Legislation in Ukraine has never been sufficiently transparent and clear. It is not for nothing that there is an age-old saying among the people: “The law is like a drawbar – wherever you turn it, that is where it came out.” In addition, constant reformation adds to the difficulties – they changed the laws of the USSR to their own, and then, when the country took a course for European integration, the legislation was rewritten little by little, but already taking into account the European norms of rights. Among these stormy events, the average citizen always remains the most extreme. Today we will talk about those citizens who owned real estate for many years, but in fact legally owned nothing, although they thought otherwise all their lives, that is, about the so-called “exchange contracts”.
Lawyers of the “Repeshko and Partners” Bar Association commented on the legislation regarding real estate ownership rights, in particular, the features of “exchange contracts” and possible risks for citizens who for years considered themselves owners without having legal confirmation of this status.
First of all, let us recall that the 90s of the last century were not the best times for the young country – frequent power outages, insane salary arrears lasting several months, wages paid in kind – preferably sugar, not nightgowns, researchers who became “shuttles” and hauled all kinds of goods from Poland and many other things. Of course, in such conditions, the population counted every penny. But life did not stand still – many needed to solve real estate issues – just as the privatization of state-owned apartments continued violently and families were moving away, moving to live from a city to a village, to another city, and so on.
At that time, both the laws of the former USSR and the latest Ukrainian laws were in effect, and the registration of real estate transactions by a notary cost some crazy money (the inventory value of real estate objects was quite large, sometimes much higher than the market value, plus the state charged a state duty – a percentage of this value, and therefore the registration could reach a crazy 700, 800, 1000 USD equivalent at that time, despite the fact that for several thousand of the same US dollars it was possible to buy an entire apartment). But this did not stop our citizens and the registration of transactions with real estate was transferred to commodity exchanges. It should be noted right away that on commodity exchanges the transaction was carried out by a broker, it cost twice as much as the notarial value, and the demand for this service was so crazy that a stock broker in a couple of months of work could quite buy a decent car for himself (this despite the fact that part the exchange still took directly from the value of the transaction). From a legal point of view, everything was also normal again.
According to Part 3 of Art. 9 of the Housing Code of the Ukrainian SSR, citizens had the right to purchase housing at stock market auctions. At the same time, according to Article 12 of the Law of Ukraine “On Property” dated February 7, 1991, which was in effect at that time, citizens acquired the right to property in the event of concluding agreements that are not prohibited by the Law.
According to the content of Art. 128, 153 Civil Code (Civil Code) of the Ukrainian SSR (as amended on 18.07.1963, which was in effect until 2004), the right of ownership of the purchaser of the property under the contract arose from the moment of the transfer of the thing, unless otherwise provided by law or contract. The contract was considered concluded when the parties have reached agreement on all essential conditions in the required form in the appropriate cases. Essential are those terms of the contract that are recognized as such by law or are necessary for contracts of this type, as well as all those terms on which an agreement must be reached at the request of one of the parties.
According to Art. 224 of the same Central Committee of the Ukrainian SSR under the sales contract, the seller undertakes to transfer ownership of the property to the buyer, and the buyer undertakes to accept the property and pay a certain amount of money for it. At the same time Article 227 of the CC of the Ukrainian SSR a mandatory notarial form of the contract of sale of a residential building (apartment) and its registration by local self-government bodies was provided for.
But according to Article 15 of the Law of Ukraine “On Commodity Exchanges” from December 10, 1991, transactions registered on the stock exchange were not subject to notarization, if they represent the purchase and sale, supply and exchange of goods admitted to circulation on the commodity exchange.
It should be noted that during the entire existence of the practice of concluding exchange deals, no one at that time brought anyone to criminal responsibility for fraud, but in the legal environment there was a constant debate as to how legal this order of things was. In turn, the bureau of technical inventory, where real estate had to be registered at that time, accepted exchange contracts for registration. Moreover, people moved to their new homes, gave money to their former owners and never saw them again, lived there all their lives and died. And some still live there.
Everything did not change suddenly, and for some it seems that nothing has changed yet, but…. The new Civil Code of Ukraine entered into force on January 1, 2004. As for real estate purchase and sale contracts concluded on January 1, 2004, according to Article 657 Civil Code of Ukraine, the purchase and sale agreement of a land plot, a single property complex, a residential building (apartment) or other immovable property is concluded in writing and is subject to notarization and state registration. If the parties fail to comply with the requirements of the law on notarization of the contract, such contract is considered null and void. So, it was established that the only legal form of an agreement with residential real estate is a notarized contract. No options.
As a result, commodity exchanges were left without the lion’s share of earnings, and ordinary citizens faced problems in the future. At the same time, problems appeared where they were not expected. The owners of the real estate that was purchased on the commodity exchange died, and the notary refused the heirs to register the inheritance, because the exchange contract is now considered illegal. The same fate befell those who wanted to sell or gift real estate purchased on the stock exchange – notaries also refused to do so. Therefore, the only option for citizens remained and remains, unfortunately, in such cases – to apply to the court with a claim.
