The construction law reform initiated by the new Ukrainian government is expected to boost the investment attractiveness of the Ukrainian real estate development market and move Ukraine up in the ease of doing business ratings.
Complete abrogation of the existing legislation
Two different scenarios for construction law reform were considered: (i) improving the existing laws and regulations, or (ii) abrogating the entire current construction legislation and adopting completely new legislative acts. The governmental working group decided on the latter option.
A new, clearer structure of construction legislation should reduce ambiguities and create a clear hierarchy and ease of interpretation of legal norms. At the top level, legal norms setting out the basic principles and general norms regulating construction relations will be incorporated into a single law on construction (construction code). This will be derived from several current laws, such as the Laws of Ukraine on Bases of City Construction, on Architectural Activity, on Territory Planning and Construction, on Investment Activity, on Local Governance in Ukraine, the Land Code of Ukraine, etc.
At the middle level various legal procedures for approving construction projects, expertise of the most important projects, supervision of construction activity, commissioning of new structures, etc. should be incorporated in resolutions of the Cabinet of Ministers of Ukraine and the Ministry for Construction and Housing Policy. The bottom level shall consist of construction standards mainly of a technical nature. It is being discussed whether construction standards of other more developed jurisdictions (eg European or US) may also be applied in Ukraine.
New zoning policy
Currently, most cities and towns in Ukraine do not have an approved zoning plan. A new zoning policy will oblige all local authorities to adopt a zoning plan. Local authorities will be allowed to accept voluntary donations from real estate investors and developers to assist in the elaboration of detailed local zoning plans. Local authorities will not be allowed to approve construction projects until detailed zoning plans are in place.
The terms for granting land plots for construction will be substantially liberalised and simplified. Currently, (i) it takes at least 270 days and (ii) there are 50 procedures to fol-low and comply with (including obtaining two decisions from the local council and approval of two deputies' committees) in order to obtain a land plot for construction. The reform aims at setting (i) a maximum term for granting a land plot for construction at 60 days and (ii) six procedures to follow and comply with (including eliminating decisions of local councils and of deputies' committees).
Simplified construction permits
The procedure for issuing construction permits will be simplified. Currently, (i) it takes at least 175 days and (ii) there are 31 procedures to follow and comply with. It is envisaged to set (i) a maximum term for issuance of construction permit at 50 days and (ii) two stages involving just two official bodies. Construction permits will be issued for construc-tion projects (not for the developers of such projects, as is the case now), thus enabling free transfers between developers together with construction permits. No construction permit will be necessary for simple structures (individual housing, cottages, retail centres, etc).
The single-window principle will be implemented to the extent possible. As many proce-dures as possible will be transformed into a single filing to a single official body for ob-taining a land plot for construction and approval of the construction project. The applica-tion of this principle should limit contacts between developers and officials, thus simplify-ing construction procedures and reducing corruption.
The silent consent principle will be applied to reduce the risks of authorities' inactions and corruption. Thus, should the authorities fail to issue a certain approval or a reasonable refusal within a set term, such approval shall be deemed as granted. Also, the scope of individual administrative responsibility of officials for breaches of construction legislation will be increased.
The state will be deprived of its monopoly to conduct an expert review of construction projects; such review will be delegated to certified professionals. A compulsory expert review of construction projects will be limited to complicated structures which require a construction permit. Experts and project developers will be equally responsible for con-struction projects.
The reform should further promote the principle of the inseparability of land and structures thereupon. The sale of land for construction at public auctions shall enjoy priority over land leases. A maximum term of 10 days shall be set for commissioning new structures. It is being discussed whether the developer's liability for the quality of construction should be in-sured.
The reform envisages speeding up the formation and launch of the single State Register of Titles to Real Estate, which should replace several currently existing registers.
Schoenherr appreciates the possibility to directly influence the Ukrainian construction re-form through its participation in the governmental working group.