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22 September 2017

Roman Hrab

The long-lasting moratorium on the sale of agricultural land has generated illegal and semi-legal schemes for its circumvention, and with each passing year their number only increases.

Below are the 5 most popular methods that are used for circumvention the moratorium and development of land bank.

1. Emphyteusis

Emphyteusis, just as a lease - is the right to use a land plot, but it has its own peculiarities. In particular, there are no restrictions on the term of this agreement, in contrast to the lease, which can’t exceed 50 years. Also, there are no requirements regarding the form, size and terms of payment for use, which allows you to pay immediately the full amount to the land owner for the entire period of use. The flexibility of this transaction has led to its widespread use as an instrument for the actual purchase of land. The agreements concluded for 100, 200 or 500 years, with a one-time payment of the land use fee to the owner are not uncommon.

2. Exchange agreement

Another widespread way of avoiding the moratorium is the conclusion of a land plot exchange agreement. Under this scheme, for example, 4 hectares of land share near Poltava are exchanged for a few hundred hectares in the Donetsk region. As a result, the buyer acquires ownership of the land share, and the seller gets unnecessary piece of land and cash without any declaration of income and, accordingly, the payment of taxes.

For its part, the state does not react in any way to such a state of affairs. Registrars and notaries continue to register the fake land swap agreements. The prosecutor's office also does not interfere in such transactions, because they don’t see violations of the state interests.

3. Free privatization

As you know, every citizen has the right to receive, free of charge, from the state the land plot of up to 2 hectares, which is intended for conducting a personal agriculture. Such land is not subject to the moratorium. In order to replenish its land bank, the enterprise collects the statements of citizens (this is especially true for ATO participants and their families) and takes upon itself the efforts to obtain these lands on behalf of the applicants. Then the enterprise interacts with the officials and "cares" that these lands are allocated. In fact, people sell their rights to land and act as intermediaries between the state and the enterprise. The state loses enormous funds, giving free land to a person who is quite likely to live in the city and will never farm it, and agricultural producer buys this land at the price lower than market price.

4. Lease agreement for a 50-years period

Making a long-term lease is another way to secure a relatively sustainable land use. The cases of lease agreements of private land for a 50-years period are not uncommon, and for state land this has become a mainstream. Today, it is impossible to conclude the lease of state agricultural land without an auction, especially under the terms of the 50-year lease and 1% from the normative monetary evaluation of lease payment, but it is also nothing happens with the contracts previously concluded on such terms. According to the calculations of the Cabinet of Ministers of Ukraine, presented in the "Strategy to improve the management mechanism in the field of use and protection of agricultural lands in state ownership and disposal" of June 7, 2017, state budget lose more than UAH 1 billion every year due to the undervalued lease rate.

5. Land share under mortgage

Also, you can get the land share using a fake debt. This scheme creates debt obligation of the land owner to the buyer as land share mortgage, which is confirmed by the receipt. In a few months, when the debt is past due, the "creditor" has to apply to the court with a claim for the collection on the collateral subject. As a result, the judge makes a decision on the transfer of land ownership to lender for debt repayment. After that, the registrar or notary changes the land owner in the Real Property Register on the basis of this decision.

In the future, the number of “gray” schemes and cases of raidership will increase, because there are enough people who are willing to sell and buy land. Administrative interventions are not enough to reduce or eliminate the shadow agricultural land market. It is necessary to introduce fully-fledged land market, and only then the schemes and agreements will become more transparent and cleaner.

 




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