Bribe an official and you are a «bona fide purchaser»! Is this approach fair?

The scandalous story of businessman Ihor Mazepa, accused by the State Bureau of Investigation of land fraud, has faded from the news but has its consequences. Several bills have been registered in the Verkhovna Rada to protect the interests of dishonest businesses. All these initiatives are written in the same vein. Anyone can be guilty of schemes involving the alienation of state or community property: a deputy, an official, but not the one who eventually received it. We can talk about a plot of a nature reserve fund or a part of the coastline that becomes private property. It is clear that not everyone can privatize such property, but only a privileged few. And these «chosen ones» often motivate and encourage MPs and officials to make such decisions. Obviously, no one wants to be held accountable for this.

Given the number of such initiatives and their simultaneous appearance in the parliament, we can say that we are all witnessing ultra-hard and overt lobbying. According to the MPs, all these similar initiatives may even be merged into one project. If this happens, it will be a «monster bill».

First of all, we are talking about the initiative of Stepan Cherniavsky’s Servant of the People (11185), which the Holka Initiative has already written about in a previous article for Hlavkom. Here, we recall, the lawmakers propose to «zero out» claims against developers if the land plot has been in their ownership for five years or more. The registration of the project miraculously coincided with the media campaign of businessman Mazepa, who, in fact, promotes the same idea as MP Cherniavsky and his colleagues.

This was followed by several other initiatives (11134 and 11135). Their co-authors argue that law enforcement officers can abuse the current provisions of the Civil Code and therefore propose not to take property from the owner, but to prosecute those who have illegally distributed this property, for example, local council members. However, the populist decision to punish only deputies is a path to schemes that law enforcement and courts will not be able to stop.

What do the deputies want to change?

The state and communities have property that can never be privately owned, such as St. Sophia of Kyiv, nuclear power plants, the coast, or the nature reserve fund. And even if someone did manage to register such property for themselves, the authorities, local governments, and prosecutors can return such objects to the community or the state at any time through the courts. There is no statute of limitations here. There is a special method of protection for this, called a negative claim.

There is a property that can be privatized by citizens or legal entities. This is, for example, agricultural land or, say, some buildings, etc. And here the question may arise whether the owner is really a bona fide purchaser: whether he or she received the property as a result of carve-ups or another scheme. And if the state authorities have evidence that such property was registered dishonestly, the authorities go to court to protect such property. This method of protection in court is called vindication. And here the statute of limitations applies.

Developers are not satisfied with the fact that there is a property that the state or community can return at any time through the courts. Therefore, they have two objectives: to limit the statute of limitations or to change the method of protection for the nature reserve fund and coastal strips and «repackage» the articles of the Civil Code so that what can be protected and returned at any time can be transferred to vindication, where the time frame for protecting the property of the state and communities is limited.

MP Ihor Fris («Servant of the People»), who co-authored two initiatives (11134 and 11135), explains that the main purpose of these legislative initiatives is to protect the property of a bona fide purchaser: «We are not talking about someone who simply received a plot of land or some property in their ownership and did not pay. We are talking about someone who bought it for money from someone under a contract. Such an acquirer needs to be protected. And there should be responsibility for those officials who give away property that cannot be private property. If there is criminal liability for such actions, they will think about whether to make schemes or not. And as for the fact that someone may be naked, barefoot, and rewrite the property to avoid compensation for damages. The court will order such a person, if guilty, to pay out of what he or she will earn in the future. And the first bona fide purchaser should be the one who buys. Of course, we are not talking about property that cannot be privatized, such as nuclear power plants, the coast, or the nature reserve fund. If someone buys a nuclear power plant, it will be taken away from them».

Yuriy Melnyk, a lawyer with the Holka civic initiative, shows what the legislative initiative should focus on: «If you look at the last sentence of the proposed amendment to one of the articles of the Civil Code (Article 388), you can see that it means the coast, forests, nature reserves, and all of this can be taken into private ownership. Based on this provision, if the Verkhovna Rada supports it, developers will have a real chance to get what they could not before. And then they will say: «We are bona fide purchasers».

The Research Department of the Verkhovna Rada of Ukraine also emphasizes the risks of the draft law in its conclusions: «The consequence of the implementation (of this proposal – «Glavkom») is the possibility of de facto legalization of various schemes under which state and municipal property is transferred to private ownership based on illegal decisions, actions, inaction of a public authority… As a result, the buyer becomes the property owner, who will have the status of a bona fide purchaser, and the state and the relevant territorial community are deprived of the right to reclaim from such a purchaser municipal property alienated based on illegal decisions».

