and other perennial plantations, because it gives a possibility to protect their right to\u00a0own\u00a0cultivated plants and not to lose the rent when that\u00a0garden becomes\u00a0a commodity.\u00a0Emphyteusis is not interesting\u00a0to big\u00a0market\u00a0players whose land bank\u00a0consists of\u00a0units.<\/p>\n However, in the case of emphyteusis, landowners who sell the right to use it long-term\u00a0due\u00a0to the restriction of competition do not receive fair value for their share. At the same time, buyers still don\u2019t become owners of these\u00a0territories\u00a0when\u00a0paying for the land.<\/p>\n There are certain risks\u00a0of\u00a0using\u00a0emphyteusis\u00a0for\u00a0purchasing land. Firstly,\u00a0people don\u2019t specify\u00a0the real\u00a0sum\u00a0of\u00a0the transaction\u00a0in order\u00a0to avoid\u00a0paying\u00a0taxes.\u00a0So,\u00a0there is a\u00a0risk\u00a0that\u00a0the\u00a0seller will receive not the real amount\u00a0of money\u00a0but\u00a0the sum\u00a0specified in the contract. Secondly, the fiscal service can recognize the agreement of emphyteusis as an \u201capparent transaction\u201d,\u00a0which is\u00a0invalid. The main risk\u00a0for the buyer\u00a0is that he doesn\u2019t become\u00a0an\u00a0owner, but only formalizes the right to use\u00a0the land\u00a0in contractual relations.<\/p>\n Artificial restrictions on the right to own land increasingly\u00a0slow down\u00a0the\u00a0agriculture\u00a0development.\u00a0This restriction of ownership applies to those people who\u00a0are not\u00a0engaged\u00a0in agriculture and could spend the proceeds from the sale of land for their own needs, including business projects.\u00a0It also applies to\u00a0those who want to work effectively in this field.\u00a0Due to\u00a0the lack of rights to leased land, farmers are simply not interested in investing time, effort and money in what they do not\u00a0actually\u00a0own. For the same reasons, limiting the right of ownership to land prevents livestock\u00a0from developing.<\/p>\n Please read:<\/strong>\u00a0The most important recommendations on business protection in Ukraine for 2019<\/strong><\/a><\/p>\n Read the news in our app!\u00a0<\/span>
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