Protection of private property in Ukraine

The Ministry of Justice has been continuously reforming the way public services are provided in Ukraine. A tremendous work has been done to improve their quality and accessibility. One of our major achievements is the introduction of the system of electronic services. Doing business in Ukraine has been simplified. Now it is possible to register business even online. At the same time all Ukrainian citizens can easily access data from the main State Registers* regardless of their place of residence.

The process of de-monopolization and de-centralization of business and real estate registration has been completed. The Ministry of Justice transferred registration functions to notaries, local self-government bodies and certified registrars. Provision of services is not concentrated in the hands of one state body anymore. The number of registrars increased by 5times. As a result, registration of property and business can now be completed in a fast and corruption-free way.

The next important element of the reform is protection of private property.

Nowevery person can use an efficient procedure of administrative appeal to challenge actions of the state registrars.The Committee on Consideration of Claims in State Registration has been fully operational since the beginning of the year.

Thanks to the Committee, every person has a chance to initiate cancellation of illegal registration actions. The Committee also provides an opportunity to reverse errors and intentional unlawful actions by registrars.

Besides, the new Law** preventing illegal takeovers in Ukraine came into force. The main goal of the Law is to stop the wave of illegal takeovers in Ukraine that started in the middle of 1990s.

The previous government was not interested in solving this problem, because the "big Yanukovych family" was involved in the seizures of property as well. This had a negative impact on a business climate and on the foreign investment prospects of Ukraine.

How the new law has been elaborated?

The expert group analyzed the schemes concerning illegal takeovers. In strong collaboration with businesses, this group elaborated preventive measures aimed at eliminating widely-used schemes of illegal takeovers.

The law introduces the following safeguards:

· The first and the most crucial measure is increasing the criminal liability for illegal registration actions for the applicant, the registrar and the interested person. Under the Law, the maximum term of imprisonment is 10 years.

· Administrative liability has also been increased. The fine foreseen in the past (UAH 340) was found to be ineffective in preventing illegal actions. It was, therefore, increased up to UAH 8,500 under the Law.

· The next important novelty introduced by the Law is as follows: a property owner is now entitled to receive a special document confirming his title to immovable property. This document is to be signed in hand and stamped by a registrar.

· The principle of extraterritoriality has been narrowed. From now on, registration of business and of the rights to immovable property is limited to the region where these are located.

Before this, extraterritoriality was a precondition for illegal takeovers. Businesses and immovable property located in Kyiv could be registered somewhere in Donetsk region, without any notification of the real owner of that business/property.

· Individuals must appear in person (including the company officials) in order to receive an electronic signature. This measure prevents cases when unauthorized persons receive an electronic signature and then deprive a company of accumulated VAT credit.

· According to this Law, notaries and registrars are required to use only reliable carriers of e-signatures. This measure prevents unauthorized access to the State Registers.

· The period for submitting claims to the Committee on Consideration of Claims in State Registration is extended from 30 to 60 days. The 30-day term was insufficient to correct the formal mistakes.

· When the registrar receives a package of documents for registration, he must notify the owner of the property. If the owner believes that his property was illegally taken over, he may file an objection against the registration action.

 

Additional control mechanism

The Ministry of Justice is authorized to restrict access of registrars to the State Registers in case of breaches and initiate cancelation of the notary certificate. The abovementioned changes will become a solid basis for protection of ownership rights for individuals and businesses. At the same time the National Police and the Law Enforcement Agencies must perform their functions properly in order to prevent illegal takeovers in Ukraine.

* The State Register of Property Rights to Immovable Property and the State Register of Legal Entities and Private Entrepreneurs

** The Law "On legislative amendments on improvement of immovable property registration and protection of property rights". The Law was adopted by Verkhovna Rada of Ukraine on 6 October 2016, signed by the President on 28 October 2016 and published on 1 November 2016.

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