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Sowing Burden

30.10.2015

Iryna Kuzina,  Attorney at law, Head of Kharkiv office at Ilyashev & Partners Law Firm
Source:  The Yurydychna Praktyka

The fate of crops after expiration of the term of rent of land, as well as availability of unclaimed property shares are the problematic issues of agrarians which are not resolved by court practice.

In most cases validity of the Agreement of agricultural lands expires prior to the end of the production cycle in the agricultural sphere. Far from always such situation occurs through the lessee’s fault. For example, there are instances when the agreement is terminated in a court procedure or when the agreement was concluded in relation to the land share but the owner later registered the state act for land allocation, etc. At the same time the land had already been prepared for sowing or had been sowed (or when the crops had already sprouted or the soil works had already been started). What is the legal regime of the results of such works and who has the title for the crops.

Subject matter of the agreement

In classification of items of property crops and harvests are considered to be things and in relation to the land plot they are considered to be yield. As it appears from Article 189 of the Civil Code of Ukraine everything which is produced, extracted or obtained or brought from things is considered to be products, yields and profits. Pursuant to Article 775 of the Civil Code of Ukraine it is the lessee who has the title to products, yields and profits received by it as a result of use of things transferred into lease.

Pursuant to Article 95(1)(b) of the Land Code of Ukraine the land user has the title to the crops and items of agricultural and other planted vegetation, as well as to the manufactured products.

As a result, after expiration of the term of the lease agreement a conflict appears which has not yet been finally resolved by the court practice.

The claims filed to court may contain one of two subject matters:

  • acknowledgment of the title to the crops (incomplete production) of agricultural products at certain land plots;
  • recovery of losses inflicted by unlawful actions on gaining possession of crops, in the form of the lost profits from the sale of harvests.

In its decision as of February 17, 2015 in the case No. 389/2149/14-ц the Appellate court in Kirovograd Region held that the claimant, – the initial lessee, had mistakenly chosen the method of protection of its violated right filing against the respondent, – the new lessee, a statement of claim for recovery of losses inflicted as a result of unlawful actions of the new lessee on gaining possession of crops.

In its ruling as of November 30, 2011 in the case No. 15/241-08 under the claim lodged by FG “A” against PSP “G” the Supreme Economic Court of Ukraine held that in the absence of letters of claim filed by the land owners – former holders of land shares (individual persons) in regard to the crops, the previous lessee has not lost the title to the sowed crops (even in case of absence of any registered lease agreements). As soon as the new lessee has not provided enough evidence confirming his title to the crops its statement of claim on vacating the land plot is not subject to be sustained till the moment of harvesting the winter wheat of 2008 harvest. For the reason of absence of the dispute with individual persons (land owners) not subject to be sustained also is the counter claim of the previous lessee on acknowledgement of the title to the crops. This is an interesting example of the fact as the court prioritized the rights to the derivative thing (i.e. crops) over the right for the initial object (i.e. the land plot).

In its ruling as of March 09, 2010 in the case No. 8/365-37/248-08 the Supreme Economic Court of Ukraine drew attention to the fact that as of the moment when the statement of complaint was lodged the claimant (new lessee) must have a proper status, i.e. have registered lease agreements. Wallowing for the fact that registration of lease agreements may take a lot of time the harvest will be reaped and this problem will be solved by itself.

It needs to confess that this matter requires a more clear-cut legislative regulation and, based on the principle of justice, the right to the crops must accrue to the person who bore costs for processing of the soil, application of fertilizers, seed material, sowing and treatment of agricultural crops (except for cases of misconduct of the land user: for example, if a person is reliably aware of further expiration of the term of land use).

Unclaimed land shares

The question of allocation of land shares of agricultural companies is governed by the Law of Ukraine “On allocation of land plots in kind (on the ground) to the owners of land shares” No. № 899-IV as of June 05, 2003 (the Law “On allocation of land shares”), the Decree of the President of Ukraine “On the procedure of fragmentation of lands transferred into collective ownership to agricultural companies and organizations” No. 720/95 as of August 08, 1995 and the Decree of the Cabinet of Ministers of Ukraine “On organization of works and methodology of distribution of land plots between owners of land shares” No. 122 as of February 04, 2004.

Undistributed (unclaimed) land plot is the piece of land laid out in the unified land mass without indication of boundaries in kind (on the ground), but which is not distributed at the meeting of owners of the land shares due to failure to visit the meeting by owners of the land shares or their lawful successors. Undistributed land plots obtain the status of unclaimed after the meeting related to distribution of land plots (Decree of the Supreme Economic Court of Ukraine No. 924/686/14 as of January 15, 2015). Such land plot must be drawn in the land management plan related to organization of land shares and the list of owners of such shares must be composed.

Pursuant to Article 13 of the Law “On allocation of land shares” the undistributed (unclaimed) land plots may be transferred (on the basis of the decision of a corresponding village, rural or town council or district state administration) into lease to be used under their designated purpose for the term till they are obtained by the holders of the state acts certifying the title to certain land plots (as of now – the Title Certificate).

The practice of transfer of such objects into lease is quite controversial.

As soon as the mentioned article refers to “the land plots” and not the “shares” the district administration requires ordering technical documentation in relation to them. In this case the analogy of the law was used which is related to the procedure of provision of the state and communal lands (the Decree of Dnipropetrovsk Appellate administrative court in the case No. 804/4708/14 as of March 13, 2015).

 In another situation (where the object of lease is represented by the land plot) the matter was regulated by special legislation (Ruling of Rivne Economic appellate court No. 906/370/15 as of June 25, 2015, clarification of the Department of agricultural development of Volyn region administration (http://agrovolyn.com/struktura.php?news=110).

 Insufficiency of the statutory regulation is evident. And the matter of the state registration of such lease agreements (including in case of death of the owner and acknowledgment of the heritage to be ownerless) is to be the subject of a separate article.

 
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