Real Estate In Ukraine 2023: SPECIAL REPORT FOR LEXOLOGY


  1. General
  2. Investment vehicles
  3. Acquisitions and leases
  4. Financing
  5. Update and trends


Legal system

How would you explain your jurisdiction’s legal system to an investor?

Ukraine is a civil law jurisdiction. Real estate is governed by nationwide laws. International law is relevant to a limited extent (eg, international tax matters). Ukraine has a compulsory system of registering property rights, which is governed by independent rules of procedure.

Courts have limited powers to interpret laws and do not create binding precedents. However, the positions of the Supreme Court shall be taken into account by authorities and lower courts.

Courts have the power to grant injunctions in disputes involving real estate, preventing any registration actions towards the property (eg, conveyancing of title).

Freedom of contract is limited by the relevant imperative provisions. Oral contracts for real estate do not have legal effect. Parol evidence in contractual disputes is admissible only as of the last resort in cases where the contract is ambiguous and cannot be interpreted under the law or customary business practice.

Land records

Does your jurisdiction have a system for registration or recording of ownership, leasehold and security interests in real estate? Must interests be registered or recorded?

Ukraine has a compulsory system of state registration of property rights, including ownership of and security interest over the land. During the period of the martial law and within 30 days after its termination, registration actions regarding real estate are carried out by designated subjects. Registered property, leasehold rights and security interests to the land are registered and displayed in an electronic public register of property rights and encumbrances. Also, there is a State Land Cadastre, which contains such information as the land’s number, owners, restrictions, boundaries and technical details of the land, etc. Currently these registers are functioning in a limited regime due to the martial law.

Conveyance or leasehold of the land cannot be performed until the land is duly registered and has a cadastral number. 

Failure to register the security does not make the mortgage agreement void, provided the mortgage agreement has all material conditions and is notarised. Unregistered security interests rank below registered interests and prior undisclosed interests. 

Registration and recording

What are the legal requirements for registration or recording conveyances, leases and real estate security interests?

The transfer of property must be registered with the electronic real estate register, and land must also be registered in the State Land Cadastre. The conveying deed remains valid without registration; however, transfer of the property becomes effective as of the date of registration of the property rights. 

Although the law allows electronic registration, there are no technical solutions for this. Thus paper applications are required for ownership, leasehold and security interests’ registration. 

The fees, taxes and the party responsible to pay them vary depending on the type of party: residents or non-residents entities, natural persons, or legal persons. Usual fees constitute of:

  • a pension levy of 1 per cent;
  • a state duty of 1 per cent; and
  • other taxes that depend on the whether the seller is a natural or legal person, and other circumstances, including: 
    • personal income tax of 0 per cent, 5 per cent or 18 per cent;
    • military tax (for individuals) of 1.5 per cent; and
    • corporate tax of 15 per cent or 18 per cent and VAT 20 per cent (if applicable). 

Taxes are usually borne by the seller, the pension duty by the buyer, and the state duty is split between both parties. Additional expenses (eg, appraisals, notary fees) are customarily split.

The amount of taxes due can be optimised through an indirect sale (the sale of a company owning a property).

Foreign owners and tenants

What are the requirements for non-resident entities and individuals to own or lease real estate in your jurisdiction? What other factors should a foreign investor take into account in considering an investment in your jurisdiction?

There are restrictions on the rights of foreign purchasers of real estate in Ukraine. The most prominent is the prohibition of ownership of agricultural land (which includes indirect ownership). However, the lease of real estate, including agricultural land, to foreigners is not restricted.

Foreign entities can acquire non-agricultural land within cities, towns, villages when buying buildings on it or for the construction of a property for their own business. Outside cities, towns and villages, foreign companies can only acquire land when buying buildings on it. 

Other restrictions may arise from international or Ukrainian sanctions. National defence or security limitations may also prohibit ownership of land or real estate belonging to strategic state- or military-owned infrastructure.

Ownership of real estate by foreigners does not require licences, however ownership must be registered with the tax authority at the location of the real estate (for entities) and an individual must obtain a tax ID before acquiring real estate.

Exchange control

If a non-resident invests in a property in your jurisdiction, are there exchange control issues?

Ukraine is gradually eliminating exchange control measures. However, the restrictions on the transfer of foreign currency abroad are currently in force in Ukraine. According to the special martial law legislation, such transfers are prohibited except for some cases (payments for goods or services received from abroad, critical import, etc). The respective restrictions are temporary and will stay in force till the end of the martial law.

Additional limitations may also arise from international sanctions, transactions with cash and anti-money laundering legislation. All payments within the territory of Ukraine shall be made in hryvnia, unless the parties use foreign bank accounts for payments.

