Reconstruction Digest:
Ukraine 2025

CONTENTS


I. REAL ESTATE AND CONSTRUCTION

The Cabinet of Ministers of Ukraine updates the general conditions for construction contracts

The Cabinet of Ministers of Ukraine ("CMU") has adopted Resolution No. 1334 of 22 November 2024, introducing amendments to the General Terms for the Conclusion and Execution of Construction Contracts ("General Terms"). The Resolution came into effect on 26 November 2024.

Key changes:

1. Requirements for contracts under public procurement procedure
The General Terms have been adopted to align with recent amendments to the Law of Ukraine "On Public Procurement" (refer to our previous digest for details). In particular, they now mandate compliance with Article 41 of the Law, requiring construction contracts to include annexes specifying the prices of material resources. For projects involving design works, such annexes may be added once the contract price is determined based on approved design documentation.

2. Contract price
The contract price may still be fixed or approximate (dynamic) and is determined based on a cost estimate. However, the requirement to set the price in accordance with the tender documentation and the winner's bid for tender-based construction contracts has been removed. The price determination is now governed by general provisions aligned with regulatory documents on construction pricing. Accordingly, for projects funded by public resources, Ukraine’s construction cost estimate norms must be applied. In the absence of such norms, industry-specific, corporate, or individual standards may be used.

3. Design Documentation
The transfer of design documentation from the design organisation is prohibited unless its composition and content fully comply with building regulations and the design assignment.

4. Provision of material resources
The obligations of the party responsible for supplying materials under the construction contract have been clarified, requiring compliance with the Law of Ukraine "On the Provision of Construction Products on the Market" and the relevant design documentation.


Automated registration of property ownership upon completion of construction

Ukraine has launched automatic registration of freehold ownership of newly constructed real properties upon registration of their commissioning, as provided by Article 27-3 of the Law of Ukraine "On State Registration of Proprietary Rights to Real Estate and Their Encumbrances". This new service integrates data from the State Register of Proprietary Rights to Real Estate ("SRPR") with the Unified State Electronic System in Construction, enabling the automatic receipt of information on the commissioning of completed construction objects.

This applies to:

  • future real estate objects ("FRO(s)") in divisible object of construction for which special property rights have been registered;
  • indivisible unfinished construction objects for which special property rights or freehold ownership rights are registered.

The first registrations of real estate objects in newly constructed residential buildings have already taken place using this system's functionality. This greatly simplifies the process of registering freehold ownership for buyers of new housing.


II. PRIVATISATION

Initiative related to tenants' pre-emptive right to purchase leased property

On 22 November 2024, Draft Law No. 12230 was registered, aiming to enhance transparency and competitiveness in the privatisation of state and municipal property leased out, as well as to mitigate a risk of selling it at a lower price. Currently, tenants may purchase such property without a tender if they have made, inter alia, improvements exceeding 25% of the market value of the leased property.

Proposed changes include:

  • Changes to the rules for determining the price of leased property purchase:
    tenants will have a pre-emptive right to purchase the property at the highest auction bid price rather than at an appraised value. In other words, the purchase of property by the tenant will, in any case, be preceded by an auction.
  • Compensation of expenses:
    tenants' expenses for structural improvements may be offset against the rental payments. The rules for this will be determined separately by the government.
  • Retrospective effect of the law:
    tenants who received a consent for structural improvement or a decision on privatisation before the law came into force will only be able to purchase the leased property at the highest price determined through auction.

The procedure for applying these changes will be determined by the government.

While the initiative proposed in this draft law is well- reasoned, several important issues remain unresolved and have been left to the discretion of the government. These include determining the conditions for carrying out structural improvements and establishing clear terms and procedures for compensating tenants for their investments. In our view, the core principles and approaches governing these legal relationships should be explicitly specified in the law level to ensure equal treatment of tenants compared to those leasing private property and to sustain their willingness to invest in the development of state and municipal property.


III.  STATE INCENTIVES FOR ATTRACTING INVESTMENTS

The legislator addresses gaps for previously launched significant investment projects

On 11 December 2024, amendments to the Law of Ukraine "On State Support of Investment Projects with Significant Investments" (commonly known as the "Investment Nanny Law") came into effect. These amendments address several critical issues for investment projects launched before the submission of an application to conclude an investment agreement, including:

  • Submission of Applications by investors:
    The amendments now allow applications to be submitted not only by applicants but also directly by investors.
  • Eligibility of previously initiated projects:
    Projects initiated more than 18 months prior to the submission of application may be eligible for participation, provided they meet the established criteria. Investments made before this 18-month period, however, will not be considered in the calculation.

These innovations resolve issues stemming from previous legislative gaps and provide an opportunity to support significant investment projects that commenced even before the law was adopted or during the war. This is an important step to attract investment and stimulate Ukraine's economic development.



Initiative to improve the functioning of industrial parks

On 14 October 2024, Draft Law No. 12117 "On Amendments to Certain Legislative Acts of Ukraine on Improving the Functioning of Industrial Parks" was registered. The draft aims to enhance the regulatory framework for industrial parks in Ukraine ("IP"), and includes the following proposed changes:

  • Simplification of the structure of IP participants:
    The initiator of the IP is given the opportunity to simultaneously perform the functions of a managing company.
  • Expansion of IP participant activities:
    Added waste processing (excluding disposal), scientific R&D, information and electronic communications, and energy generation/storage, including from renewable sources.
  • Cancellation of the 1,000-hectare limit
    on the maximum area of an IP.
  • Update of the requirements for registration of IPs in the IP Register: 
    Updated the criteria for making a decision on inclusion, grounds for refusal, as well as the content of the IP concept.
  • State support for managing companies:
    Managing companies whose primary activity is leasing real estate will be eligible for state support, similar to small and medium-sized enterprises.
  • Optimisation of the managing company selection procedure:
    (a) A two-stage tender, including prequalification of candidates, submission and evaluation of bids,
    (b) determining the grounds for disqualifying candidates from participation,
    (c) Shortening the application review period from 30 to 15 days, etc.
  • Replacement of the initiator:
    If the initiator transfers its rights to the IP's land plots to another person who is not a managing company, participant or other IP entity, the receipt acquires the status of the IP's initiator, provided. This is subject to compliance with legal requirements and timely notification of the changes to the IP Register.


