The Law of Ukraine "On Land Lease" obligatorily determines the moment of commencement of the lease agreement, and the parties to such an agreement may not establish other rules or omit the date of its conclusion at their discretion - SC Grand Chamber

The Law of Ukraine "On Land Lease" (as amended by the Law of Ukraine No. 340-IX of 5 December 2019, which entered into force on 16 January 2020), in particular para. 3 of part 1 of Article 15 and the second sentence of part 1 of Article 19, establishes that the date of concluding a land lease agreement is an essential condition of this transaction and that the term of its validity begins from such date.

Therefore, the parties to a land lease agreement may not regulate their relations in a manner that contradicts such mandatory rules, including, at their own discretion, establishing other rules for determining the moment of commencement of the term of this transaction or not specifying the date of its conclusion. The terms of a land lease agreement that do not comply with the above mandatory rules do not change the moment specified in the Law of Ukraine "On Land Lease" from which the term of the land lease agreement begins.

This was emphasized by the Grand Chamber of the Supreme Court.

In the case before the Grand Chamber of the Supreme Court, on 17 November 2020, the village council and the company entered into a lease agreement under which the village council transferred the land plot to the company for a paid use for one year. On 24 May 2021, on the basis of this agreement, the company registered the right to lease the land plot. On 22 November 2021, the village council decided to terminate the agreement due to the expiration of the term for which it was concluded and to subdivide the land plot.

According to the company, the mentioned decisions of the village council were aimed at unilaterally refusing to fulfil the terms of the agreement, which had not yet expired, and at unlawfully seizing the real estate that forms part of the real estate complex located on the plot of land owned by the company by right of ownership, which became the basis for filing a lawsuit, in particular to declare illegal and cancel the decisions of the village council and the registration actions taken after the subdivision of the disputed plot of land.

The court of first instance upheld the claim. Instead, the court of appeal issued a new decision dismissing the claim.

The complainant pointed out that in clause 37 of the agreement, the parties had agreed that the agreement would enter into force after it had been signed and registered by the state, and that there was therefore no reason to believe that the parties to the agreement had rights and obligations arising from the transaction prior to its registration.

The Grand Chamber of the Supreme Court noted that on 1 January 2013 the Law of Ukraine of 11 February 2010 No. 1878-VI came into force, which excludes references to state registration of transactions in Articles 182, 640, 657, 732, 745 of the Civil Code of Ukraine and Articles 18 and 20 of the Law of Ukraine "On Land Lease" on mandatory state registration of land lease agreements. Instead, the law provides for the state registration of the lease right, in particular on the basis of a duly executed lease agreement.

As noted by the SC Grand Chamber, a distinction should be made between the moment of entering into a land lease agreement (the moment when the parties reach agreement on all essential terms and conditions and sign it - for agreements from 1 January 2013), from which the parties to the agreement acquire rights and obligations in binding legal relations, and the moment when a real right arises on the basis of the said transaction, which is related to the moment of state registration of such a right (third sentence of part 1 of Article 19 of the Law of Ukraine "On Land Lease" in the version in force at the moment of signing the agreement).

If the date of concluding a land plot lease agreement (the date on which the rights and obligations of the parties to the agreement become binding) and the date of registering the title to the land plot on the basis of the agreement (the date on which the lessee acquires a title to the land plot) do not coincide, the agreement is valid for the period between concluding the agreement and the date on which the lessee acquires the land plot by registering the title to the land plot, and the parties to the agreement have the right to protect their contractual rights of a binding nature that have been violated by means of obligatory remedies.

The SC Grand Chamber noted that the terms of the agreement to be reached must not contradict the legal conditions under which such an agreement may be concluded (Article 6 of the Civil Code of Ukraine). Otherwise, a transaction (its individual terms and conditions) that does not comply with the law will not have the legal consequences it is intended to have, since the application of a mandatory rule of law cannot depend on the will of private individuals.

Para. 3, part 1, Art. 15 and the second sentence of part 1, Art. 19 of the Law of Ukraine "On Land Lease" obligatorily establish that the date of concluding a land lease agreement is an essential condition of this transaction and that the term of its validity begins from this date.

Therefore, the parties to a land lease agreement may not regulate their relations in a manner that contradicts the above mandatory provisions of the Law (as amended by Law No. 340-IX) in particular, at their own discretion, establishing other rules for determining the moment of commencement of the term of this transaction or not specifying the date of its conclusion. The terms of a land lease agreement that do not comply with the above mandatory rules do not change the moment specified in the Law of Ukraine "On Land Lease" from which the term of the land lease agreement begins.

Thus, the condition stipulated in clause 37 of the agreement regarding its entry into force after its state registration contradicts the rules for calculating the term of a land lease agreement, which are mandatorily established by the second sentence of part 1 of Article 19 of the Law of Ukraine "On Land Lease", and therefore the said condition did not change the date stipulated in this Law from which the term of the agreement commenced.

Taking into account that the one-year term of the agreement ran from the date of its conclusion (from the date on which the parties agreed on all its essential terms and signed it on 17 November 2020) and expired at the time of the contested decisions of the village council and the relevant registration actions based on them, the SC Grand Chamber agreed with the court of appeal's conclusion that the company's right had not been infringed.

The Resolution of the Grand Chamber of the Supreme Court of 6 March 2024 in case No. 902/1207/22 (proceedings No. 12-80гс23) - https://reyestr.court.gov.ua/Review/118036819.

This and other legal positions of the Supreme Court can be found in the Database of Legal Positions of the Supreme Court - https://lpd.court.gov.ua.