It is also proposed to introduce a rule in the Civil Code on the obligation to seek criminal prosecution of perpetrators, although the Civil Code does not regulate these issues. There is another code for this, the criminal code. In several places, different provisions of the drafts refer to the prosecution of officials, which may be positively perceived by society. However, along with this provision, the main thing that may be less noticeable to society is the new game rules. 

Supreme Court Justice Victor Prorok emphasizes that it will be extremely difficult to prove intent in such cases: «To bring an official to justice, it is necessary to prove their intent to commit illegal actions, which is almost impossible. It is often difficult to provide evidence of whether an official intentionally «carved up land» or tried to develop infrastructure. Ideally, the construction in the proposed amendments looks nice – to bring to justice, but in practice, except in some striking cases, it will be almost impossible to implement. That is why such requirements are currently being addressed through criminal prosecution. As for legislative changes, the law should stipulate that property that was illegally withdrawn from the state/community shall be returned without any time limit. A person who becomes the owner of a land plot cannot help but realize that there is a river nearby or see a forest on the plot».

In addition to bringing to justice officials or deputies who have illegally transferred property to private ownership, the authors of the draft law propose that the perpetrators compensate the state for the losses. First, the perpetrator may not have property worth the amount that the state or community should receive as compensation. Stories about politicians and officials in the «mom loves speed» style, when the property is transferred to relatives, are known throughout the country. 

Secondly, when it comes to objects that can never be private property (St. Sophia of Kyiv, the nature reserve fund, etc.), it is unrealistic to determine the amount of compensation in such cases. If the state or community cannot regain such property at any time, it will lose the ability to use it forever. Not only will it lose the right, but sometimes it will lose the object itself, as in the case of archaeological monuments, which are non-renewable objects. After all, building on sites with archaeological monuments means losing entire layers of history.

In the interests of developers, the Civil Code was changed during the time of the traitor Yanukovych. Back then, the provision on the non-application of statutes of limitations to decisions of government and local authorities was removed. An attempt by lawmakers of the previous cadence to change this was not implemented. The draft law (4521) by MPs of the previous convocation Ihor Lutsenko and Ostap Yednak was never considered.

Nevertheless, the Grand Chamber of the Supreme Court has developed a case law in recent years that allows coastal strips and property to be returned based on another article of the Civil Code, which the representatives of the mono-majority are now also trying to change with the already mentioned draft law by MP Cherniavsky (11185).

Bona fide acquirers and seizure of property

In one of the two draft laws submitted by MP Fris and his colleagues (11134), parliamentarians propose to amend not only the Civil Code but also the Criminal Procedure Code: to prohibit the seizure of property during civil lawsuits if it is held by a «bona fide purchaser».

The MP explains why this proposal was made: «It happens that law enforcement officers initiate 400-500 seizures of land plots that have been passed off as Tsar Panko's. They often seize property without involving a third party who may be concerned and who is in no way related to the proceedings. In the text of the draft law, this applies not only to third parties, but to everyone, because there are different stakeholders and, accordingly, different opinions. By the second reading, the draft law may change, and we may even come up with a joint committee version».

But the fact is that when the court imposes an arrest to secure a claim, it is not yet known whether the acquirer is bona fide, because the case has not yet been considered on the merits. The seizure is imposed so that while the court is considering the case and examining the evidence, for example, in a case involving the registration of a plot in the forest, the developer does not have time to cut down trees and build high-rises. 

If this is not done, and it turns out that the forest was acquired illegally, the forest may no longer exist, and the apartments/cottages will have already been sold. Moreover, property may also be seized in cases where the plaintiff is seeking to recover money. If he manages to sell his property in time to avoid presumably repaying the debt, they will be able to do so without any problems, because the court will not be able to seize it.

And if the final provisions of the draft law (11134) come into force, all defendants whose property is currently under arrest may go to court and have it lifted. 

«Like draft law 11185, these two initiatives are aimed at legalizing the carve-up of protected areas. How can there be a «bona fide purchaser» if the land plot is located in the forest or on the coast? Moreover, the proposed amendments will lead to the cancellation of land plots already seized in the framework of existing criminal proceedings! For years, the prosecutor's office has been suing for the preservation of coastal strips or protected areas – and now they want to throw this work into the trash. I think we need to make the exact opposite changes here. The land that is withdrawn from circulation is endowed with natural features or is inextricably linked to protected areas. Of course, information about this should be available in the cadastre, and it should be entered there under a simplified procedure», – says Petro Testov Analyst at the Ukrainian Nature Conservation Group.

