NEW LEGAL REGULATION ON CONSTRUCTION IN UKRAINE
Salans Kyiv Real Estate & Construction Legal Newsletter, Kyiv, Ukraine, Friday, May 15, 2009
KYIV - The latest Salans Kyiv Real Estate & Construction Legal Newsletter was issued today. IN THIS ISSUE:
1. The main “innovations” in legislation at the pre-project works stage are in respect of the procedures and documents required for performance of such
works
2. Changes in legal regulation regarding the issuance of technical specifications (the term for submission of such technical specifications has been assigned)
3. Changes in legal regulation on the issuance of initial data for project planning
4. Changes in procedures for pre-construction works
5. Changes in the conduct of construction
6. New procedures of commissioning of new properties
7. It is also important that liability be established regarding violation of the terms of issuance of technical conditions on the engineering of an architecturally
significant property and regarding unauthorized conduct of pre-construction works
NEW LEGAL REGULATION ON CONSTRUCTION IN UKRAINE
The law of Ukraine “Amendments to some legislative acts of Ukraine on the promotion of construction” dated September 16, 2008, the law of Ukraine on “Mitigation of the effects of the global financial crisis on the construction industry and residential construction” dated December 25, 2008 and the Resolution of the Cabinet of Ministers of Ukraine on “Procedures for the commissioning of completed construction projects” dated October 8, 2008 have significantly changed legal regulations on construction. The changes have affected all main aspects of construction – from obtaining permits to commissioning procedures for property.
The law of Ukraine “Amendments to some legislative acts of Ukraine on the promotion of construction” dated September 16, 2008 entered into force on April 15, 2009, as concerns the part addressing city planning legislation.
The law of Ukraine on “Mitigation of the effects of the global financial crisis on the construction industry and residential construction” dated December 25, 2008 took effect on January 14, 2009.
At first sight all of the above changes are intended to facilitate and improve legal regulations on construction. However, this first view is deceptive. In practice, the realization of legal standards in the Ukrainian legal sphere is complicated by its “peculiarities”.
References to the pending resolutions of the Cabinet of Ministers may be considered to be the main drawback of the adopted regulations. Consequently, some provisions of the legislation shall be simply “postponed” until the necessary sub-regulations (resolutions of the Cabinet of Ministers of Ukraine) have been adopted.
Under to the applicable legislation, every developer must pass the following stages prior to obtaining the desired Real Estate Title Certificate:
v Execute their ownership right to land ;
v Perform pre-project works;
v Perform project works;
v Complete construction;
v Commission the building.
The changes in legislation affect all the above stages. For a more detailed description of the latest changes in legislation, please see below.
1. The main “innovations” in legislation at the pre-project works stage are in respect of the procedures and documents required for performance of such works.
At present, project development of architecturally significant property can only be undertaken subject to basic conditions for project planning, including:
v City planning conditions and limitations on development of the respective land plot
v Technical conditions regarding engineering requirements;
v Technical design assignment for architecturally significant property.
2. Changes in legal regulation regarding the issuance of technical requirements (the term for submission of such technical requirements has been assigned)
Upon obtaining city planning conditions and limitations on construction of a land plot, legal entities that own the respective elements of the engineering infrastructure or operate them must submit technical specifications regarding the engineering of the city-planning property within 15-days of the registration date of the application made by the customer or his authorized representative.
The list of persons who must submit technical specifications regarding the engineering of city-planning property is dictated by city planning conditions and limitations on land plots development.
When submitting technical data, it is taken into account that the connection point of the customer’s engineering networks to the main or other engineering networks is on the border of the customer’s land plot or, upon his consent on the territory of the land plot in question.
If technical conditions provide for the necessity of building engineering networks or properties by the customer outside his land plot, the amount of the customer’s participation share (contribution) to the construction and development of the engineering transport and social infrastructure of the local community shall be reduced by the costs incurred in this connection. The engineering networks and\or properties built by the customer are transferred to the respective enterprises that maintain them.
