Scanning reading

18. Scan the text “Real Estate in Ukraine” and find out information concerning:

• documents which need a foreign individual in order to buy the property in Ukraine

Before scanning the text see the notes, given below the text.

Time limit – 15 minutes

Be sure to know that the word “scanning” means reading for detail.

Real Estate in Ukraine

Many foreign visitors to Ukraine are well aware that Ukraine's real estate market has been developing rapidly. Apartment prices in Kyiv and other major cities of Ukraine have "gone through the roof" in the past several years. Happy indeed are the investors who purchased real estate (apartments) in Ukrainian cities in the early 90s for a few thousand dollars and have seen their property rise in value an average of 20-40% a year ever since. Property values show no sign of halting their growth, and real estate analysts generally agree that the fundamental causes of the growth in prices in Ukrainian cities will continue to push up prices for several more years at the least.

Among the causes of the rise in price of real-estate in Ukraine are the following:

• low levels of housing per capita in Soviet times

• Soviet system kept people from moving to big cities, but now they are allowed to

• opportunities and capital concentrated in big cities

• rising income levels in cities and resort areas

• lack of investment alternatives

• mistrust of banks after losing life savings during the inflation and banking crisis of the early 1990s

• increasing accessibility of bank loans and mortgages

Foreign citizens or legal entities have the right to buy and own property in Ukraine. These property rights are set forth in the Constitution of Ukraine and Law of Ukraine On Property. The law permits owners of property (including foreign investors and joint ventures) not only to own property but also use such property for commercial purposes, lease property, and keep the revenues, profits, and production derived from its use, after all necessary taxes are paid.

To purchase residential or office premises, the buyer should verify the seller’s title by reviewing the title documents. Title documents which should initially be presented by the seller include:

• a certificate of privatization, a purchase contract (notarized as a rule) or evidence of gift or inheritance

• a proof showing the seller is the owner

• a certificate from the Unified Register of Prohibitions on the Disposal of Immovable Property on the absence of mortgages, arrest or other encumbrances.

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

• contracts (sale contracts, deeds of a gift, barter contracts, etc.)

• certificates on acquisition on real estate by public tenders issued by notaries

• court and arbitration court awards recognizing property rights

• certificates of Ownership Rights as to Real Estate issued by local authorities, etc.)

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 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. In order to enter into a sale-purchase agreement, a foreign individual needs to have the following documents:

• passport with a valid visa

• tax payer number on the territory of Ukraine (which is obtained at the regional Tax administration).

• if buyer is married and comes to Ukraine without his or her spouse: copy of marriage certificate, copy of spouse's passport, and notarized copy of spouse's consent to buy property in Ukraine

When buying real estate a 1% tax is paid on the sales amount and another 1% is paid to the Ukraine Pension Fund. Buyers and sellers settle on who is to pay these fees and state this in the sales agreement. Real estate agencies typically charge 3-5% of the property price for their services. Finally, buyers may buy an insurance policy on the property for 1% from their real estate agency.

Typical rental prices in Ukrainian cities are usually 5-10% of the property value per year, or 0.8% per month. In other words, an apartment that would currently sell for $40,000 USD would probably cost $160-320 per month to rent (closer to the middle of this range would be most typical).

Many real estate agencies offer rental and property care services, allowing foreigners owners to not have to worry about their property at all. Owners can agree to pick up rent from the agency periodically or have the money deposited to their Ukrainian bank account.

Money earned from renting out real estate is taxable in Ukraine. If owners are not Ukrainian tax residents, they must pay 26% on earnings from real estate rental — twice the rate of 13% (flat tax on income) for residents.

Owners of higher-end apartments or multiple properties may find it worthwhile to register as private entrepreneurs and pay a fixed monthly tax instead of percentage-based income taxes on money earned from rent. This standard tax of around $40 USD does not change for any level of income related to entrepreneurial activities that amounts to less than 500 thousand UAH (nearly $100,000) per year.

Corruption, lack of regulations, lack of controls and lack of respect for an individual's rights as well as an insecure legal framework for enforcing personal property rights means that buying property in Ukraine is most certainly not without potential headaches, stresses and problems. So, finding a well-connected real-estate agency is essential, as it is impossible to check the legal status of an apartment without an agency.

In any case all potential problems concerning real estate deals under existing legislative rules are successfully solved by professionals.