Real estate due diligence in Ukraine

Real estate due diligence in Ukraine

The first step for the buyer while acquiring real estate in Ukraine should be verifying the seller's title by reviewing the title documents. Title documents which should initially be presented by the seller include:

In case you deal with the legal entity the most common title documents that provide proof of ownership rights of companies are:

Property rights must be registered in the All-Ukrainian Real Estate Ownership Rights Register. Registration of the title of real estate can be confirmed by an Extract from the Real Estate Ownership Rights Register distributed by the local Bureau of Technical Inventory (BTI).

Thus, when buying real estate in Ukraine you should check title documents and registration of property rights.

Real estate due diligence also includes analysis of documents of seller that prove a valid existence and registration of an entity. The seller has to present the following documents:

Another important issue is property encumbrance. The general register of all kinds of real estate encumbrances does not exist in Ukraine today. Although the corresponding law was passed on 1 July 2004 and came into force, the appropriate bodies of state registration and databases have not been created yet as required.

The basic property encumbrances are:

1. Lease contracts

A lease agreement for a building or any other capital structure or a part thereof concluded for the period of at least one year shall be subject to state registration.

2. Judicial restraining order

According to the Commercial Procedure Code and Civil Procedure Code courts of general jurisdiction and commercial courts of Ukraine can carry judicial restraining orders as a provisional remedy for a claim. It’s a usual practice in Ukraine when, for instance, some court institution prohibits alienation of real estate for a certain period of time. Such resolutions are temporary and should be cancelled after the trial is finished. However, while they are effective any sale of real estate is not legal.

3. Contractual mortgage

In Ukraine there is a certain procedure to register hypothec (as a special kind of mortgage of real estate). All hypothecs should be registered at the State register of hypothecs supported by Ministry of Justice.

4. Tax lien

Such liens are subject to the procedure for registration of movable property mortgages as there is no special procedure for registration of tax liens. An extract from such a register is a proof of the absence of the tax lien.