3. Changes in legal regulation on the issuance of initial data for project planning
Basic data on city-planning projects are valid until completion of the project and at least for two years but not if this takes longer than five years.
The customer may apply to the respective executive body or local self-regulatory body, and also to the persons who provided the technical requirements to request an extension of validity for the basic data. The decision on the extension of validity for the basic data is made based on the substantiated opinion of a specific authorized body on architecture and city planning
4. Changes in procedures for pre-construction works.
In particular, the notion of a permit for pre-construction works has been introduced. This is a document proving a right to the customer and contractor to perform the following works prior to construction of the property:
v Preparation of the land plot,
v Fencing in of the construction site and demolition of buildings and structures,
v Improvements to the land plot allocated for development,
v Construction of temporary production and service structures, required for the organization and maintenance of construction,
v Conduct of temporary engineering networks,
v Setting up of access roads,
v Storage of building materials.
The permit for pre-construction works is issued by the State Architectural and Construction Inspectorate of Ukraine and its territorial bodies (herein referred to as “Inspectorate/s of State Architectural and Construction Control”).
In order to obtain a permit for pre-construction works, the customer or a person authorized by him shall submit to the Inspectorate of State Architectural and Construction Control a written application with the following documents attached:
v A certificate proving right of ownership or right of use of a land plot or a “superficies agreement”;
v City planning conditions and limitations on development of the respective land plot obtained as prescribed by law;
v Schedule of pre-construction works agreed and approved as required by state construction standards;
v Document regarding the appointment of responsible contractors for the pre-construction works.
The Inspectorate of State Architectural and Construction Control shall consider the application; grant a permit for pre-construction works or refuse to issue it; and issue and register the permit for pre-construction works within ten business days of the day of registering the application therefor.
A refusal to issue a permit for pre-construction works may be based on the following reasons:
v Failure to submit the documents required for decision making on the granting of such permit;
v Non-compliance of the documents submitted with the legislative requirements;
v Detection of inaccurate information in the documents submitted.
The issuance of a permit for pre-construction works must be performed free of charge.
A permit for pre-construction works must be issued for a period of not more than one year.
The Inspectorates of State Architectural and Construction Control shall inform the respective executive body or local self-regulatory body in writing about
the issued permits for pre-construction works simultaneously with their issuance.
A customer or contractor is allowed to commence pre-construction work no earlier than in seven calendar days after obtaining the permit for pre-construction works.
A permit for pre-construction works may be cancelled upon the decision of the Inspectorate of State Architectural and Construction Control if:
v the customer obtains a permit for construction works;
v the termination of a legal entity or termination of entrepreneurial activity by an individual entrepreneur (customer, contractor) becomes known;
v legislation in the sphere of construction and architecture is systematically violated during performance of the pre-construction works;
v the project scheme of pre-construction works is violated;
v officials of the Inspectorate of State Architectural and Construction Control are prevented from carrying out their duties.
The Inspectorates of State Architectural and Construction Control maintain a register of the issued (and cancelled) permits for pre-construction works and refusals to issue a permit for pre-construction works.
The Cabinet of Ministers of Ukraine shall approve an appropriate form of the permit for pre-construction works, an application form to be submitted to obtain the permit, and a form for the refusal to issue a permit, as well as the procedures for issuance and cancellation thereof and maintenance of the relevant
registry.
Unfortunately, as of this writing, the Cabinet of Ministers of Ukraine has not yet approved a form of the permit for pre-construction works, and the main point is that it is not known whether the state budget provides enough funds to develop and print such permits.
5. Changes in the conduct of construction
Changes have been made in order to permit the conduct of construction works and the list of documents required to be submitted to obtain the permit, as well as to conditions subject to which such permit is issued. Moreover, now a permit to conduct construction works shall also provide for the conduct of pre-project works.
The main innovation for foreign legal entities willing to conduct construction works is that, in order to obtain a permit to conduct construction works, they must submit documents proving that individuals and legal entities of Ukraine are involved in not less than 90% of the total volume of construction-assembly works and also that they use 50% national products and materials, in particular regarding construction structures. It is difficult to imagine what documents could prove such facts.
