Problem

Until 2021, land legislation mandated that land plots be sold through auctions. Such auctions for the sale of land plots were outdated auctions that required people to physically come to the premises to participate in the auction, raise signs with bids, and other do other things that were not merely outdated but also contained a number of corruption factors, including influence of stakeholders on the outcome of the auction, falsification of the results of land auctions by staging a “sparring partner”, entering false information about a land lot in order to avoid a competitive auction procedure, non-transparency of land auctions and restrictions on public control over them, etc. To change this corrupt practice, a more modern, transparent and effective mechanism, electronic land auctions, was introduced in 2021. From now on, the sale or lease of state-owned and municipally owned land plots is carried out in the form of an electronic auction in real time through an electronic trading system administered by the state-owned enterprise Prozorro.Sale. These changes significantly minimize a number of corruption risks that were common during conventional land auctions. At the same time, most of the corruption risks that led to their introduction have been effectively eliminated, but some flaws still need to be resolved.
Thus, the provisions of the Land Code of Ukraine establish cases in which certain land plots are not subject to sale or lease at land auctions. One of such cases is when the land plot is occupied by real estate (buildings, structures) owned by individuals or legal entities. This exception can be used by dishonest officials who, in collusion with private developers, avoid land auctions and transfer rights to a state asset at a significantly reduced cost. This significantly undercuts revenues to local budgets, violates the rights and interests of land users, and reduces investment attractiveness. The same applies to such exceptions as the transfer of land plots to enterprises, institutions and public organizations in the field of culture and arts (including national creative unions and their members) for creative workshops, as well as to citizens for haying, grazing and gardening.
Negative consequences were also caused by the armed aggression of the Russian Federation, which resulted in the suspension of land auctions in respect of agricultural land and the return to the “manual” procedure making land plots available for use in commercial agricultural production, according to which such land plots are transferred for use for a period of one year with fixed lease terms, and the lease agreement itself is subject to registration in the ledger of registration of land ownership and land use, which is maintained by the district state (military) administration in hardcopy and electronic forms. At the same time, government agencies and local self-government bodies are effectively vested with unlimited discretion in transferring such land plots to the respective users, which may create obvious corruption risks.
However, the Law of Ukraine On Amendments to Select Legislative Acts to Restore the System of Registration of Lease Rights to Agricultural Land and Improve Land Protection Legislation was adopted on October 19, 2022, which proposes, among other things, to resume land auctions for the transfer of state-owned and municipally owned agricultural land for use. However, electronic land auctions will not be held if the State Land Cadaster is not operational for 30 business days. In this case, the leasing of land plots will be carried out in accordance with the specified rules.