Legal liability

What types of liability does an owner or tenant of, or a lender on, real estate face? Is there a standard of strict liability and can there be liability to subsequent owners and tenants including foreclosing lenders? What about tort liability?

The nature of liability of an owner, tenant or lender depends on the type of asset (eg, land or other real estate, such as buildings, factories or plants etc). Owners (tenants) of land are liable for using it according to designated purpose (with the exception of the period of martial law), maintaining soil fertility, paying land tax and observing established limitations, etc.

Breaching the land law entails civil, administrative or criminal liability depending on the severity. The violation may result from concluding deeds and contracts in violation of the law, damaging or polluting land, use contrary to the designated purpose, failure to perform recultivation, etc.

Owners of real estate undertake the burden of care for the property and should take measures to prevent damage to the health of individuals and the environment; should not infringe on the rights of its neighbours; should pay the taxes and utility bills; and inform tenants or buyers about third-party rights.

Owners (or tenants, if agreed) bear the risk of accidental loss and damage to their property. Tenants are liable for using the property according to the contract and purpose, fire safety and others.

Protection against liability

How can owners protect themselves from liability and what types of insurance can they obtain?

Owners and tenants are not required to have insurance for the property unless their contract provides otherwise. Insurance is mandatory for mortgaged property, real estate with a hazard source, and when leasing state- or community-owned property.

Insurance protects owners against destruction or damage to the property and loss and tenants’ liability for destruction and damage. Insurance for civil liability shields owners and tenants from third-party claims and tort liability.

Environmental insurance is not common in Ukraine as no regulation  exists at the moment (except for the draft law ‘On Environment insurance’ – which is not in force yet). 

Choice of law

How is the governing law of a transaction involving properties in two jurisdictions chosen? What are the conflict of laws rules in your jurisdiction? Are contractual choice of law provisions enforceable?

In relation to deeds with real estate, the laws of the country where the property is located or shall be registered shall apply. Therefore, if the parties choose to apply foreign law to  the contract regarding real estate in Ukraine, Ukrainian courts will not recognise an express choice of law.


Which courts or other tribunals have subject-matter jurisdiction over real estate disputes? Which parties must be joined to a claim before it can proceed? What is required for out-of-jurisdiction service? Must a party be qualified to do business in your jurisdiction to enforce remedies in your jurisdiction?

Depending on the parties involved real estate disputes are considered by civil or commercial courts, located at the property’s location. Apart from the plaintiff and a defendant, state registrars usually join real estate disputes, considering that enforcement of the court’s decision is usually associated with registration actions. 

Ukraine is part of the Hague Service Convention, which applies to service of process in civil and commercial matters and has diplomatic service for outside-jurisdiction enforcement. Ukraine also has several international treaties on judicial assistance, which allow sending courts’ requests for service directly to foreign court or authority and a party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which is applied on a reciprocal basis. 

Foreign parties are not required qualification to do business to enforce remedies in Ukraine. The courts’ decisions are enforced by the State Enforcement Agency.

Commercial versus residential property

How do the laws in your jurisdiction regarding real estate ownership, tenancy and financing, or the enforcement of those interests in real estate, differ between commercial and residential properties?

There are no differences between commercial and residential properties in terms of ownership, financing or enforcement of interests in real estate. However, commercial lease agreements have slightly different requisite material terms to be included, such as conditions for return and for the renovation of the property and rent indexation. Business tenants enjoy a statutory right to auto-prolongation of the lease term. 

Planning and land use

How does your jurisdiction control or limit development, construction, or use of real estate or protect existing structures? Is there a planning process or zoning regime in place for real estate?

Development and construction of real estate are limited by planning and zoning requirements, construction permitting and control systems. Obtaining a construction permit requires developers to obtain urban development conditions and limitations establishing requirements for construction, including local land zoning, maximum heights of the building, protected areas and engineering networks limitations etc. 

The Government has simplified the submission and receipt of permits and some registration procedures in construction during martial law and within one year from the date of its termination or cancellation. 

Construction and use of real estate before commissioning is controlled by the authorities. They may visit the site, check compliance of used materials, on-site safety, qualifications of engineers involved etc. However, certain easements of this rule apply in respect to the buildings damaged during the war in Ukraine as well as the building commissioned during the martial law.

Protection of existing structures is controlled and is limited mostly with respect to historical sites and areas. 

Planning and zoning are carried out at the state, regional and local levels. At the local level, it’s laid down in comprehensive plans of development of territories, general plans of settlements and detailed plans of the territory, which determine the key decisions of development, planning, building and use of the territory, the restrictions of land use, requirements for building and landscaping.

Any person can apply for urban development conditions and limitations for a duly registered in the state cadastre land plot.

Variations of zoning conditions are complicated and require public consultations and decisions of local councils on amendments to zoning documentation. 

