How to purchase real estate (apartment) in Ukraine?
Foreigners coming to Ukraine to start a business, or to get married or employed, or for any other reason, usually consider purchasing an apartment or a house in Ukraine.
In response to popular requests from our clients, the EXPATPRO team has prepared a brief guide on how a foreigner can buy an apartment in Ukraine, and which intricacies and pitfalls shall be considered, as the real estate market trends and legislation tend to be ever-changing.
A foreigner can choose to purchase an apartment in a new building or the secondary market. It depends on what you prefer. Anyway, all the papers and information have to be thoroughly and profoundly checked in both cases. However, there are some differences between these two options.
The essential point to keep in mind is that you can issue a power of attorney and your legal representative will do all the necessary actions to buy the apartment on your behalf.
We are ready to support you during the following stages of the apartment purchase, which have their own peculiarities depending on whether you purchase in the primary or secondary market:
1. Conducting due diligence.
2. Negotiations and a presale agreement.
3. The final apartment sale and purchase agreement. Payment. Registration of ownership.
Step 1: Conducting Due Diligence
If you find a property of your interest on the secondary market, don’t make a hasty decision to purchase it, as it should be well-checked, the same as the apartment in a new building.
Due diligence procedure comprises verification of the following papers and information:
1. a) legal status of the house where the apartment is located:
You should check the status of the building where the apartment is located. Is it an architectural monument or a cultural heritage object of Ukraine (it could be verified via the State Register of Ukrainian Immovable Monuments of state and local significance)?
If so, you face a complicated task on the check of the nuances (whether there is consent from the Ministry of Culture for the apartment alienation, if there is a valid protection contract, the act of technical condition of the monument that should be updated every 5 years, whether the term of one month expired, during which the State Department of Cultural Heritage Protection enjoys its right of privileged purchase, etc.)
1. b) title documentation to the property, such as an apartment sale and purchase contract or other document confirming the ownership of the seller (certificate of ownership, deed of gift, etc.), technical certificate (passport) for the apartment, a document confirming the registration of the ownership rights of the previous owners (shall be checked through the extract from the Register of Titles to Real Estate or the Certificate from the BTI (Bureau of Technical Inventory).
2. c) arrests, mortgages, other encumbrances on the property
It is necessary to check the information about the apartment in the public registers, e.g. whether the apartment has been mortgaged (checked with the Register of Titles to Real Estate) or is a subject of litigation (checked with the Unified State Register of Court Decisions, Registry of Enforcement Proceedings).
1. d) verification of the information about the seller (whether they are married (if so, notarized consent to sell the apartment from the spouse is required), whether they have minors, or disabled persons, or have unpaid debts (checked with the Unified Register of Debtors).
If it is a company, it has to be checked whether it is not bankrupt or engaged in any court proceedings.
If there are children who have the ownership rights to the apartment or rights to use it, there should be a consent of custody and guardianship agency on the alienation of the apartment. Otherwise, you run the risk of getting into a protracted legal battle and losing your apartment, if the deal contravenes or narrows the scope of existing property rights of the child, since in this case the deal could be declared invalid by the court.
1. e) documents of the owner(s) of the apartment (passport data, tax registry ID number, marriage/divorce certificates, birth certificate (if one of the owners is a minor), etc.).
2. f) checking whether debts on utility payments exist for the apartment.
3. g) revision of the persons registered in the apartment
If the seller does not provide information about the persons registered in the apartment, you need to request a notary to check the persons registered in the premises in order to find out the absence of the rights of minors and disabled persons to the apartment.
Step 2: Negotiations and a Presale Contract
Once the due diligence procedure is done, you can launch negotiations with the seller of the real estate and sign a Presale (deposit) contract.
According to the terms of the Presale contract, the parties agree on the terms of the main agreement: price, payment process, terms, liability for non-signing the main agreement.
To secure the rights of both parties under the Presale contract, the buyer usually pays a deposit that confirms his intention to buy the apartment and the seller undertakes not to sell the apartment to any other person. If the buyer evades the conclusion of the main contract within the stipulated terms, the sum of the deposit shall remain at the seller. And if the seller refuses to conclude the main contract, the buyer receives the doubled deposit back.
Step 3: The Final Apartment Sale and Purchase Agreement. Payment. Registration of Ownership
At this stage, the deal is being carried out and closed: the apartment sale and purchase agreement (hereinafter – “SPA”) shall be concluded, notarized and the ownership rights shall be registered by a notary within the Register of Titles to Real Estate.
Before signing and notarization of the SPA the parties must:
♦ evaluate the property since the price cannot be lower than the average market value of the apartment;
♦ pay a mandatory pension tax (fee) in the amount of 1% of the property value. This fee is usually born by the Buyer;
♦ pay a state fee of up to 1% of the property value to the notary certifying the apartment SPA.
The Buyer pays for the property before or after the signing of the SPA, however, becomes the owner of the realty upon signing the agreement, its notarization and registration within the Register of Titles to Real Estate.
In Ukraine, all payments over 50,000 UAH (approximately US $2,000) must be transferred through a bank. However, the majority of real estate deals between individuals are carried out through cash payments.
EXPATPRO has considerable experience in real estate support activities and advising both on the secondary and primary real estate market of Ukraine, as well as in the successful completion of the real estate deals.
You are welcome to read our next article on purchasing an apartment in a new building here.