Bioenergy eco-industrial park

The government has registered a new IP "Teofipol Eco Park", in the Khmelnytsky region. Strategically located near one of Ukraine's largest sugar plant, the park is positioned to efficiently use the plant's production waste for its energy needs.

Key activities of the IP:
- cellulose processing,
- production of paper and bioplastics,
- biogas and biomethanol generation.

This will contribute to the development of environmentally friendly industries and economic growth in the region.

Construction of the park is set to begin in 2025, with total investments projected at approximately UAH 2.43 billion.



UAH 114 million in funding for Formatsiya.Lviv IP

Formatsiya.Lviv Industrial Park has received over UAH 114 million in state support for infrastructure development. Priority works include pipeline upgrades, modernisation of the pumping station and construction of power grids.


IV.  LAND



On defining the functional zones of land plots and change of their designated use 

Since June 2020, Ukrainian legislation has enabled changes to the designated use of land within the same category without requiring a land management project. The category of land and its designated use are determined in alignment with the functional purpose defined in the approved comprehensive spatial development plan for community territories or the settlement’s master plan.

Until 1st January 2025, lacking the aforementioned urban planning documentation could rely on detailed territory plans ("DTP") to define functional zones. This provided land users with a pathway to change the designated use
of land plots through DTP approval.

As 2025 approaches, however, some communities still lack the required urban planning documentation.


Starting 1st January 2025, in cases where the State Land
Cadastre does not include data on functional zones or
where the required urban planning documentation was not approved by 24 July 24 2022, changes to land use designation will only be possible after the development and approval of one of the following:

- A comprehensive spatial development plan (for territorial communities), or
- A master plan (for settlements).

On 3 December 2024, the Draft Law No. 12283 was registered, proposing an extension of established deadlines until 1st January 2028. This also applies to the
aforementioned provisions regarding the determination of the functional purpose of territories.


V. OTHER NEWS


Initiative to strengthen the rights
of a 'good faith' acquirer

On 20 November 2024, the Verkhovna Rada of Ukraine has introduced Draft Law No. 12089 that aimed at strengthening the legal protection of conscientious purchasers of real estate.

Draft Law 12089 proposes the following amendments to the Civil Code of Ukraine (the "Civil Code"):

  • Clarification of the statute of limitations for negative and vindication claims: the statute of limitations will commence on the day of the state registration of the violator's rights to real estate, on the date of property transfer (if registration of the transaction/right was not mandatory at the time of such transfer).
  • Restrictions on property reclamation: privately owned property cannot be reclaimed if more than 10 years have passed since the transfer of ownership of such property previously held in state or communal
    ownership.
  • Guarantee of compensation to a 'Good Faith' purchaser: If property is reclaimed through a court decision and transferred to state or community ownership, its market value will be compensated by the state or local authorities.
  • Regulation of right protection under negatory claims: it is proposed to extend the provisions of Articles 387 and 388 of the Civil Code to disputes involving the removal of obstacles to possession. This measure aims to eliminate recent practices of abuse intended to circumvent statutes of limitations in disputes challenging ownership rights to privately owned property acquired from state or communal ownership.


Retrospective effect (if the draft law is adopted):

  • Compensation for 'Good Faith' acquirers: the law is
    expected to apply to cases where the court of first instance has not yet issued a decision to reclaim property from a good faith acquirer.
  • Calculation of time periods: the changes to the statute of limitations will apply to property registered in the SPPR/ title transfer before the law came into force.


Temporary restriction of access to state registers managed by the Ministry of Justice of Ukraine

On 19 December 2024, as a result of the largest external cyberattack on Ukraine's state registers, the operation of unified and state registers under the jurisdiction of the Ministry of Justice of Ukraine ("Registers") was temporarily suspended.

Among the affected registers are:
- the State Register of Proprietary Rights to Real Estate ("SRPR"),
- the Unified State Register of Legal Entities and Individual Entrepreneurs and Public Organisations ("USR"),

which are crucial for transactions with real estate.

As of 10 January 2025, the operation of the first five registers has been resumed, enabling:
- certification of wills,
- certification of powers of attorney,
- registration of notarial blanks;
-  registration of civil status acts, and
-  registration and verification of data on legal entities, individual entrepreneurs and public organisations.

The resumption of the USR now allows the execution of
the preliminary agreements involving real estate.

    According to the Ministry of Justice, the next step is to restore the SRPR. Until its restoration, the notarial certification of agreements and registration actions with real estate remain unavailable. 

    Additionally, a temporary procedure has been outlined for the operation of the eRecovery service during the restoration of the Registers:

    • Processing of applications: applications for compensation for damaged property submitted before access to the Registers was restricted are being processed. New applications will not be accepted until the Registers are fully operational.
    • Housing certificates: for holders of housing certificates with reserved funds, the reservation period will be extended for the duration of the suspension of the Registers.
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