Owner or tenant or any other rights holder can challenge zoning decision in court, if it violates their rights, interests or contradicts the one on a higher level. 

Failure to comply with zoning requirements entails administrative liability such as order to rectify violations, fines and demolition of the unauthorised construction.

Government appropriation of real estate 

Does your jurisdiction have a legal regime for compulsory purchase or condemnation of real estate? Do owners, tenants and lenders receive compensation for a compulsory appropriation?

For the purpose of locating specific structures (eg, military facilities or critical infrastructure) the government body can compulsorily purchase a land subject to prior negotiations with the interested parties. If the agreement is not reached, appropriation can be affected by court order upon thorough justification. Compensation to owners will generally include land value, associated relocation and disturbance costs. 

During the martial law the forced alienation or seizure of property is allowed for the purposes of the defense-industrial complex activity. Such alienation is allowed only on the basis of the decision of the military command, agreed with the local authorities, and entails a subsequent full refund of the property’s cost.


Are there any circumstances when real estate can be forfeited to or seized by the government for illegal activities or for any other legal reason without compensation?

The government may seize property as a criminal penalty for serious crimes if prescribed by the Criminal Code of Ukraine. Also, the property of the Russian Federation and its residents may be seized by decision of the government due to the war. 

Additionally, local governments may ‘claim’ ownerless property (ie, property with no identified owner). Ownerless property is maintained on the record for one year. Afterward the local government may petition the court for its transfer to communal ownership.

Bankruptcy and insolvency

Briefly describe the bankruptcy and insolvency system in your jurisdiction.

Ukrainian law provides for financial restructurings. A borrower in the early stage of distress can agree on a restructuring plan with creditors. Debtor and creditors may agree on the moratorium on the security enforcement lasting from 90 to 180 calendar days. 

Companies can be declared bankrupt by commercial courts following an application filed by the debtor or its creditor. A debtor’s application has to be accompanied by detailed information on their financial state, list of debts and assets proving the debtor’s insolvency. Creditors are not obliged to prove the insolvency of the debtor.

Bankruptcy proceedings provide for commonly known mechanisms: 

  • appointment of a trustee or administrator;
  • automatic stay for 120 days since the bankruptcy’s commencement;
  • valuation proceedings upon the creditor’s petition; and
  • possible reorganisation or liquidation of the debtor.

Investment vehicles

Investment entities

What legal forms can investment entities take in your jurisdiction? Which entities are not required to pay tax for transactions that pass through them (pass-through entities) and what entities best shield ultimate owners from liability?

Common forms of foreign investments in Ukrainian real estate include direct purchase, acquisition of a company owning an asset, or investments through special institutional vehicles. Limited liability or joint-stock company structures are used to shield investors from liabilities. Investment funds may be used for significant investments considering some tax benefits. Financing of residential real-estate projects with private funds shall be carried out exclusively through real estate operation funds, construction financing funds or mutual investment institutions.

Foreign investors

What forms of entity do foreign investors customarily use in your jurisdiction?

The most common forms of entities used are limited liability companies and joint-stock companies. The investors’ responsibility regarding repayment of debts in a limited liability company is limited to the amount of their share. There are no requirements regarding minimum amounts in a limited liability company’s charter capital and its registration formalities are fast and can take one day. Limited liability companies are chosen more frequently due to their simple and flexible management instruments. 

A joint-stock company is created when the mobilisation of large funds under a public offering is necessary. A joint-stock company’s charter capital is divided into shares of equal par value. Minimum charter capital for a joint stock company is equal to 1 250 minimum monthly salaries (approximately US$220,000 in 2022).

Both limited liability companies and joint stock companies may be established by a single or a group of founders.

Organisational formalities

What are the organisational formalities for creating and maintaining the above entities? What requirements does your jurisdiction impose on a foreign entity? Does failure to comply incur monetary or other penalties? What are the tax consequences for a foreign investor in the use of any particular type of entity, and which type is most advantageous?

The incorporation of a company requires the signing of constitutional documents and registration with a state registrar. Upon registration, within one to three business days, the company will be acknowledged and recorded by tax and other authorities. Information about an incorporated company is displayed in the electronic companies’ register, which is public. Information contained herein confirms a company’s registration as fact and is deemed reliable.

Foreign companies acquiring Ukrainian real estate must register with the tax authorities at the location of the property and pay tax on income derived from it.

A foreign company’s income from operations with Ukrainian real estate is taxed at 15 per cent rate. A foreign company’s income received through a permanent establishment is taxed at 18 per cent corporate income tax.

Acquisitions and leases

Ownership and occupancy

Describe the various categories of legal ownership, leasehold or other occupancy interests in real estate customarily used and recognised in your jurisdiction.

