This article analyses a number of the principal issues and problems of Ukrainian real estate law, focusing on recent legislative developments. The most important legislative developments of 2004 include entering into force of the Civil Code ("New Civil Code") and the Mortgages Act and the adoption of the State Registration of Proprietary Rights to Real Property and Their Limitations Act ("Registration Act").

The Registration Act has introduced into Ukrainian law the state registration of proprietary rights and their limitations, whereby the state shall now officially recognize and confirm the arising, transferring and termination of proprietary rights to real property and limitations on them. The Registration Act requires the following proprietary rights to be registered: (1) ownership rights (title); (2) proprietary rights, including inter alia right of possession, servitudes and rights of use of real estate having a term exceeding one year; and (3) limitations of the proprietary rights arising, for example, out of mortgages, court injunctions, decisions of courts and other competent authorities as provided by the Registration Act.

For the purpose of such state registration, the State Registry of Rights to Real Property and their Limitations ("State Registry of Rights") is to be created by the State Committee on Land Resources which, according the Registration Act, will be the holder of the State Registry of Rights. Until the State Registry of Rights is created, registrations of the real property shall continue to be handled by the appropriate local Bureau of Technical Inventory ("BTI").

The Registration Act establishes a significant guarantee for acquirers of proprietary rights who register these rights - in case of any dispute over particular real property, registered rights to real property should prevail over non-registered rights. Furthermore, future transactions in any real property will be possible only if the property rights to the property in question have been registered.

Notwithstanding the above, the Registration Act has left some unresolved issues and controversies concerning the registration of title to real estate, in particular, concerning the reliability and timing of the registration process, as well as on how the State Registry of Rights will be integrated with other state registries related to real property. Hopefully these problems will be successfully resolved in the near future.

To purchase an office or residential premises, the buyer should verify the seller's title by reviewing the title documents. Traditionally, most state notaries and the BTI, where titles are currently registered, would ordinarily only register a transfer of title based on short-form types of contracts, which typically merely state the brief details of a transaction without contractual protections. However, as the law of misrepresentation and fraud is not yet well developed in Ukraine, it is strongly advisable to have more elaborate agreements like those common in the West guaranteeing, for example, absolute and unconditional title, the good physical condition of the premises, and the absence of any knowledge of adverse claims and defects.

Turning to the title documents that should initially be presented by the seller, ordinarily this includes (1) a certificate of privatization, a purchase contract (usually notarized) or evidence of inheritance or gift, (2) a certificate from the appropriate office of the BTI stating that the seller is the owner and citing the BTI registration number, and (3) a certificate from the Unified Register of Prohibitions on the Disposal of Immovable Property and other appropriate state registries on the absence of mortgages, arrest or other encumbrances. An individual should also show his or her passport and personal tax number.

On the buyer's side, an individual needs to show his or her passport. A corporate buyer (as well as a corporate seller) will need to prove that it validly exists and that its representatives are duly authorized to conclude the purchase transaction. In addition, a foreign company should have a permit from the General Direction for Services to Representative Offices (known as GDIP) for the particular purchase. The notary involved should require the submission of receipts confirming that the state duty and pension fee (each constituting 1 % of the amount of the transaction) have been paid.

Before a purchaser completes any acquisition of real property in Ukraine, a complete due diligence of title, starting with the original transfer from state ownership (if applicable) should be conducted. If a building or other construction was built by the owner, the necessary construction documentation (permissions for construction, project approvals documentation including the Government Act) should also be verified, since the absence of any of the required documents may lead subsequently to a prohibition of any use of the structure that was improperly constructed. The technical description of the property being purchased should correspond exactly to all official records, including the BTI certificate and the technical passport for the property. The importance of exhaustive due diligence, including practical verifications, for title transfers in Ukraine cannot be overemphasized.

According to Article 657 of the New Civil Code, the purchase contract must be executed before a notary, and the transaction should be listed by the notary in its register of notarial acts. The buyer should then apply for the transfer of the property to be registered at the appropriate BTI office. Note that under the New Civil Code, a purchase contract for real property enters into force only at the moment of the state registration of the real property purchase contract.

According to the Resolution of the Cabinet of Ministers of Ukraine of 26 May 2004 On Approval of the Temporary Procedure for State Registration of Agreements (Temporary Procedure), the registration of contracts for the purchase and sale of real estate must be carried out by the notary who notarizes such contract. The notary should submit the necessary information concerning the contract to the State Registry of Agreements simultaneously with the contract's notarization, assuming that the notary is a registrar and for this purpose is connected to the state registry's computer system. If the notary does not have access to the State Registry of Agreements computer system, such a notary should send one copy of the agreement to this State Registry of Agreements on the same day when the agreement is notarized.

The Mortgage Act, defines a mortgage as a kind of performance security for an obligation, whereby (1) real property which remains in the possession and use of the mortgagor is used as security, and (2) in case of non-performance of the obligation secured by the mortgage, the mortgagee has a priority right to satisfy its claim from the mortgaged property.

Parties wishing to establish a mortgage agreement should bear in mind that, to be effective, a mortgage agreement must be concluded in writing, certified by a notary and registered. A mortgagee should be aware that, although the mortgagee's rights under a mortgage contract take effect from the moment of its notarisation, the priority right of the mortgagee over other possible registered claims to the mortgaged property, including under other mortgages, only takes effect from the moment of the state registration of the mortgage agreement and applies only with respect to subsequently registered claims.

Currently, the registration of mortgages is governed by the Resolution of the Cabinet of Ministers of Ukraine of 31 March 2004 On the Temporary Procedure for the State Registration of Mortgages ("Mortgage Registration Procedure"). Under the Mortgage Registration Procedure, the State Registry of Mortgages, to be created by the Ministry of Justice, will be the public record of mortgages.

Leases of offices, residential dwellings and buildings may be validly granted, including to and by foreigners. Unlike for leases of land, no restrictions currently exist to limit the duration of leases to premises. Leases must be made in writing in the Ukrainian language (but may also exist in dual or multi-language versions). Furthermore, the New Civil Code requires a lease agreement for a term of more than one year to be notarized and registered. Currently, registration of such lease agreements is governed by the above-mentioned Temporary Procedure and should be registered at the State Registry of Agreements.