The banking crisis of 2013 led to a dramatic fall in real estate prices in Ukraine. However, the economic reformations between then and now have seen the revival of this business. Real estate is back and profitable once more. The year 2021 may be an excellent time to start buying property in Ukraine.
This article is a guide for purchasing real estate property by foreigners. In this instance, foreign investors will refer to foreign legal entities, local subsidiaries, or individuals. The term property will be used to mention items for personal use, rental income, or assets.
Persons who are eligible for owning property in Ukraine include:
▪︎Shareholding legal entities registered overseas;
▪︎Shareholding legal entities incorporated in Ukraine.
Before purchasing the property, these individuals/ entities should decide whether they need to buy a commercial, residential, dwelling, or land property.
Also important is to research the different types of taxes payable when they buy, own, and sell the property at a later date. Foreign individuals should also take note of ownership, gift and inheritance taxes.
As a buyer, note that you pay a notary fee to prepare the sale-purchase agreement, registration of ownership title, and extract in Real-estate Register. The fee costs about $200. A Pension Fund fee which is 1% of the real estate sale amount, is also applicable.
Requirements as a Buyer
Foreign individuals should produce the following:
▪︎A certified copy of a valid passport;
▪︎Ukrainian tax number;
▪︎Spousal consent in notarial form (if married);
▪︎A notary certified Power of Attorney (PoA) if a representative is being used.
Foreign legal entities should produce the following:
▪︎An Extract from the Company Registry;
▪︎Company documents such as the Company Charter, Articles of Association, Company Constitution, Constitution, and other statutory documents;
▪︎Confirmation documents (such as minutes) which prove the appointment of the director;
▪︎Passport of company's representative;
▪︎Notary signed PoA in the case of a representative.
For a Ukrainian legal entity, an extract from the Unified State Register of Legal Entities, Private Entrepreneurs, and Public Formations is required. Also, a company statutory document and appointment of director confirmation documents are the general documents the entity must be ready to provide.
Real Estate Due Diligence
Seller's Legal Capacity
When buying from a legal entity, the Companies Register provides registration and title documents. The purchase deal is also concluded after a General Shareholder's Meeting, where the majority of all parties agree.
The Director must provide their employment contract and appointment documents. When the sale-purchase agreement is signed by a representative under a power of attorney, it is wise to check its validity under the Registry of Powers of Attorney. This is certified by a notary.
For an individual seller, it is essential to check whether the individual is eighteen years old. They, therefore, must provide a passport, residence permit, and tax number.
It is also encouraged to check whether the individual has clarity of mind if they are old, or below the age of eighteen. This is to ensure that they have no tutorship over their actions. In the case of a minor selling property, the consent of Child Protective Services must be provided.
When dealing with an individual acting under a power of attorney, and the person dies on the day of deal finalizing, the POA is void according to Ukrainian law.
Further, Ukrainian law regards all property acquired during lawful marriage/ union as joint property. As a potential buyer, therefore, you must enquire for a notary signed consent form from the seller's spouse before purchasing the property.
For a safe real estate deal, one must do due diligence, even with the assistance of a real estate agency.
Firstly, to ensure that the property you would like to purchase does not have any legal disputes amongst parties, you can check online the Register of Court Rulings. That way, you can discover and possibly dodge a property purchase faux-pas earlier when you know current disputes regarding the property.
In considering a purchase or purchase of real estate properties, property title deeds should be checked in the Real Estate Registry.
The Unified State Registry of Real-Estate Property Rights and Their Encumbrances provides details on property rights. These include information such as tax pledge, ownership, lease, mortgage, and arrests. These liens on real estate are enforced from the moment of registration in the real estate registry.
The seller must provide a letter that indicates all the property rights and liens available on the real estate. After this, ensure that the title and registration of real estate comply with legislation, valid at the time of issue of the documents.
The general time limit for court issues in Ukraine is three years. If the seller had bought the property between 0-3 years, due diligence should be done between this period to check the lawfulness of all dealings by the seller.
By law, cash deals are prohibited in the purchase of the real estate. Purchases are made through a bank in Ukraine.
When buying property as a legal entity registered in Ukraine, you can only pay in Hryvna (UAH) from your business bank account to the seller's account.
When buying as a foreign legal entity or individual, you can pay for real estate from a foreign bank account to the seller's account.
If paying in foreign currency, you are permitted 1st or 2nd Group of Classifiers of Foreign Currency. This includes the Euro, the US Dollar, the GBP, amongst other currencies.
You can also use a Ukrainian investment bank that pays in the Hryvna (UAH) Ukrainian currency when purchasing as a foreign individual or legal entity.
Investing in the Ukrainian real estate market in 2021 is a financially viable and lucrative deal.
However, considering the laws of Ukraine and the various taxes involved, it is easier to purchase property in Ukraine as a foreign individual rather than a legal entity. The process also requires a lot of due diligence to promote fair and legitimate dealings. It is best to consult with a professional and credible real-estate consultancy agency when investing in real estate in Ukraine.