Ukraine recognises state, communal and private ownership. Trust ownership is a form of security with restrictions on use and disposal. Real estate may be owned individually or jointly (common or shared ownership). In the case of co-ownership, each co-owner owns a proportional quota of the entire property and thus participates in the income of the entire property in proportion to quota.

The right of use includes leasing, loans of use, servitude (eg, the right of way by vehicle), emphyteusis (restricted use of land for agricultural purposes), and superficies (restricted use of land for construction). 


What are the typical pre-contractual steps?

A letter of intent is non-binding and does not have legal consequences for the parties. In the pre-contractual steps, the parties usually conclude a preliminary contract, which is binding. The preliminary contract related to a real estate purchase is executed in writing and subject to notarisation. A party unreasonably evading the conclusion of the principle contract shall reimburse damages for the other party and bears other liabilities prescribed by the preliminary contract.

The seller may be forced to sell real estate on the basis of the preliminary contract by a court decision.

The parties are not legally bound to take the property off the market, but they may agree to do so.

Brokers are usually involved in the search for suitable real estate or a buyer. At the same time it is not compulsory and not always safe, considering that there is no regulation of brokerageactivity.

Contract of sale

What are typical provisions in a contract of sale?

A sale and purchase contract is executed in writing and subject to notarisation. Essential conditions are the term, subject of sale (ie, name, address, area, description of the title documents, cadastral number, designated use, legal regime etc) and price. 

Typically the payment is made in full; however another payment order may be agreed by the parties.

The ownership of real estate is evidenced by registration at the publicly available electronic state register. Due to the martial law the respective register is not publicly available. The information registered herein confirms the facts of acquisition of rights to immovable property. The notary always checks the seller’s title documents before certifying the deal. 

Liabilities for taxes and transaction-related expenditures are shared according to the parties’ agreement.

The risk of accidental loss or damage to the property passes to the buyer from the moment of transfer, unless otherwise provided by a contract.

Environmental clean-up

Who takes responsibility for a future environmental clean-up? Are clauses regarding long-term environmental liability and indemnity that survive the term of a contract common? What are typical general covenants? What remedies do the seller and buyer have for breach?

A sale and purchase contract does not usually contain conditions for a future environmental clean-up. A seller’s guarantee that the property is not contaminated may be included in an agreement and allow the buyer to claim for damages in case of a breach. If there is no such guarantee, it is doubtful that any other remedies for the seller could be applied.

Lease or sale-and-purchase agreements of land or real estate usually contain obligations of the buyer (tenant) to comply with ecological regulations, use the asset according to the purpose, avoid containment of soil or reduction in its fertility etc., which are basically the owner’s obligations prescribed by the law. Violation of such obligations entails administrative, civil and criminal liabilities.

Lease covenants and representation

What are typical representations made by sellers of property regarding existing leases? What are typical covenants made by sellers of property concerning leases between contract date and closing date? Do they cover brokerage agreements and do they survive after property sale is completed? Are estoppel certificates from tenants customarily required as a condition to the obligation of the buyer to close under a contract of sale?

A seller must warn a buyer about all third parties’ rights to the real estate (eg, lease, right of use, pledge, encumbrances etc). Should the seller breach this obligation, the buyer has the right to demand a price reduction or to terminate the contract, if he or she was not aware of the third parties’ rights to the asset in question.

In a land sale, tenant’s pre-emptive rights must be considered. A seller must inform a tenant about a planned sale and its price in advance and the tenant has a right to purchase the land plot. Should a seller fail to notify the tenant, the latter will have a right to demand the land plot in court.

Sale-and-purchase contracts customarily do not contain covenants devoted to leases. However, they may contain a seller’s representations as to the completeness of the information provided on lease and third parties’ rights.

Leases and real estate security instruments

Is a lease generally subordinate to a security instrument pursuant to the provisions of the lease? What are the legal consequences of a lease being superior in priority to a security instrument upon foreclosure? Do lenders typically require subordination and non-disturbance agreements from tenants? Are ground (or head) leases treated differently from other commercial leases?

Before concluding a mortgage, the debtor shall notify the creditor of all third parties’ rights and claims to the property. Should the debtor fail to fulfil this obligation, the creditor may demand acceleration of the fulfilment of all contractual obligations and compensation for damages.

Leases survive an ownership transfer (including foreclosures), and the rights and obligations of the landlord pass to the new owner. In any case, parties to a lease contract can agree to the early termination of the lease, subject to the sale of the property or enforcement of the mortgage.

The debtor is not able to lease the mortgaged property without the consent of the creditor. 

In cases of bankruptcy, the mortgaged property of a debtor shall be included in the liquidation estate.

Delivery of security deposits

What steps are taken to ensure delivery of tenant security deposits to a buyer? How common are security deposits under a lease? Do leases customarily have periodic rent resets or reviews?