Speaking of «bona fide» purchasers and land seizures, it was thanks to this tool that the prosecutor’s office managed to save the Bilychansky Forest. Moreover, not only did it help to preserve the ecological shield of the capital, but the forest also helped to form the defense line of Kyiv in 2022. Court proceedings in these cases have been going on for over 15 years.

Basically, in terms of digitalization, when there is a State Geocadastre, land plots should have established restrictions on alienation so that property owned by the state or community does not suddenly and unnoticeably disappear from the owner – the state or community. And enormous resources – the work of prosecutors and judges – would not be spent on protecting such property.

Acting Head of the StateGeoCadastre Dmytro Makarenko says that most problems arise because the cadastre is not sufficiently filled: «The StateGeoCadastre is responsible for state-owned agricultural land, and the state allocates funds for the inventory of state-owned land. Here, the completeness of the cadastre depends on the information provided by the Ministry of Defense and the information provided by the Ministry of Environment or the Ministry of Culture. As for the other categories, information should be provided by state administrations, nature reserves, etc. In addition, local governments should be primarily interested in making an inventory of municipally owned land».

Environmentalist Testov emphasizes that the StateGeoCadastre should change its position and remember its controlling function: «Until 2021, the StateGeoCadastre approved land management projects and conducted land expertise to change the designated purpose of such land and allotment. Thus, it had all the levers to make legal decisions. It is not quite clear why this was not done. It is necessary to oblige the StateGeoCadastre to take into account not only what is entered in the cadastre, but also forestry or water cadastre materials, and in general to proceed not from the position of the information in the cadastre, but from what is actually on the land plot, what other documents besides the land management confirm the land category. This way, there will be no cases where an official simply «didn't notice» the existence of a forest or a reservoir, and now a «bona fide purchaser» suffers because of his actions».

The Specialized Environmental Prosecutor’s Office emphasizes that limiting the statute of limitations to five years, as proposed by lawmakers, is a serious risk. This is emphasized by the head of the Specialized Environmental Prosecutor’s Office, Borys Indychenko: «In recent years, we have returned more than 32 thousand hectares of protected lands. The proposed changes will limit the rights of the state and communities to protect their violated rights. Moreover, the proposal to limit the statute of limitations for filing claims will eliminate the possibility of restoring rights, including a healthy, sustainable, and clean environment. What about forests or protected lands that were alienated during the Yanukovych era? The proposed compensation procedure is unlikely to be effective unlike the current one, which defines the obligation to return illegally alienated objects. For example, the prerogative to dispose of land belongs to self-government bodies, which are collective institutions. The legislation does not provide for the procedure of collective responsibility of deputies, including financial responsibility, for their decisions. Therefore, the proposed rules on recovery of damages from the perpetrators in such cases make no sense».

Law enforcement officials note that such changes to the legislation will completely destroy the case law formed by the Grand Chamber of the Supreme Court to protect the environmental interests of the state and communities.

MP Taras Batenko (For the Future) says that these two initiatives (11134 and 11135), which he also signed as a co-author, were already on the agenda, but they were removed: «There are two other similar draft laws (the already mentioned 11185 and 11233 – author's note), and therefore I do not exclude that after discussions we will come up with a committee version. We know that there are reservations regarding forests and water resources and we have to take them into account, including some comments from government agencies and associations».

At the same time, the lawmakers emphasize that by amending the law, they seek to protect the property of a bona fide purchaser and improve the investment climate in the country.

Supreme Court Judge Viktor Prorok notes that there is no critical need to «reinvent the wheel» to protect a bona fide purchaser: «Both the Civil Code of Ukraine and court practice already contain such mechanisms. If a bona fide purchaser is deprived of the property he has purchased, he is entitled to a refund from the seller of the money paid for it, and if they suffer other damage, they can compensate for it at the expense of the body whose illegal actions led to this situation».

However, these legislative initiatives are not the only ones. The project of Oleksandr Matusevych’s Servant of the People (9516), which allows deforestation without an environmental impact assessment and has serious corruption risks, is already on the agenda of the parliament and may be considered next week if the issue is not removed at the conciliation board.

This text is in Ukrainian