Buying Property in Ukraine

Legal Alerts 01.02.2018

 

There’s a growing number of people looking to buy real estate in Ukraine, maybe not just for personal use but for business also. This is due, in large part, to the attractive property prices today following the economic and political instability experienced by the country in recent years. Here’s our guide to help you through the process.

Hire a real estate agent

It is almost always easier to find the right property through a qualified real estate agent, who will likely have you sign a contract setting out your mutual rights and obligations. Conditions such as full pre-payment of fees and commissions of more than 3-5% of the property value are unreasonable. Should you choose to forgo an agent, there are many sites online and ads in newspapers and magazines specialising in property sales. But beware – these options are less reliable.

Legal due diligence

After finding the perfect property, it’s crucial to do the due diligence. The title chain and details of any encumbrances (mortgages, liens, etc) can be checked in a public registry of real estate. Additional data about property and its owner(s) and/or any real estate developer can be obtained from the state registrar of court decisions; the electronic system of enforcement proceedings; the unified registrar of debtors; and so on. It’s also recommended that you ensure there are no outstanding debts for electricity, water, or other communal expenses. A technical survey is also advisable, especially if the property is in an older building.

When purchasing a property still under construction, ensure the reliability of the real estate developer by verifying all applicable licenses and permits, as well as the number of projects previously completed by the developer. Non-profit organisations such as the Affected Investors Support Association monitor developers and publishes online lists of those who are less unreliable.

Open a bank account

If due diligence does not reveal any issues, the next step is to open an investment account with a bank in Ukraine. While it is possible to pay for property from a foreign bank account in hard currency, settling in UAH via an account in Ukrainian banks will make the whole process easier. To open an account, a non-resident needs to obtain a Ukrainian tax ID and submit a few documents, such as a copy of their translated passport, certified by a public notary.

Investing in property also makes application for residency simpler, provided certain conditions are met – for example, the invested amount must exceed USD 100 000. This can also simplify repatriation of investment when the property is sold.

Preliminary sale and purchase agreement

Sometimes parties choose to enter into a preliminary sale and purchase agreement. This tool allows the purchaser time to carry out the necessary due diligence or accumulate sufficient funds for the purchase, while also allowing the seller to prepare all necessary documents for the sale. The preliminary agreement usually provides for a deposit to be transferred by the purchaser to the seller to secure execution of the main sale and purchase contract. At completion of the deal, the deposit is then credited towards the purchase price. A typical deposit amount would be 3-5% of the purchase price. A preliminary agreement must be put in writing and certified by a notary. Some parties propose ignoring the certification requirement. However, this may cause problems for the purchaser down the road if the seller backs out of the deal, making it very difficult to reclaim the deposit previously paid.

Main SPA, payment and title registration

If the parties proceed with the deal, a main sale and purchase agreement is entered into, again, this must be certified by a notary. As limits regarding the sums involved in cash transactions in Ukraine are very low, settlements for real estate are executed through bank accounts with the help of online banking and, usually, at the notary’s offices. This allows full settlement to be completed within one banking day. Upon completion, a notary will issue an extract from the state registrar of property rights and one original version of the sale and purchase agreement to the purchaser.

Deal costs

The costs parties incur for the sale and purchase of real estate usually include notary fees and state registration fees (these can be split between the parties) as well as 1% state duty on the property’s assessed value. The seller will also incur a mandatory 1% pension fund fee.

Good luck!

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