One of the most urgent issues faced daily by local self-government bodies is the effectiveness of using existing land plots. Ukraine has not yet formed an effective legislation in the field of land use. Many uncertainties result in economic losses and the lack of proper control over land use.

According to expert estimates, only 22.6 million hectares are officially cultivated under land lease agreements, 11.7 million ha, or 28% of the total agricultural land, are in shadow lease. Thus, potentially there are possibilities to significantly increase budget revenues due to legalisation of land relations.

The main documents regulating the transfer of land into lease include the Land Code of Ukraine and the Law of Ukraine “On Land Lease”. The experts point out that according to Article 206 of the Land Code of Ukraine, land use in Ukraine is fee-based, and the land plot is an object of the charge. It should be borne in mind that the basis for the land plot lease fee to be charged is a lease agreement for such a land plot. If the land lease agreement is not registered in accordance with the procedure established by law, it is considered invalid. The court recognised the validity of agreements and, accordingly, the right to lease the land for the tenant, who has carried out the state registration of these agreements. At the same time, the lack of state registration of a lease agreement does not provide legal grounds for the tenant to use a land plot.

Therefore, summing up, attention should be paid to the fact that:

1. Land lease agreements enter into force only after their state registration;
2. Local self-government bodies have the right to losses’ compensation in case of misuse of land plots;
3. When leasing land plots, lease agreements should be concluded carefully, envisaging all possible conditions relating to the use of land and lease payment.

The materials were prepared by Yanina Kazyuk, financial decentralisation coordinator, and Viktor Ventsel, financial monitoring expert at the Central Reform Office under MinRegion (with the support of the U-LEAD with Europe Programme).

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