The draft law proposes to increase the threshold of residual book value of a lease object at which its value must be determined based on market valuation to 50 percent. As a result, the starting rental price at auctions for the lease of state and municipal property is expected to increase by improving the mechanism for determining the value of a lease object for the purpose of rental calculation. In particular, the draft provides for the replacement of the current mechanism requiring revaluation by the property holder with an independent valuation.
Key provisions:
Property valuation may be paid by a prospective lessee – currently, this is the obligation of the property holder, which often blocks lease transactions. Following the amendments, the lessee will be able to cover these costs – even before the auction or conclusion of the agreement.
If the asset has not been revalued for years or its residual value is only nominal “on paper,” the starting lease payment is significantly understated. The proposed changes aim to ensure the use of actual market valuation.
No valuation required – for beneficiaries. Where the lease is granted for UAH 1 or under social programs, valuation will not be required at all, easing the financial burden on budget-funded institutions.
Lease renewal – simplified and without revaluation. The draft proposes to cancel the requirement to approve a valuation report and to conduct an independent valuation of the lease object when extending a lease agreement.
Following the adoption of the proposed law, the lease amount will not increase directly; however, the starting rental price may be higher if market valuation is applied. In addition, the law is expected to eliminate one of the key obstacles to leasing state and municipal assets — the financial incapacity of property holders to fund valuation procedures.
The Supreme Court, as part of the panel of judges of the First Judicial Chamber of the Civil Cassation Court, in its Ruling dated March 12, 2025, in case No. 676/76/22 regarding the invalidation of the village council’s decision, the recognition of the state registration of the land plot as unlawful and its cancellation, and the obligation to return part of the land plot, came to the following conclusions:
The Prosecutor stated that the decision of the Rudska Village Council of Kamianets-Podilskyi District, Khmelnytskyi Region, dated July 24, 2015, No. 5, regarding the transfer of the land plot with cadastral number 6822486800:03:001:0101 into private ownership, is subject to invalidation, as the plot is located within the territory of the nature reserve fund, which is under the permanent use of the National Nature Park “Podilski Tovtry” based on a state act granting the right of permanent land use.
By Presidential Decree of Ukraine No. 474/96 dated June 27, 1996, the National Nature Park “Podilski Tovtry” was established, with a designated land area of 261,316 hectares, including 3,015 hectares allocated for permanent use.
The territory of the National Nature Park “Podilski Tovtry” is part of the Emerald Network of Ukraine (with a total area of 261,521 hectares) and is protected under the Convention on the Conservation of European Wildlife and Natural Habitats (Bern Convention) of 1979, ratified by Ukraine in 1996.
The Prosecutor indicated that the fact that the disputed land plot is located within the territory of the nature reserve fund is confirmed by relevant and admissible evidence, namely cadastral plans certified by specialists and data from the Public Cadastral Map. The land management project for the allocation of a land plot within the nature reserve fund was not approved by the relevant department of the Regional State Administration in the field of environmental protection. Lands of the nature reserve fund are subject to a special protection regime and are fully or partially excluded from commercial use.
The land plot transferred to PERSON_2 is part of the nature reserve fund, classified as particularly valuable land that has been withdrawn from economic use, and was under the permanent use of the National Nature Park “Podilski Tovtry.” Therefore, it could not be granted into ownership for individual horticulture. The land plot is subject to return to the state, represented by the Khmelnytskyi Regional State Administration.
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Particularly valuable lands include, among others, lands of the nature reserve and other environmental protection purposes (subparagraph “g” of paragraph one of Article 150 of the Land Code of Ukraine (hereinafter — in the version effective at the time of the disputed legal relations)).
The legal framework for the organization, protection, effective use of the nature reserve fund of Ukraine, and the restoration of its natural complexes and sites is defined by the Law of Ukraine “On the Nature Reserve Fund of Ukraine” (hereinafter — in the version effective at the time of the disputed legal relations).
The nature reserve fund consists of land and water areas, natural complexes, and sites that have particular environmental, scientific, aesthetic, recreational, and other value, and are designated for the purpose of preserving the natural diversity of landscapes, the gene pool of fauna and flora, maintaining the general ecological balance, and ensuring background environmental monitoring (second paragraph of the preamble to the said Law).
According to Article 43 of the Land Code of Ukraine, lands of the nature reserve fund are land and water areas with natural complexes and sites that have particular environmental, ecological, scientific, aesthetic, recreational, and other value and have been granted the status of nature reserve fund territories and sites in accordance with the law.
In accordance with Article 44 of the Land Code of Ukraine, lands of the nature reserve fund include natural areas and sites (nature reserves, national nature parks, biosphere reserves, regional landscape parks, wildlife sanctuaries, nature monuments, and reserved tracts), as well as artificially created sites (botanical gardens, dendrological parks, zoological parks, and parks-monuments of landscape gardening art).
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In the areas designated for regulated recreation, stationary recreation, and the economic zone, any activity that leads or may lead to the deterioration of the environment and the reduction of the recreational value of the national nature park’s territory is prohibited (part two of Article 21 of the above-mentioned Law).
In view of these provisions, the Law of Ukraine “On the Nature Reserve Fund of Ukraine” does not permit construction and maintenance of garden houses or horticultural activity within national nature parks.
The Supreme Court concurs with the conclusions of the lower courts that the transfer of a land plot into private ownership for horticultural purposes within lands of the nature reserve fund is in contradiction with the aforementioned legal requirements.