At the same time, if the heirs find themselves in this situation, to begin with, they need to obtain from the notary a resolution on refusal to perform a notarial act precisely on the given grounds – that the inherited property belonged to the deceased on the basis of a stock exchange agreement.
In the future, the court must make two requirements in the statement of claim:
- to recognize as valid the contract of purchase and sale of immovable property concluded on the commodity exchange;
- to recognize the right of ownership of immovable property in the order of inheritance by law or by will.
At the same time, when preparing the case for submission to the court, it is necessary to collect the following documents:
- a new technical passport (the cost starts from UAH 2,500-3,000),
- certificate of BTI (cost starts from UAH 600);
- an information certificate from the register of real estate (even about the lack of registration in it), the price of the issue is UAH 41;
- real estate appraisal report for payment of court fees (made by an appraiser, the cost starts from UAH 1,000)
- the resolution of the notary on the refusal to perform a notarial act;
- a copy of the passport and RNOCPP of the claimant (heir) and copies of documents confirming family ties in case of inheritance by law and a copy of the will in case of inheritance by will
- the stock exchange contract itself;
- to pay the court fee, which for 2024 will amount to UAH 1,211.20 for the request to recognize the contract as valid and 1% of the appraisal value, but not less than UAH 1,211.20 for the recognition of ownership.
It will be a little different for those who will apply to the court on their own behalf in order to be able to conclude an agreement with a notary with property purchased on the stock exchange. The procedure will also go through a claim to the court, but the claim will have only one demand – to recognize as valid the contract of sale of real estate concluded on the commodity exchange.
In this regard, a package of documents that must be submitted to the court will be distinguished, namely:
- a copy of the passport and RNOKPP of the claimant (property owner)
- the stock exchange contract itself;
- certificate of BTI (cost starts from UAH 600);
- an information certificate from the register of real estate (even about the lack of registration in it), the price of the issue is UAH 41;
- to pay the court fee, which for 2024 will amount to UAH 1,211.20 for the request to recognize the contract as valid.
For both cases, it will be necessary to collect at least some information about the commodity exchange for which the contract was certified, which should be noted in the lawsuit (existing, liquidated, re-registered, etc.)
At the same time, the defendant in both categories of cases will be the real estate seller. At the same time, it does not matter where he is and what his fate is – in the statement of claim, you can safely put his place of residence, which is indicated in the stock exchange agreement.
As for the legal justification, according to Article 153 of the 1963 CC of the Ukrainian SSR, the contract is considered to have been concluded when the parties have reached an agreement on all essential conditions in the required form in the appropriate cases. According to the provisions of Art. 227 of the Civil Code of the Ukrainian SSR of 1963, the contract of sale of a residential building must be notarized if at least one of the parties is a citizen. Failure to comply with this requirement entails the invalidity of the contract (Article 47 of this Code).
At the same time, according to Art. 15 of the Law of Ukraine “On Commodity Exchanges” dated December 10, 1991, in the version that was in effect at the time of concluding the sales contract, contracts registered on the stock exchange were not subject to notarization. The agreement was considered concluded from the moment of its registration on the stock exchange.
In accordance with Part 2 of Article 47 of the Central Committee of the Ukrainian SSR, which was in effect at the time of the conclusion of the contract, Resolution No. 9 of the Plenum of the Supreme Court of Ukraine dated November 6, 2009. “On the judicial practice of consideration of civil cases on the recognition of deeds as invalid”, if an agreement requiring notarization has been executed in whole or in part by one of the parties, and the other party evades its notarization, the court at the request of the party that executed the agreement, its legal successors, the prosecutor has the right to recognize the agreement as valid.
Thus, at the time of the conclusion of the Sales Agreement, the Law of Ukraine “On the Commodity Exchange” was in force, according to the terms of which contracts drawn up by the Commodity Exchange were recognized as valid, and the transaction itself was carried out in compliance with the requirements of the legislation in force at that time. Subsequently, amendments were made to the Central Committee of the Ukrainian SSR in 1963, according to which agreements on the alienation of immovable property are subject to mandatory notarization.
According to part 2 Art. 47 of the Civil Code of Ukraine (as amended in 1963) and Art. 220 of the Civil Code of Ukraine (as amended in 2003), if the parties have agreed on all the essential terms of the contract, which is confirmed by written evidence, and there has been full or partial performance of the contract, but one of the parties evaded its notarization, the court may recognize such a contract as valid. In this case, the following notarization of the contract is not required.
But the main thing to be aware of is that the legal process is quite a long process! In any case, if you manage to get through the trial in six months, consider yourself very lucky! On average, this category of cases is considered for about a year. Therefore, we advise everyone to carefully look at their documents that certify the right to real estate.
In the event that you find a stock exchange agreement – immediately and without fail apply to the court! Firstly, as you can see from the above, it is cheaper for the owner to “legalize” ownership of his property than for the heir, and secondly, since the court takes time, then “legalize” the documents while they are there, and not when it is needed to sell or donate the specified property, and thirdly, if you love your descendants, do not leave problems and lawsuits as an inheritance to them, do everything ahead of time.