Furthermore, important is that, pursuant to the recent changes, in case of reconstruction or capital repairs of roads, railway tracks, electric lines, pipelines or linear communications, within the existing rights of way, a permit to conduct construction works may be issued without submitting any certificate proving right of ownership or right of use of a land plot.
At present, a permit to conduct construction works is a document that certifies the right of a customer and contractor to conduct pre-construction works (if the pre-construction works have not been performed beforehand under a permit for pre-construction works) and construction works, and to connect the property under construction to the relevant engineering networks and structures.
A permit to conduct construction works is issued by the Inspectorates of State Architectural and Construction Control.
In order to obtain a permit to conduct construction works, the customer and contractor shall submit to the Inspectorate of State Architectural and Construction
Control a written application with the following documents attached:
1) documents to be submitted by the construction’s owner:
v a certificate proving right of ownership or right of use of a land plot or a “superficies agreement”;
v project documentation for the construction, agreed and approved as required by legislation;
v information on field and technical supervision;
v a copy of the document proving right of ownership to a building or structure, or written consent of its owner to conduct the specified works (or, in the
case of reconstruction, restoration or capital repairs, of the city-planning properties);
v financial statements prepared pursuant to article 11 of the law of Ukraine "Accounting and financial statements in Ukraine", and a copy of the license
to perform financial services, certified as prescribed by law (in the case of conduct of construction, involving direct or indirect financing from
individuals);
2) documents to be submitted by the construction contractor:
v copies of the constitutive documents and certificate of state registration;
v copy of a license to function as the general contractor for the property, certified as prescribed by law;
v contractor agreement (contract) for construction;
v document regarding the appointment of responsible contractors;
v information on the qualifications and work experience of the specialists involved in fulfilling the order;
v proposals regarding involvement of subcontractors.
The Inspectorate of State Architectural and Construction Control shall consider the application; grant a permit for construction works or refuse to issue it; and issue and register the permit for construction works within one month of the day of registering the application therefor.
A refusal to issue a permit to conduct construction works may be based on the following reasons:
v Failure to submit the documents required for decision making on the granting of such permit;
v Non-compliance of the documents submitted pursuant to legislative requirements;
v Detection of untrue information in the documents submitted.
The issuance of a permit to conduct construction works must be performed free of charge.
A permit to conduct construction works shall be issued for the standard period of construction or for the period of validity of the construction agreement (contract).
A permit may be prolonged on the customer’s request for a period of not more than one year.
A permit to conduct construction works may be cancelled upon the decision of the Inspectorate of State Architectural and Construction Control if:
v The customer files an application to cancel the permit to conduct construction works;
v the permit to conduct construction works is issued or re-registered in contradiction of the legislative requirements;
v the termination of a legal entity or termination of entrepreneurial activity by an individual entrepreneur (customer, general designer, general
contractor) becomes known;
v legislation in the sphere of construction and architecture is systematically violated during performance of the construction works;
v officials of the Inspectorate of State Architectural and Construction Control are prevented from carrying out their duties;
v the construction works have not been started within three months of the issuance of a permit to conduct construction works.
If the right to construct a city-planning property is transferred to another customer or a construction organization (general contractor) is changed, the permit to conduct construction works shall be subject to re-registration.
Re-registration of a permit to conduct construction works must be performed as is prescribed for the obtaining of a permit to conduct construction works.
Carrying out of construction works on city-planning properties without a due permit to conduct construction works or re-registration thereof, as well as conduct of construction works not stipulated by the permit shall be considered as unauthorized construction and entails legal liability in the form of an administrative penalty.
6. New procedures for the commissioning of new properties
New procedures for the commissioning of completed construction properties are regulated by the Resolution of the Cabinet of Ministers of Ukraine “Procedures for the commissioning of completed construction properties” dated October 8, 2008, which came into force on January 1, 2009.
Commissioning of completed construction properties is carried out by the committee formed by the State Architectural and Construction Inspectorate that issued the permit to conduct construction works, subject to a written application to be submitted by the customer of the construction property.