Security deposits are common practice providing protection against the tenant’s possible default. Leases typically prescribe tenant’s obligations to pay the landlord a security deposit amounting to one to six monthly rent payments in advance. Upon expiration of the lease term the security deposit can be returned to the tenant or credited towards the rent payments. Letters of credits are not commonly used for this purpose.

The rent rate may be changed within the period and in a manner specified in the contract. It is a usual practice for long-term leases.

Due diligence

What due diligence should be conducted before executing a contract? Is any due diligence customarily permitted or conducted after contract but before closing? What is the typical method of title searches and are they customary? How and to what extent may acquirers protect themselves against bad title? Discuss the priority among the various interests in the estate. Is it customary to obtain government confirmation, a zoning report or legal opinion regarding legal use and occupancy?

Due diligence is usually performed by legal, technical, environmental and financial advisers. It typically covers:

  • verification of the ownership title and its origination history;
  • review, mortgages and other possible encumbrances, zoning restrictions, land use limitation etc;
  • leases relating to the asset;
  • pending or threatened litigation or other claims;
  • environmental issues;
  • technical investigations; and
  • tax and financial issues.

Registered rights of claim (mortgage) to real estate are subject to satisfying according to their ranking in priority of registration. The earlier a mortgage is registered, the higher priority it has. Priority cannot be changed by the agreement.

Structural and environmental reviews

Is it customary to arrange an engineering or environmental review? What are the typical requirements of such reviews? Is it customary to get representations or an indemnity? Is environmental insurance available?

Yes. Technical and environmental due diligence are often conducted on targets. Such due diligence requires site visits, documentation on the real estate, and is often not very deep. While the use of technical due diligence is more widespread, environmental due diligence is suitable for transactions related to industrial assets that may require environmental impact assessment. Typically, a seller does not provide comprehensive warranties on the target’s environmental or technical condition – targets are sold ‘as is’. 

Environmental insurance is not common in Ukraine, as no regulation exists at the moment (except for the draft law ‘On Environment insurance’ which is not in force yet). 

Review of leases

Do lawyers usually review leases or are they reviewed on the business side? What are the lease issues you point out to your clients?

Leases are typically reviewed by the business (focusing on commercial conditions) and lawyers (focusing on ownership title and encumbrances checks, uninterrupted access, provision of utilities and maintenance, subleases, limitations of use, rent calculations, payment orders and changes, security deposits, liabilities of the parties, lease term extensions and early termination provisions, improvements to the leased property and their compensation etc). 

The leasing of state or municipal property or land involves public auctions, but with certain limitations during the martial law period. 

Foreign clients may let a property for lease upon the creation of a legal presence in Ukraine. 

Other agreements

What other agreements does a lawyer customarily review?

Although the main focus of the legal review is the title to real estate and encumbrance-related documents, all the other documents and agreements related to the transactions, such as property and asset management, financing facilities, utilities and service contracts are usually reviewed too.

Closing preparations

How does a lawyer customarily prepare for a closing of an acquisition, leasing or financing?

Lawyer’s actions depend on the type of the transaction (direct or indirect sale etc), parties’ content (residents or non-residents, individuals or legal entities) and assets type. 

Deliverables typically include the agreement itself and security agreements. But for the conclusion the parties must present:

  • title documents;
  • technical documentation (eg, technical passports, layouts or cadastral measurement documents);
  • documents confirming the parties’ legal capacity (including identity documents, power of attorney, corporate authorisation, decisions on sales, purchases, leases and financing etc);
  • excerpts of the state registry confirming the absence of encumbrances;
  • valuation reports; and 
  • consents of spouses, tenants and co-owners etc.

The authority of a legal entity is verified based on:

  • constitutional documents of the company;
  • representative empowerment;
  • the managing body’s consent to the transaction; and
  • information from the companies’ state register.

Closing and contracting may be simultaneous (in simple transactions) or have a time gap between them, depending on the conditions of the contract.

Closing formalities

Is the closing of the transfer, leasing or financing done in person with all parties present? Is it necessary for any agency or representative of the government or specially licensed agent to be in attendance to approve or verify and confirm the transaction?

Real estate sale-and-purchase transactions will always need to be closed in person, as a notary must be present at the closing to notarise the transfer agreement and perform registration of the title. A notary checks the parties’ authority to enter the deal and title documents.

Lease closing can be done completely remotely, but for long-term and high-profile leases closing is typically done in person as it requires notarisation.

Although the closing of a financing deal does not require notarisation, mortgage agreements require thus shall be made in person.

Contract breach

What are the remedies for breach of a contract to sell or finance real estate?

A buyer may sue a non-performing seller for transfer of ownership against the payment of the purchase price and additionally for damages for late delivery, or terminate the agreement and sue for damages and the return of payments.

