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Agricultural land lease in Ukraine: The most important questions and answers

How to draw up an agricultural land lease agreement. Photo: www.pnktv.news

How to draw up an agricultural land lease agreement. Photo: www.pnktv.news

The law on land lease (of all types) in Ukraine was adopted back in 1998, and a standard land lease agreement was approved in 2004. However, these most important documents today are quite consistent with economic realities, as they have been repeatedly amended. The last amendments were enshrined into the law in November 2021, and into the agreement—in July 2020. Based on the texts of these documents, The Page has prepared answers to the most important questions related to the agricultural land lease.

1

What regulatory documents govern land lease in Ukraine

The Law "On land lease" No. 161-XIV adopted on October 6, 1998.

The Resolution of the Cabinet of Ministers dated March 3, 2004 No. 220 "On Approval of the Model Land Lease Agreement". This document provides a sample (form) of such an agreement and contains some recommendations for its drafting.

Land Code.

2

Who can lease land

Lessors of land plots are individuals and legal entities owning land plots or persons authorized by them.

For private land, these are its owners.

For communal lands—village, settlement, and city councils.

For the lands of territorial communities—district and regional councils.

For state lands—executive authorities.

If the heirs refuse the land that is part of their inheritance, then the person managing the inheritance can lease it.

If the land leasehold was delivered on the right of emphyteusis (long-term use of a land plot for agricultural needs), this plot is leased out by its user.

The leased land plot may be subleased.

3

For what period the land lease agreement is concluded

The term of the land lease agreement is determined by the parties' mutual consent, but cannot exceed 50 years.

When leasing agricultural land plots for commercial agricultural production, farming, and personal farming, the term of the lease agreement cannot be less than 7 years.

When leasing agricultural land plots where melioration is carried out, the term of the agreement cannot be less than 10 years.

4

When the tenant gets the land plot

The land plot is deemed to be transferred by the lessor to the tenant from the moment of state registration of the tenancy.

As reference: As of January 13, 2,693 land auctions were announced in the system Prozorro.Sale, and 1,800 of them were for rent. The total area of land offered for lease is 13,000 hectares. The cost of such lots is 66 million UAH. The trades are organized by 283 participants.

1,918 auctions for the lease and sale of agricultural land have been announced in the system (1,416—for lease, 502—for alienation). The total area of plots at auctions for leasing agricultural land is 11,783 hectares, for selling—1,076 hectares. The cost of the lots at auctions for leasing agricultural land is 26 million UAH, for alienating—170 million UAH.

5

Is it necessary to notarize a lease agreement

There is no requirement for such a notarization. But the owner of the land plot may require to notarize the land lease agreement.

6

Is it possible to pay for renting land with products grown

Normally, rent is paid in money. But with the parties' mutual consent, the payments can be made in kind. The money value equivalent of payment in kind is determined according to the market prices on the date the rent is paid.

Rent for state and communal land can only be paid in money.

7

What the landlord obligations are

In addition to the general obligations as a party to the agreement, the lessor of the land is obliged to:

  • not to perform any acts that would prevent the tenant from using the land plot;
  • reimburse the tenant for capital expenses related to the improvement of the land that was carried out with the consent of the lessor;
  • warn the tenant about the land plot features that, in the process of its use, may result in dangerous consequences for the environment or in deterioration in the condition of the leased property itself.

If the lessor does not comply with the conditions specified in the lease agreement, then the tenant is entitled to compensation for the losses incurred as a result of this.

8

What the land tenant responsibilities are

In addition to the general obligations as a party to the agreement, the land tenant is obliged to:

  • to start using the land plot within the terms stipulated in the agreement;
  • to comply with the regime of using lands of natural reserve, nature-oriented, health-improving, recreational, historical and cultural purposes, and water fund;
  • within five days after the state registration of the tenancy of a state or communal land plot, to provide a copy of the lease agreement to the tax authority;
  • in case of leasing a land plot together with a water body located on it, to use the latter in accordance with the requirements of water legislation.

9

How to terminate a lease agreement

The land lease agreement can be terminated (early terminated) by the consent of the parties. At the request of one of the parties, the lease agreement can be terminated only by a court decision.

In case of the agreement termination at the initiative of the tenant, the lessor of agricultural land has the right to be paid rent for six months, if during this period no proposals were received from other persons to conclude a lease agreement for the same plot on the same conditions.

The transfer of ownership of a leased land plot to another person (including under procedure of inheritance) and the reorganization of a legal entity who is a tenant are not grounds for changing the conditions or terminating the contract.

In case of early termination of the land plot lease, the right to which was acquired at auction, at the initiative of the lessor, the latter shall reimburse the tenant for the costs of acquiring it and for the losses incurred by the tenant as a result of the early termination of the agreement.

The lease agreement for the state or communal land may be terminated if a decision is made to use the land for public needs.

10

If the owner decides to sell the land, what rights the tenant has

The tenant has the prevailing right to acquire the plot in case of its sale. But if the plot is sold at auction, then the pre-emptive right does not apply there.

The landlord is obliged to notify the tenant of the intention to sell the plot, specifying its price and the conditions it is sold under (the term for such notification is not defined in the law).

If the tenant renounces his pre-emptive right to acquire the leased land, the rights and obligations of the landlord under the lease agreement are transferred to its new owner.

It is not allowed to alienate the leased state or communal land plots without the tenant’s consent.

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