Build on foreign land

Conclusion of lease agreements of land for construction

The land Code of Ukraine, in addition to the right of ownership of land, establishes the right to use land, which is divided into the right of permanent use of land and the right to lease land. The right of permanent use and the right to lease land is realized by land users and tenants of land plots according to its intended purpose.

This article deals with the right to lease land intended for the construction, operation and maintenance of a residential house.

The right to lease a land plot intended for the construction, operation and maintenance of a residential house is a fixed – term paid ownership and use of the land plot, which is necessary for the tenant to conduct business and other activities.

The main documents which regulate the leases of land in Ukraine, Land code, Civil code and the Law of Ukraine “On land lease” from the city of 06.10.98 of No. 161-XIV (with changes and additions).

General conditions of land lease agreements.

A land lease agreement is a contract under which the lessor is obliged to transfer the land plot to the lessee for ownership and use for a certain period for a fee, and the lessee is obliged to use the land plot according to the terms of the agreement and the requirements of the land legislation.

The conclusion of the lease agreement of the land plot from the state or municipal property has certain features. In particular, landlords of land plots that are in state ownership are Executive authorities within the powers defined by the law. And landlords of the parcels of land which are in municipal property, are local governments. The lease of the land plots which are in state or municipal property, is carried out on the basis of the decision of an relevant body of Executive authority or local self-government, within their competence, by the conclusion of the contract of lease of the land.

The procedure for the conclusion of the land lease agreement provides for the agreement between the landlord and the tenant on all important conditions and other conditions, registration of the contract and its registration.

According to Art. 124 of the Land Code of Ukraine and Art. 16 of the Law of Ukraine” on land lease”, the conclusion of the land lease agreement consists of several stages, each of which provides for the implementation of certain legal actions aimed at obtaining a person of land on the terms of the lease. These actions include:

* application (request) of the interested person to lease the land plot to the relevant Executive authority or local government body;

* consideration of the application (application) in the manner prescribed by the Land Code;

* the decision of the Executive authority or local government on the transfer of land for rent or refusal of such transfer;

• in case of a positive decision of the Executive authority or local government on the transfer of land from reserve lands to lease or with a change in its purpose, a project for the allocation of land is developed. The provision of land for rent without changing its purpose, the boundaries of which are defined in kind (on the ground), is carried out without the development of the project branch;

* the conclusion of the land lease agreement, in which all important and other conditions of land lease, its notarial certification (at the request of one party) and the state registration of this agreement are stipulated. The state registration of such agreement are subdivisions of the Center of state land cadastre at state Committee of Ukraine by making entries in the registration book under clause 3.2 Instructions on the procedure for the preparation, issuance, registration and storage of state acts on the ownership of land and the right of permanent use of land and land lease agreements and p.4.2 of the Temporary order of the state register of land cadastre.

The civil code of Ukraine establishes the legal basis of the land lease agreement, in particular its reality, urgency and payment.

According to Art. 14 of the Law of Ukraine “on land lease” land lease agreement is in writing and at the request of one of the parties can be certified by a notary. In addition, the concluded lease agreement is subject to mandatory state registration in the state cadastre. Also, the law provides for the introduction of a typical land lease agreement, the form of which is approved by the Cabinet of Ministers of Ukraine.

An integral part of the lease agreement is: the cadastral plan of the land plot with the display of restrictions (encumbrances) in its use and established land easements; the act of determining the boundaries of the land plot in kind (on the ground); the act of acceptance and transfer of the lease object; the project of land plot assignment.

The essential terms of the land lease agreement are:

* location and size of land;

* term of the lease agreement;

* determination of the amount of rent, indexation, forms of payment, terms, order of its introduction and revision, responsibility for its non-payment;

• conditions of use and purpose of land;

* conditions for saving the state of the rental object;

* terms and conditions of transfer of land to the lessee;

* conditions of return of the land plot to the lessor;

* existing restrictions (burden) regarding the use of land;

* identification of the party that bears the risk of accidental damage to or destruction of the rental object or part of it;

• responsibility of parties.

According to the law, the absence in the land lease agreement of one of the essential conditions provided for in this article, as well as violation of the requirements of articles 4-6, 11, 17, 19 of the Law of Ukraine “on land lease” are the basis for refusal of state registration of the lease agreement, as well as for the recognition of the contract invalid.

By agreement of the parties, other conditions may be specified in the land lease agreement, in particular, the quality of land, the order of fulfillment of the obligations of the parties, the order of insurance of the lease object, the procedure for reimbursement of expenses for the implementation of measures for the protection and improvement of the lease object, carrying out land reclamation works, as well as circumstances that may affect the change or termination of the lease agreement, etc. – however, they may not contradict the current legislation.

The term of the land lease agreement is determined by the consent of the parties, but may not exceed 50 years.

Changing the terms of the land lease agreement is carried out by mutual agreement of the parties. In case of failure to reach agreement on changing the terms of the land lease agreement, the dispute is resolved in court. If the term of the lease agreement has expired, and the tenant continues to use the land, then in the absence of written objections of the lessor for a month after the expiration of the contract, such contract shall be renewed for the same period and on the same conditions as were provided for in the contract. A written communication is carried out by a letter of communication.

Features of the terms of the lease of land for construction.

Chapter 34 of the Civil Code of Ukraine is called”the Right to use someone else’s land for construction.” In our opinion, given the purpose of land lease (for the implementation of construction), the land lease agreement should be concluded for a longer period than it is in most cases concluded, since the short-term transfer of land for construction does not give the tenant guarantees that the latter will have time to use its right to build an object.

The subject of the lease of land for construction is the land on which buildings or structures should be built (for this the land plot is provided). The lessee has the right to start using the land only after the state registration of the lease agreement. The tenant’s obligation is to ensure the development of the land plot for construction over three years (p.4. part 1. article 416 of the Central Committee of Ukraine), but the Land Code of Ukraine does not establish requirements for the timing of development of land. Given that such a requirement is contained only in the Civil code, it should be considered a direct rule that regulates the lease of land provided for construction.

The parties to the lease agreement have the right to provide grounds for termination of the right to lease the land granted for construction. When concluding a land lease agreement for development, it should be borne in mind that the Central Committee of Ukraine, together with the General grounds for termination of the agreement, establishes a special basis for its termination, which is not provided for by the current land legislation – the non-use of land for construction for three years in a row. Given this rule of the Central Committee of Ukraine, landlords often use it and determine the obligation of the tenant to complete the construction of the land for three years after the state registration of the lease. In addition, the lack of development of the land plot for three years established by the contract is considered to be a failure (improper performance) of obligations, which gives grounds to landlords to demand early termination of the contract.