Similarly, a seller may sue a non-performing buyer for payment of the purchase price, including damages for late payments against the transfer of ownership, or terminate the agreement and retain ownership of the property and sue for damages for non-performance. The seller may retain down payments made by a buyer, if this is permitted by the contract.

Breach of lease terms

What remedies are available to tenants and landlords for breach of the terms of the lease? Is there a customary procedure to evict a defaulting tenant and can a tenant claim damages from a landlord? Do general contract or special real estate rules apply? Are the remedies available to landlords different for commercial and residential leases?

Specific remedies are subject to the contract. Each party bears responsibility for damage and losses caused to the other party due to non-performance or improper performance of their obligation. 

Tenants are liable for damages caused to the leased property (except normal wear and tear), and landlords are liable for the damages caused as a result of special peculiarities of the leased property, in case a tenant was not aware of it. 

A defaulting tenant may be evicted in case of delayed payments, use of property for unintended purposes, unauthorised subleasing, negligent use and for other reasons previously agreed on.

A tenant may terminate the agreement in case the property does not correspond to the agreed condition or intended purpose, or the landlord does not fulfil their obligation regarding capital repairs. A tenant may demand a reduction of rent in cases of a substantially hindered use of the property due to the reasons not attributable to the tenant, or can be relieved from payment in case the leased property could not be used due to circumstances not attributable to the tenant.

The mentioned remedies are applicable both to commercial and residential leases.


Secured lending

Discuss the types of real estate security instruments available to lenders in your jurisdiction. Who are the typical providers of real estate financing in your country? Are there any restrictions on who may provide financing?

Security in real estate financing includes mortgages, pledges, suretyships, bank guarantees and fiduciary (trust) ownership.

The most commonly used are mortgages, pledges of corporate rights or other property and suretyships. While mortgages are the most important security instrument in real estate, lenders usually demand a combination of several types of securities, which will ensure flexibility in debt recovery in case of default.

Mortgages and pledges are subject to state registration, which entails a lien to the collateral. 

Suretyship is an obligation of the person (surety) to perform the borrower’s obligations if, for whatever reason, the borrower does not perform. Thus, a lender may demand debt repayment from the surety.

Fiduciary ownership as a security is novel in Ukrainian law, and is thus not widespread in practice yet. It prescribes the transfer of an asset to the lender into fiduciary ownership that does not entitle the lender to alienate it, unless under foreclosure. Upon establishing the fiduciary ownership, a borrower loses its title to an asset and after repayment, the title shall be transferred back to the borrower.

Enforcement of different types of security differs. However, all of them can be enforced by either in court and out-of-court procedures.

Mortgages provide several foreclosure methods: transfer of title to real estate to the creditor, sale of the asset to a third party on behalf of the mortgagor or sale of the real estate upon a court’s decision.

Financing may be provided by any person or entity in form of loans. In its turn, financial credits can only be provided by financial institutions. Banks and other financial institutions are the most typical providers of real estate financing in Ukraine.

Financing is available in each stage of real estate development and depends on the borrower’s solvency and availability of relevant collateral.

Leasehold financing

Is financing available for ground (or head) leases in your jurisdiction? How does the financing differ from financing for land ownership transactions?

Financing of leases is not common in Ukraine, as lenders do not usually provide this type of financing. At the same time, lenders may provide loans for general business purposes, which may include leases. Such financing is provided against adequate security.

Form of security 

What is the method of creating and perfecting a security interest in real estate?

The most efficient method of creating and perfecting a security interest is combining relevant securities. For example, a mortgage, the most important security instrument, can be supplemented by a pledge of corporate rights and suretyship. Such an approach will ensure flexibility in debt recovery in case of default and will provide multiple instruments for the lender. Additionally, lenders usually require the property to be insured.


Are third-party real estate appraisals required by lenders for their underwriting of loans? Are there government or industry standards for appraisals? Must appraisers have specific qualifications or required government or industry certifications? Who is required to order the appraisal?

Third-party real estate appraisal is usually required by lenders in order to assess the credit risk and determine necessary security. It is also necessary for the purpose of foreclosure of a mortgage. An appraisal is performed according to the law-established procedure and methodology by qualified appraisers. Each qualified appraiser shall have respective qualifications confirmed by a qualification certificate.

Legal requirements

What would be the ramifications of a lender from another jurisdiction making a loan secured by collateral in your jurisdiction? What is the form of lien documents in your jurisdiction? What other issues would you note for your clients?

A foreign lender can make a loan secured by Ukrainian real estate without any special qualification or licence. Loans issued to residents of Ukraine by foreign lenders are subject to registration with the National Bank of Ukraine. Interest payable to the foreign lender is subject to withholding tax at 15 per cent (in certain circumstances 5 per cent) rate unless otherwise prescribed by the double taxation treaty. 

