Simplified Procedure for Changing Designated Purpose of Land Plots

The active position of Ukraine’s institutional investors (the European Bank for Reconstruction and Development allocated EUR 2.1 billion in 2023 alone), the development of internal and external instruments for insuring against military and political risks, and the simplification of national legislation aim to attract foreign capital into Ukraine.

On 6 February, 2024 the Verkhovna Rada of Ukraine adopted the Law of Ukraine On Amendments to Certain Legislative Acts of Ukraine on Simplifying the Procedure for Changing the Designated Purpose of Land Plots for Attracting Investments for the Rapid Reconstruction of Ukraine No. 3563-IX, which came into force on 28 May, 2024 (hereinafter – the “Law”). The title of this document sounds promising, so let’s find out what the procedure used to be and how it has changed, and which lands are covered by the provisions of the Law.

For comparison, the regular procedure for changing the designated purpose of land plots in Ukraine includes the following steps:

1. Submission of a notarized application for changing the designated purpose of the land plot signed by the owner;
2. Ordering a land management plan for land plot allocation and, accordingly, concluding an agreement with an organization that employs at least two certified surveying engineers or with a sole proprietor who is a certified surveying engineer;
3. Submission by the land plot owner of a developed land management plan for approval by the village, town, or city council, respectively, and approval of such a project by the body of local self-government;
4. Entering information into the State Land Cadastre. For this purpose, land management documentation shall be submitted to the State Cadastral Registrar through the Administrative Service Center (ASC) or an authorized official of the executive body of the body of local self-government;
5. Registration of rights to real estate in the State Register of Rights — registration of title to a land plot. This can be done by applying to an administrative service center or a notary with the appropriate set of documents.

Instead, the new Law provides that during the period of martial law in Ukraine and within 5 years from the date of its termination, the designated purpose of land plots may be changed:

1. By a decision of the land plot owner, by submitting an application for entering information on the changed designated purpose of the land plot into the State Land Cadastre;
2. Without developing land management documentation;
3. Failure to comply with the rules for correlating the types of the designated purpose of land plots and the types of functional designation of territories;
4. On the basis of a reasoned opinion of the relevant authorized body of urban planning and architecture on the possibility of placing the relevant facility on the land plot in accordance with the requirements of regulatory acts.

It should be noted that the simplification applies to land plots:  1) in those territories outside settlements for which there is no approved urban planning documentation at the local level; 2) and on which it is planned to locate certain types of facilities.

Exceptions: lands of water, nature reserve fund and other environmental protection purposes, historical, cultural, recreational, health, forestry purposes.

Urban planning documentation

Urban planning documentation shall mean: a comprehensive plan (which includes a zoning plan as its integral part), a master plan of a settlement (which includes a zoning plan as its integral part); a zoning plan as a separate type of urban planning documentation at the local level approved before the Law of Ukraine On Amendments to Certain Legislative Acts of Ukraine on Land Use Planning comes into force, a detailed plan of the territory. 

Construction sites

Since the simplified procedure is focused on the development of territories and industries, and the restoration of the energy sector of Ukraine, the Law establishes a list of structures/buildings to be constructed on these land plots, namely:

• industrial and warehouse buildings;
• non-residential agricultural buildings; pipelines, lines of electronic communication networks and power lines (except for main oil and gas pipelines);
• complex structures of industrial facilities (except for structures of enterprises engaged in the extraction, production and processing of nuclear materials, structures of enterprises and facilities for the enrichment and processing of nuclear fuel; structures of enterprises intended for thermal treatment (incineration) of household waste; nuclear power plants).

In turn, investors need to understand some of the peculiarities of the land for which the procedure for changing the designated purpose has been simplified.

First, since a simplified change of the designated purpose of land plots is possible outside of settlements and in the absence of approved urban planning documentation, the lack of housing and logistics infrastructure in the area should be taken into account.

The construction of industrial facilities and warehouses outside the settlement will in most cases require investment in the construction of a quality roads, utilities, etc., which may constitute a significant portion of the investment. Should an industrial facility need to be constantly staffed by a large number of employees, it may also be advisable to build residential infrastructure in the future.

Second, it should be taken into account that Ukraine is under martial law and there are lands contaminated with explosives/mines or which are unusable due to the potential threat of contamination with explosives/mines. The law provides for the creation of a Register of Territories Contaminated/Potentially Contaminated with Explosives. However, until such a register comes into existence, it is worth carefully studying and initiating a survey of the land plot for investment for such contamination by explosives/mines.

Third, simplification of this procedure looks quite interesting for investors, but it does not in any way affect the attractiveness of making investments, in the form of tax benefits or granting the preferential right to use state or municipal land for the implementation of an investment project.

The fact is that the specified simplification is only one of the forms of state support for attracting investments along with those defined. For example, by making significant investments in Ukraine: exemption from payment of certain taxes and duties in accordance with the Tax Code of Ukraine; exemption from import duty taxation of new equipment (machinery) and accessories for it in accordance with the Customs Code of Ukraine; ensuring the preferential right of use of a state-owned or municipal land plot for the implementation of an investment project; ensuring the construction of adjacent infrastructure facilities (roads, communication lines, heat, gas, water and electricity supply facilities, engineering communications, etc.) at the expense of funds from the state and local budgets and from other sources not prohibited by law, etc., necessary for the implementation of an investment project with significant investments.

In general terms, we should note positive dynamics in the efforts to improve Ukraine’s investment climate at the legislative level, which we hope will be implemented in the future.