Automatic registration of ownership of new real estate: lawyers comment on changes for Ukrainians

Digitization is actively changing approaches to the interaction of citizens with state bodies. Electronic services, such as the “Diya” application, already allow replacing a number of paper documents, simplifying everyday life. Administrative Service Centers (ASCs) offer services that previously required visits to various institutions, many of which are now available to order online. In Ukraine, a new automatic system of registration of ownership rights to real estate has been introduced after the completion of construction. This initiative of the Ministry of Community and Territorial Development significantly simplifies the procedure, because it eliminates the need to involve the state registrar. However, recent innovations in the field of buying and selling real estate have raised many questions.

Lawyers of the “Repeshko and Partners” Bar Association comment on how exactly the procedure for concluding real estate purchase and sale contracts has changed, and what nuances should be taken into account by Ukrainians when buying real estate. Experts reviewed all the details of the new rules so that everyone could understand what has changed and how it will affect the real estate market.

In recent weeks, all the news channels have spread the news about a change in the process of concluding a contract for the sale of real estate. It corresponds to reality, but only partially. The adopted changes affected only newly built property, leaving out of consideration the secondary real estate market, which significantly outnumbers the primary one.

In our country, investing in the construction of real estate is almost the only means of investing funds for their preservation and multiplication in the case of purchase specifically for renting. As attractive as new buildings were, they remained a lottery for potential owners. After a series of high-profile scandals, it became possible to minimize the risks for those who want to invest in real estate, as they say, at the stage of the pit, precisely with new buildings and technical development.

The risks of potential investors in new buildings can be divided into several main types:

• construction on land without a suitable target purpose or without a formed land plot;
• construction without permits;
• court cases against the developer;
• tax debts of companies involved in the construction process.

Of course, it is impossible to protect against everything, but the state is gradually moving in the direction of reducing some risks. At the end of November 2024 Ministry of Development of Communities and Territories of Ukraine reported that automatic registration of ownership rights to real estate objects after the completion of construction was launched in Ukraine. Currently, property rights are registered automatically after the commissioning of the construction object (new building), without the participation of the state registrar, but for this to happen, a number of conditions must be met.

This service allows the State Register of Property Rights to Immovable Property (SRRP) to receive from the Unified State Electronic System in the Construction Sector (EDESSB) information about the commissioning of objects of completed construction, for which a special property right (SMP) has been registered in the State Register of Property Rights (SRP) for:

• divisible objects of unfinished construction (house);
• future real estate objects (apartments, car spaces/parking spaces, other premises);
• registered SMP or ownership of indivisible objects of unfinished construction (garden/residential/cottage houses, etc.).

The functionality enables simultaneous automatic (in general without the participation of the state registrar) updating of the technical characteristics of such real estate objects by making changes to the relevant sections, registering the right of ownership – instead of the previously registered SMP. This also happens in cases provided for by law, registration of encumbrances, entry of information on the joint ownership of owners of apartments and/or non-residential premises on such real estate objects, execution of other registration actions and on the basis of information received from the EDESSB.

A special property right is a type of property right, but not a property right, which is very important to remember). It has a set range of objects to which it applies:

• indivisible objects of unfinished construction;
• divisible objects of unfinished construction;
• future real estate objects.

The special property right is covered by guarantees regarding the protection of the right of ownership (including the removal of obstacles to the exercise of the special property right; recognition of the special property right in the event of its non-recognition, violation, or dispute; recognition of the right of ownership after the facility is put into operation).

It is very important that the owner of a special property right can apply to the court for the protection of his rights, including with a demand for:

1) completion of the construction of the object (including the object of which the future real estate object is a component) and its commissioning. It is not allowed for the courts to make decisions on the completion of the object, in respect of which there is no right to perform construction works due to its cancellation or annulment, until such right is restored. In this case, the owner of a special property right has the right to choose another way of protecting the violated right;

2) recognition of the right of ownership of the object, in respect of which a special property right has been registered, after the commissioning of the completed object.