During the martial law the restriction on the transfer of foreign currency abroad is in force (except some cases, including payments for goods and services, critical imports, etc). 

There are no restrictions on the foreign ownership of real estate in Ukraine, except for the ownership of agricultural land. Tax considerations related to real estate ownership may be relevant and should be considered on a case-by-case basis.

Mortgage agreements are subject to notarisation and registration, which leads to notary and registration fees, but not taxes. Mortgages can be assigned without taxes.

Loan interest rates

How are interest rates on commercial and high-value property loans commonly set (with reference to common benchmark interest rates (eg, SOFR, Ameribor), central bank rates, etc)? What rate of interest is legally impermissible in your jurisdiction and what are the consequences if a loan exceeds the legally permissible rate?

Every transaction is assessed on the basis of the financial risk of the project, the current interest rate of the National Bank of Ukraine, the financial capability of the borrower, the viability of the project etc. Based on the analysis banks offer individual terms and conditions of loan financing to potential borrowers, including interest rates, which are usually fixed without any reference to Ameribor or other benchmark interest rates.

Loan default and enforcement

How are remedies against a debtor in default enforced in your jurisdiction? Is one action sufficient to realise all types of collateral? What is the time frame for foreclosure and in what circumstances can a lender bring a foreclosure proceeding? Are there restrictions on the types of legal actions that may be brought by lenders?

A lender will typically sue a debtor, initiate insolvency procedure, sell trust property or enforce the foreclosure on the collateral (either in-court or out-of-court). 

An out-of-court foreclosure of a mortgage can be enforced through the notary’s executive inscription, by transferring the title to the asset to the lender or its sale to a third party. Judicial procedure prescribes the sale of the asset at public auction upon the court’s decision. There are certain restrictions on mortgage foreclosures that apply to individuals during the martial law and within 30 days after its termination.

Foreclosures start with a notification being sent to the borrower and other parties concerned. The notice sets a 30 calendar days term upon receipt for the debtor to remedy the default. Should the debtor fail to remedy the debt, a lender can proceed with the foreclosure. There are no restrictions on the type of legal action that may be brought by lenders, however, in some cases, foreclosure may invalidate any further creditor’s claims.

As to the fiduciary ownership, a trustee is entitled to sell a trust property to any third party unless otherwise prescribed by the agreement. A lender must give 30 calendar days prior notice on its intention and disclose the minimum sale price.

In parallel with foreclosure, a loan agreement may prescribe other liabilities (eg, delay interest, fines, reimbursement of losses) that can be enforced voluntarily by the debtor or in court.

Loan deficiency claims

Are lenders entitled to recover a money judgment against the borrower or guarantor for any deficiency between the outstanding loan balance and the amount recovered in the foreclosure? Are there time limits on a lender seeking a deficiency judgment? Are there any limitations on the amount or method of calculation of the deficiency?

The borrower is liable for the full amount of the loan plus interest, other permitted additions, and must compensate the lender for any deficiency in the amount recovered through the foreclosure (unless the lender enforces the out-of-court foreclosure to the assets of an individual).

The standard limitation period is three years. There are no limitations on the amount, but lenders can recover only the amount that is borrowed plus interest, fines and losses. 

Protection of collateral

What actions can a lender take to protect its collateral until it has possession of the property?

During the foreclosure of the mortgage, the asset may be transferred to the lender’s management for the period of foreclosure. Such a transfer is possible if prescribed by the agreement or on the basis of a court’s decision. This allows a lender to effectively manage an asset, receive rent payments, products output or other income from the asset which shall be directed to repayment of debts, unless otherwise provided by the agreement or court’s decision.

A borrower is obliged to insure the mortgaged property against accidental loss or damage in favour of the lender. A mortgage agreement may also contain the borrower’s obligation to take other types of insurances. 


May security documents provide for recourse to all of the assets of the borrower? Is recourse typically limited to the collateral and does that have significance in a bankruptcy or insolvency filing? Is personal recourse to guarantors limited to actions such as bankruptcy filing, sale of the mortgaged or hypothecated property or additional financing encumbering the mortgaged or hypothecated property or ownership interests in the borrower?

A lender is entitled to satisfy its claim from mortgaged or pledged assets. The recourse depends on the specific terms of the secured and security agreements. If the lender uses the out-of-court foreclosure procedure, and the borrower is an individual, the recourse will be limited to the collateral. If the borrower is a legal entity or entrepreneur, the uncovered amount of claims will be valid. 

If the collateral consists of several objects, the lender may enforce an out-of-court foreclosure over one object and then demand the remaining sum of the debt.

In case of foreclosure on the basis of a court’s decision, the creditor has recourse to all the debtor’s other assets for uncovered debt.

