Supreme Court judge joins discussion about the problematic aspects of owners of war-damaged property exercising their right to compensation

Vasyl Krat, judge of the Supreme Court in the Civil Cassation Court, discussed whether the powers of the guardian of a missing person to dispose of a certificate of compensation for the destroyed property of such a person are sufficiently regulated, and whether the mortgagee can count on funds for the destroyed mortgaged property at the expense of such a certificate, during the round table ‘Problematic aspects of exercising the rights of owners of destroyed property to compensation: dialogue and search for solutions’.

The event focused on the issue of purchasing housing with the help of certificates issued to persons who lost their homes as a result of the war. The participants considered the situation when property registered to a missing person was destroyed.

Article 44 of the Civil Code of Ukraine states that the guardian of the property of an individual declared missing or a person missing under special circumstances assumes civil duties in his or her favour, repays debts at the expense of his or her property, and manages this property in his or her interests. However, certain problems arise when implementing the relevant rule in practice. Therefore, amendments to the said article and/or a separate law were proposed for discussion. In particular, there was a proposal to determine the possibility for the guardian to not only repay the debts of the missing person at the expense of the property of the missing person, but also to make decisions on their restructuring, write-off, forgiveness, and appeal, since now, for example, if a bank charges an unreasonable amount of debt to such a person, the guardian cannot appeal it. It was also suggested that the law should provide for the guardian's powers to register ownership of real estate and terminate it due to destruction; register inheritance; give consent to the other spouse to purchase real estate, etc. It was also proposed to provide safeguards against abuse, such as the involvement of a guardianship authority in certain cases (for example, when granting permission to purchase real estate under a certificate to protect against the acquisition of an illiquid object, etc.). It was also proposed to introduce a ban on the conclusion of certain transactions by a guardian on behalf of a missing person as a safeguard.

Vasyl Krat expressed doubts about the need for such amendments to the Civil Code of Ukraine. He stressed that the Code should not resemble an instruction manual, containing rules for all occasions. At the same time, the judge said, the guardian provided for in Article 44 of the Civil Code of Ukraine is inherently nothing more than a representative by law under Article 242 of the Code. Therefore, all the rights and obligations of a representative by law can be applied to him/her. Vasyl Krat noted that if the authors of this extensive list of proposed amendments miss some situation that may arise in practice but will not be regulated by law, they will have to initiate legislative changes again.

The judge agreed with the expediency of establishing some restrictions for the guardian of the property of a missing person as a legal representative, but noted that the relevant amendments should be made not to Article 44 of the Civil Code of Ukraine, but to Article 242 of the Code. Part 3 of this article states that another person may be a legal representative in cases established by law. The situation with a guardian over the property of a missing person is exactly such a case established by law.

Vasyl Krat emphasised that there is no need to overregulate the Code, to come up with a construction that a guardian under Article 44 of the Civil Code of Ukraine is someone other than a legal representative. The Code just specifically defines ‘guardianship of property’, which is essentially a representation. He pointed out that a missing person legally exists, and therefore, taking into account Article 25 of the Civil Code of Ukraine, has civil legal capacity, and the said guardian is a legal representative. Therefore, the maximum that could be changed in Article 44 of the Civil Code of Ukraine is to add the phrase that guardianship over the property of a missing person is legal representation.

There was also a discussion about the need to regulate the issue of compensation for destroyed real estate that was mortgaged. Vasyl Krat noted that such regulation already exists in the Law of Ukraine ‘On Mortgage’. Article 51 of this Law, which can be applied by analogy to the legal relations under discussion, stipulates that if the mortgaged property is seized (redeemed) for state or public needs in accordance with the law, the mortgagee has the right to demand early fulfilment of the principal obligation from the debtor, and in the event of non-fulfilment, the right to priority satisfaction of its claims at the expense of funds payable to the mortgagor or at the expense of other property acquired by the mortgagor in connection with the seizure (redemption) of the relevant real estate.

According to the judge, this article stipulates that when property is taken away from the mortgagor, the mortgagee is entitled to value - the proceeds from the sale of the mortgaged property. Compensation for the destroyed property is also a value. In other words, these are the same situations. Therefore, Vasyl Krat suggested, there is no need to amend the legislation on every occasion and regulate similar situations only because of their minor differences. "Otherwise, another 'half-issue' will arise later, and we will have to settle it again. Article 51 of the Law of Ukraine ‘On Mortgage’ refers to the property that is taken away. In the case of destroyed property, there is no such thing, but there is compensation. In both cases, the mortgagee receives the right to value," said Vasyl Krat. 

The purpose of the roundtable was to discuss the practice developed over the past year in the execution of sale and purchase agreements with housing certificates and problematic issues in notarial and registration practice. The event was attended by representatives of the Ministry of Justice of Ukraine, the Ministry of Communities and Territories Development of Ukraine, the Ministry of Social Policy of Ukraine, the Ministry of Veterans Affairs of Ukraine, members of the Ukrainian Parliament, notaries, judges, attorneys, representatives of the Register of Damage for Ukraine (RD4U), developers of the Register of Damaged and Destroyed Property, representatives of commissions for consideration of issues related to compensation for destroyed real estate, the Norwegian Refugee Council in Ukraine and other experts.

The event was organised by the Notary Chamber of Ukraine.