Therefore, the Rudska Village Council (legal successor — Zhvanecka Village Council) and PERSON_2, and subsequently PERSON_1, knew or ought to have known — by exercising reasonable diligence regarding the location of the disputed land plot — that it could not be transferred into private ownership for horticultural use. The conduct of the defendants was not in good faith.
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In the areas designated for regulated recreation, stationary recreation, and the economic zone, any activity that leads or may lead to the deterioration of the environment and the reduction of the recreational value of the national nature park’s territory is prohibited (part two of Article 21 of the above-mentioned Law).
In view of these provisions, the Law of Ukraine “On the Nature Reserve Fund of Ukraine” does not permit construction and maintenance of garden houses or horticultural activity within national nature parks.
The Supreme Court concurs with the conclusions of the lower courts that the transfer of a land plot into private ownership for horticultural purposes within lands of the nature reserve fund is in contradiction with the aforementioned legal requirements.
Therefore, the Rudska Village Council (legal successor — Zhvanecka Village Council) and PERSON_2, and subsequently PERSON_1, knew or ought to have known — by exercising reasonable diligence regarding the location of the disputed land plot — that it could not be transferred into private ownership for horticultural use. The conduct of the defendants was not in good faith.
The Supreme Court, as part of the panel of judges of the Second Judicial Chamber of the Civil Cassation Court, in its Ruling of March 12, 2025, in case No. 568/823/23 regarding the termination of ownership of a land plot through its confiscation and sale at a land auction, the termination of the land lease agreement, and the termination of the lease right to land plots, reached the following conclusions:
Part five of Article 22 of the Land Code of Ukraine stipulates that agricultural land may not be transferred into the ownership of foreigners, stateless persons, foreign legal entities, and foreign states.
According to part four of Article 81 of the Land Code of Ukraine, agricultural land inherited by foreigners, as well as stateless persons, must be alienated within one year.
In accordance with subparagraph “e” of part one of Article 140 of the Land Code of Ukraine, the grounds for termination of ownership rights to a land plot include the failure of foreign persons and stateless persons to alienate the land plot within the prescribed period in cases determined by this Code.
Compulsory termination of rights to a land plot is carried out in a judicial procedure in the event of confiscation of the land plot (paragraph “v” of part one of Article 143 of the Land Code of Ukraine).
According to part two of Article 145 of the Land Code of Ukraine, if, under the law, the owner of a land plot is obliged to alienate it within a certain period and the land plot has not been alienated within that period, such land plot is subject to confiscation by a court decision.
Paragraph 10 of part one of Article 346 of the Civil Code of Ukraine defines confiscation as one of the grounds for termination of ownership rights.
Part five of Article 41 of the Constitution of Ukraine stipulates that confiscation of property may be applied exclusively by a court decision in the cases, scope, and procedure established by law.
The court of first instance, taking into account the requirements of the above-mentioned legal provisions, concluded that PERSON_1, as a citizen of a foreign state, acquired ownership of an agricultural land plot and did not alienate it within the period established by Article 81 of the Land Code of Ukraine. Therefore, the ownership right to the disputed land plot is subject to termination by means of confiscation by a court decision in favor of the state, and the land plot itself is subject to sale at a land auction.
The decision of the Radiviliv District Court of Rivne Region dated February 5, 2024, in this part was not appealed, and therefore, pursuant to part two of Article 17 of the Civil Procedure Code of Ukraine, it is also not subject to cassation review in this part.
At the same time, when filing a claim with the court, the head of the Dubno District Prosecutor’s Office, acting in the interests of the state represented by the Main Department of the StateGeoCadastre in Rivne Region, also requested to terminate the land lease agreement and the additional agreements thereto, in which PERSON_1 currently acts as the lessor, as well as to terminate the lease right of LLC “Radyvyliv Agro” to the disputed land plot.
In refusing to satisfy these claims, the appellate court based its decision on the fact that the lessor of an agricultural land plot, as a natural person, may only be a citizen of Ukraine. However, PERSON_1 is a citizen of the Russian Federation and therefore is not authorized to enter into transactions concerning the lease of agricultural land. The additional agreements dated November 8, 2018, and December 31, 2021, to the land lease agreement No. 412 dated October 15, 2008, concluded between the defendant and LLC “Radyvyliv Agro”, violate public order, as they concern an agricultural land plot that is national wealth and under special protection of the state. The owner of this land was a foreign citizen, who is prohibited by law from leasing such land, and therefore these transactions are null and void.
The panel of judges of the Supreme Court agrees with the conclusions of the appellate court on the following grounds.
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An analysis of the provisions of the Law of Ukraine “On Land Lease”, in particular Part 1 of Article 4 in conjunction with subparagraph “v” of Part 2 of Article 5 of this Law, provides grounds for the conclusion that foreign nationals cannot act as lessors of land plots.
In the reviewed case, it was established that PERSON_1 is a citizen of the Russian Federation. Therefore, under Ukrainian national legislation, she does not have the right to enter into lease agreements for agricultural land.
⭕️An agricultural land plot inherited by a foreign citizen and not alienated within one year is subject to confiscation by court decision. Any additional agreements to lease such a land plot, concluded by a foreign citizen acting as the lessor, are null and void as they violate public order and contradict the legal prohibition against foreigners serving as lessors of such land plots.
You can discuss the mentioned Resolution of the Supreme Court (Civil Cassation Court) in the group Urban Planning in Ukraine.