Cash management and reserves

Is it typical to require a cash management system and do lenders typically take reserves? For what purposes are reserves usually required?

There are no legal requirements as to a cash management system, as it is not a common practice. Lenders typically do not take reserves. However, it is customary for banks to open an account for a borrower and carry out settlements via this account, which provides control of the money flow. Also, loan covenants may include some requirements for the borrower’s cash flows and values of financed assets.

Credit enhancements

What other types of credit enhancements are common? What about forms of guarantee?

Suretyship agreements, fiduciary ownership, bank guarantees and letters of credit are customarily used as credit enhancements. Guarantees can only be issued by banks.

Loan covenants 

What covenants are commonly required by the lender in loan documents?

The most common covenants include the following:

  • use the loan for purpose;
  • no additional encumbrances;
  • adequate financial information;
  • a pari passu clause;
  • no disposal of secured and other assets;
  • insolvency of the borrower;
  • no foreclosure on secured property;
  • right of inspection;
  • no change of use of the secured property;
  • no change of the controller or beneficiary;
  • adequate maintenance of the secured assets;
  • no default in payments;
  • informing about potential default; and
  • financial reporting.

Financial covenants

What are typical financial covenants required by lenders?

Each lender establishes its own financial covenants, which typically include loan-to-value ratios, debt-service ratios etc. The financial reporting requirements and ongoing appraisals depend on the lender’s internal regulations and procedures.

Secured movable (personal) property 

What are the requirements for creation and perfection of a security interest in movable (personal) property? Is a ‘control’ agreement necessary to perfect a security interest and, if so, what is required?

A security interest in movable (personal) property is created on the basis of pledge agreement, which does not require notarisation, but can be notarised upon the parties’ consent. Registration of the pledge of movable property is not compulsory, however will ensure its priority over a non-registered pledge of the same property.

Single purpose entity (SPE)

Do lenders require that each borrower be an SPE? What are the requirements to create and maintain an SPE? Is there a concept of an independent director of SPEs and, if so, what is the purpose? If the independent director is in place to prevent a bankruptcy or insolvency filing, has the concept been upheld?

It is not required for each borrower to be an SPE, although it is common to create a special purpose vehicle for the particular project. Lenders do not usually require an SPE or a special purpose vehicle to be formed for purposes of lending. There are no specific requirements for the establishment and administration of such entities under Ukrainian law; however, it is possible to indicate a particular single purpose in the charter of a legal entity.

International and national regulation

Are there any emerging trends, international regulatory schemes, national government or regulatory changes, or other hot topics in real estate regulation in your jurisdiction? (eg, transition to a new alternative benchmark rate upon cessation of LIBOR as benchmark rate?)

Land reform is in process, including the opening of the land market in July 2021, which enabled the sale and purchase of agricultural land. Notwithstanding some limited possibilities for foreign investors, the law launched one of the most anticipated and greatly welcomed among international community reforms. Land market relieves additional opportunities for financing agribusiness, as it enables to pledge the of agricultural land as collateral, which was not available in full earlier. 

The ongoing construction reform promises eased permitting procedures and elimination of corruption risk related to permitting document issuance.

The most significant influence on the real estate market regulation was exercised by the martial law in Ukraine, including the following restrictions:

  • the new currency restrictions;
  • easement of the construction permitting documents;
  • the prohibition to registering the acquisition of property rights to real estate before the end of one month from the state registration of the previous transaction to the property. The respective rule is applicable if each such acquisition was made on the basis of a contract or in connection with the contribution of the real estate into the authorised capital of the legal entity or with transferring such real estate to the legal entity as initial, membership and targeted contributions of the cooperative members, etc, or in connection with the withdrawal of the shareholders (participants) of the legal entity; and
  • launching the State Register of Destroyed and Damaged Property, which contains information about damaged and destroyed objects as a result of Russian aggression, as well as allows the creation and storage of acts of commission inspection on them. These data are necessary for the formation of the policy of compensation for damages and reconstruction. 

Recently, there has been an observable modification of the real estate market in Ukraine. The authorities are aimed at the fast rebuilding and in this regard we foresee the creation of favorable conditions and rules for attracting potential investors and expect the state support of foreign investments in Ukrainian real estate.  

Also, considering the acquiring of the status of a candidate country for EU membership by Ukraine, it directs its efforts toward harmonisation of the domestic legislation with the EU.

Sergiy Oberkovych

Sergiy Oberkovych

Senior Partner, Attorney at law

  • Recognitions
  • The Legal 500 EMEA 2023
  • Who’s Who Legal 2022
Oleksandr Melnyk

Oleksandr Melnyk

Partner, Head of Corporate Law and M&A practice, Attorney at law

Practices | Sectors


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