In early April 2005, Law of Ukraine No. 191-VIII "On Amendments to Certain Laws of Ukraine Regarding Simplification of Conditions for Doing Business (Deregulation)" dated February 12, 2015 (the "Deregulation Law") came into force. This Law has introduced amendments to 37 law and regulations, including the Land Code of Ukraine, the Law of Ukraine "On Land Lease" and the Law of Ukraine "On Individual Peasant Farms", which regulate relations associated with the lease of agricultural lands.
Somewhat earlier, Law of Ukraine No. 247-VIII "On Amendments to Certain Laws to Provide Clarification on the Authority of Notaries and the Authority to Register Derivative Proprietary Rights to Land Plots Intended for Agricultural Use" dated March 5, 2015 (the "Law on Registration of Derivative Proprietary Rights") came into force. According to the lawmakers’ intention, this Law had to improve the procedure for registration of derivative proprietary rights to land plots intended for agricultural use and to provide notaries with access to data stored on electronic (digital) media of the State Land Cadastre. Therefore, this Law also affects land lease relations as it simplifies the procedure for state registration of the rights of lease to land plots intended for agricultural use.
Let’s find out whether the lawmakers have managed to deregulate land lease relations, simplify and improve the procedure for state registration of the right of lease?
Less essential terms of a land lease agreement
Firstly, the Deregulation Law reduced the list of the essential terms of a land lease agreement and abolished the requirement for mandatory annexes which previously constituted an integral part of the agreement. Previously, a land lease agreement had to contain 11 mandatory essential terms and 5 annexes. If at least one of the essential terms of the agreement or the annexes thereto was missing, this could serve as a ground for the denial of state registration for such agreement or even its challenging to the court. The Deregulation Law has considerably narrowed the list of the mandatory terms and conditions of a land lease agreement. From now on, the parties will have to necessarily agree only the following 3 terms: (1) the leased land plot (its cadastral number, location and size); (2) the term of the land lease agreement; and (3) the rent.
Lease of land plots intended for agricultural use
Before the Deregulation Law was adopted, the possibility of the use of an individual peasant farm’s land plots by legal entities remained undetermined. Such practice did exist, but there was a discussion as to its legality in view of the ambiguous interpretation and application of provisions of the Land Code of Ukraine and the Law of Ukraine "On Individual Peasant Farms". From now on, individuals have the statutory right to transfer land plots intended for running an individual peasant farm for their use by Ukrainian legal entities. Legal entities in turn may use such land plots for commercial agricultural production and farming purposes without changing their intended use.
Minimum period for the lease of agricultural lands
Previously, the Law of Ukraine "On Land Lease" provided that the period of the lease of agricultural land plots for commercial agricultural production purposes should be determined subject to the period of main crop rotation under respective land surveying plans. The parties actually had the right to agree this period between themselves, subject to the maximum period of 49 years. The parties could agree and enter into both long- and short-term lease agreements. However, the execution of short-term agreements did not encourage the lessees to care about soil fertility, and this often resulted in soil exhaustion. The revised law canceled the requirement for mandatory development of a crop rotation plan and established the minimum seven-year period for the lease of land plots intended for commercial, farming or individual agricultural production. Inspired by some EU countries' experience, Ukrainian lawmakers expect that the introduction of the minimum period for the use of land plots will ensure the rational use of such land plots.
The moment of a land plot transfer
Under the Deregulation Law, a land plot is now deemed to have been transferred for lease at the time when the respective right of lease is registered in the state register. The execution of a separate land plot delivery and acceptance protocol is no longer required.
State registration of the right to lease agricultural lands
The procedure for state registration of rights to land plots has markedly changed. The Law on Registration of Derivative Proprietary Rights has given notaries equal rights with state registrars to register rights to lease land plots intended for agricultural use. Furthermore, according to the above Law, if a person has entered into an agreement for lease of an agricultural land plot the title to which was acquired and registered before January 1, 2013 and if such person has not yet registered his/her title with the new State Register of Proprietary Rights to Immovable Property, the notary shall simultaneously register the lease right and the title to the land plot.
Still, only notary with an access to the State Land Cadastre can perform such registration. Only the first notaries have been connected to the State Land Cadastre at the moment.
To sum up, both new laws addressed in the article simplify the documentation of land lease relations, improve and facilitate the procedure for state registration of land lease rights. At the same time, the novelties so introduced will have been fully implemented in practice only after sufficient number of notaries throughout Ukraine will get an access to the State Land Cadastre to provide new services to customers, which will ease for them leasing of land plots. Hopefully, that will not take too much time.