The form of such application shall be approved as prescribed by the Ministry of Regional Development and Construction of Ukraine (the form was approved by order of this ministry dated December 10, 2008, registered by the Ministry of Justice of Ukraine on January 20, 2009 under No. 38/16054).
The following documents must be attached to the application:
v project documentation for the construction, agreed and approved, as required by legislation;
v list of the construction and installation works, specifying the business entities that carried them out;
v information about the responsible engineering technicians;
v a package of project documents for the construction and installation works, in accordance with the list stipulated by the regulatory documents;
v documents evidencing relevant compliance, as stipulated by the regulatory documents, of the materials, constructions, products and equipment used;
v research results on the quality of drinking water, ground and air depending on the particular conditions of construction;
v a document evidencing the filing of the project documentation with the insurance documentation fund, if such construction property is on the list of
properties and structures of which the project documentation is to be filed with the insurance documentation fund as stipulated by the Ministry of
Regional Development and Construction of Ukraine and the Ministry of Emergencies of Ukraine;
v conclusion of the official from the Inspectorate of State Architectural and Construction Control, who was supervising construction of the property, on
the possibility of commissioning the property.
A report on mandatory scientific-technical maintenance must be submitted, together with all of the above for construction properties subject to such maintenance.
The Inspectorate of State Architectural and Construction Control shall consider the submitted materials and, in case of their compliance, shall form an acceptance committee within three business days.
If the documents submitted by the customer do not meet the above requirements, the application, with all the documents attached, shall be returned to the customer within three business days of the registration date thereof.
The customer may apply again to the Inspectorate of State Architectural and Construction Control, only after the defects have been eliminated.
The acceptance committee shall include representatives of:
v the customer,
v the general designer,
v the insurer,
v the general contractor,
v the Inspectorate of State Architectural and Construction Control,
v an executive body or a local self-regulatory body and operating entity (upon agreement).
The acceptance committee must commence inspection of the property’s readiness for operation within ten business days of the day of its formation.
Subject to the document evidencing readiness for operation of the property, the Inspectorate of State Architectural and Construction Control shall issue to the customer or his authorized person a certificate of compliance of the constructed property with the project documentation (herein – a “certificate”), requirements of state standards, construction norms and rules within two business days of its execution.
The form of the certificate was approved by order of the Ministry of Regional Development and Construction of Ukraine, dated December 10, 2008, registered with the Ministry of Justice of Ukraine on January 20, 2009 under No. 38/16054).
The commissioning date of the completed construction property shall be the date of issuance of the certificate registered by the Inspectorate of State Architectural and Construction Control.
The acceptance committee may not require the performance of additional types of works on the completed construction property, except for those prescribed by the project documentation and basic data.
The Inspectorates of State Architectural and Construction Control shall inform: a local self-regulatory body or local state administration, as to the location of the construction property; and the statistical body about the issuance of the certificate, within three business days of its issuance.
The certificate shall be a basis for: concluding agreements on the supply to the construction properties of resources required for their operation (i.e. water, gas, heat, electric power); entry of data about these construction properties into the statistical records; and registration of title to them.
7. It is also important that liability be established regarding violation of the terms of issuance of technical conditions on the engineering of an architecturally significant property and regarding unauthorized conduct of pre-construction works.
At present, the civil code of Ukraine on “Administrative violations” provides that violation of the terms of issuance of technical conditions on the engineering of an architecturally significant property prescribed by law shall entail penalties for officials concerned ranging from the sum of the equivalent of twenty to one hundred personal minimum wages (a statutory amount often indexed over time).
New legal provisions were adopted regarding liability for the conduct of pre-construction works either without a permit for pre-construction works or without a permit to conduct construction works.
Thus, under part 1 of article 1 of the law of Ukraine "Liability of enterprises, associations thereof, institutions and organizations for violations of city-planning requirements”, the conduct of pre-construction works without a permit for pre-construction works or a permit to conduct construction works or without approved project documentation shall incur a penalty in the amount of the equivalent of fifty personal minimum wages.
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