We would like to emphasize: a special property right arises from the moment of its state registration in the State Register of Property Rights to immovable property. No options!

State registration of a special property right is carried out in accordance with the Law of Ukraine “On State Registration of Property Rights to Immovable Property and Their Encumbrances” after obtaining the right to perform construction works. The primary state registration of a special property right to an object of unfinished construction is carried out by the customer of the construction. It is at this stage that the state registrar is present, who enters information about the SMP into the register.

The primary state registration of a special property right to a future real estate object can also be carried out by the construction customer and/or the construction developer in accordance with the distribution of future real estate objects between them, determined by the agreement on the organization and financing of the construction of the object.

We will remind that the first SMP were registered in the register in 2023. This was an innovation, before such registration of rights did not exist, which provided a significant field for fraud and abuse in the construction sector. Registration of a special property right is mandatory for those who intend to sell future apartments, garage boxes, other residential and non-residential premises or parking spaces.

An object of unfinished construction, a future object of real estate belongs to the person who has registered a special property right to such an object. Such an object may belong to one or several persons (including the determination of the shares of each of such persons).

In case of transfer of a special property right to an indivisible object of construction in progress/future object of real estate (except for the first sale) or an encumbrance of property rights registered in favor of the buyer who paid part of the price for an indivisible object of unfinished construction/future object of real estate , the rights and obligations of the buyer under the contract of sale of an indivisible object of unfinished construction/future object are simultaneously transferred to the transferee real estate (first sale) or an agreement on participation in the construction financing fund.

Regarding the categories to which the changes apply, these are the following objects. A divisible object of unfinished construction is an object of immovable property that will be built in the future (residential building, building or structure), in respect of which the right to perform construction works has been obtained and which has not been put into operation, provided that as part of such object of the object are future real estate objects.

At the same time, the future real estate object is a constituent part of a divisible object of unfinished construction, which, after the completion of construction, will become an independent object of immovable property (apartment, garage box, other residential or non-residential premises, parking space, etc.).

In turn, an indivisible object of unfinished construction is an object of immovable property that will be built in the future (residential building, building or structure), for which the right to perform construction works has been obtained and which has not been put into operation, provided that such an object does not include future real estate objects.

In general, the current regulations for the investor are an additional guarantee of the legality of the developer’s activity, since the developer is obliged to submit the following documents in order to obtain a permit to carry out construction work:

1) a copy of a document certifying the right of ownership or the right to use a land plot or a surface agreement, for example, a land plot lease agreement, a land plot purchase and sale agreement, a state deed on land plot ownership, an extract from the State Register of Real Property Rights and other documents certifying the right of ownership or the right to use a land plot;

2) a copy of the documents on the appointment of persons responsible for the execution of construction works and persons who carry out copyright and technical supervision;

3) information about the license granting the right to perform construction works and qualification certificates.

Confirmation of the registration of a permit to perform construction works is the display of data in the Unified State Electronic System in the field of construction, access to which is open and any person can check information about the validity of construction permit documents.

It all related to the real estate construction stage. But already after the acceptance of the new building into operation, the new rules announced in November regarding the registration of ownership in automatic mode come into play.

These changes were generally received positively by the general public, because the innovations expand the list of administrative services provided automatically, which simplifies and improves the quality of their provision, as well as reduces the burden on state registrars. In addition, the changes increase the degree of protection of the rights of individuals to immovable property (as it excludes the possibility of state registration on the basis of falsified documents that can be submitted to the state registrar).

But the most cautious experts point out that there is another side to such innovations – the latest cyber attack, which shut down several important registers of the Ministry of Justice for at least two weeks, makes it clear that electronic is not 100% protected, and saved copies will not be possible to restore how would a failure occur on a global scale. But of course, for the average user, the speed and convenience of performing some legal action currently outweighs everything else.

At present, the automation of state registration processes has allowed individuals and legal entities to automatically receive a complex service regarding the automatic registration actions defined by the legislation in the DRRP from the very beginning of construction to its completion.