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New Law on Compensation for Destroyed Housing: What’s in It?

Date of publication: 31 March 2023

Dmytro Hruba, Attorney at Law

Source: NV Business

On 23 February, the Verkhovna Rada of Ukraine adopted the long-awaited Law of Ukraine On Compensation for Damage and Destruction of Certain Categories of Real Estate Objects as a Result of Hostilities, Terrorist Acts, Sabotage Caused by the Military Aggression of the Russian Federation.

The law provides for the introduction of a procedure for obtaining compensation for destroyed/damaged housing, introduces the basis for the functioning of the Register of Damaged and Destroyed Property, etc. It is difficult to overestimate the relevance of this law in wartime conditions. Thousands of destroyed real estate objects throughout the country speak for themselves.

Who can claim compensation and for which real estate?

The first thing you should pay attention to is that compensation is provided exclusively for damaged or destroyed residential real estate. That is, all owners of non-residential real estate are outside the scope of the adopted law.

Secondly, despite the fact that the war in Ukraine has been going on for more than nine years, the law provides for the possibility of receiving compensation for damaged/destroyed real estate from 24 February 2022.

Thus, people whose housing was destroyed/damaged before the specified date cannot claim compensation. I hope that the legislators have some clear and consistent plan for previously damaged and destroyed property and this injustice will be eliminated. Otherwise, it is difficult to explain this kind of differentiation.

The third thing that should be emphasized is the issue of the parties that can claim compensation. Such parties are only represented by natural persons – citizens of Ukraine who had the right to residential real estate, as well as housing cooperative (managers of apartment buildings, building cooperative that maintain the respective buildings) for damaged common property of an apartment building.

It is important that the heirs of property owners will also be able to receive compensation.

That is, all foreign citizens, stateless persons, as well as legal entities (except for those mentioned above) will not find themselves in the list of applicants for compensation.

In addition, according to the law, the following persons will not be able to receive compensation:

  • persons to whom sanctions have been applied according to the Law of Ukraine On Sanctions;
  • persons who have a criminal record for committing criminal offenses provided for in Section I Crimes Against the Basics of National Security of Ukraine of the Criminal Code of Ukraine;
  • heirs of such persons regarding damaged/destroyed real estate objects.

What about compensation for future real estate?

Here it is important to note the rather progressive provisions of the law, according to which compensation can be received not only for completed and commissioned real estate objects, but also for future real estate objects: construction objects (manor houses, garden and country houses) and components of construction objects (apartments, other residential premises in a building).

Compensation for future real estate objects is carried out under certain conditions, namely: 1) at the time of damage, the supporting and external enclosing structures of the future building must be erected (except for translucent structures and filling of doorways); 2) in relation to such construction objects, the right to perform construction works must be obtained.

Types and amount of compensation

The law provides for several types of receiving compensation, including:

  • performance of construction-related works on a damaged real estate object to restore or provide construction products for the performance of such works;
  • transfer of money to the current account of the recipient of compensation with a special regime of use for the construction of a manor house, garden or country house;
  • financing the purchase of an apartment, other residential premises, a manor house, garden or country house (including financing the purchase of a premises/house to be built in the future, or investing/financing its construction) using a housing certificate.

The last two options can only be applied to the destroyed property with certain nuances.

Therefore, compensation for a destroyed manor house, garden or country house, construction objects (manor houses, garden and country houses) is provided in one of the ways indicated above (providing funds or housing certificate). At the same time, it is important that the form of compensation in this case is determined by the recipient himself.

Compensation for a destroyed apartment, other residential premises in a building, a part of a construction object (apartment, other residential premises in a building), which is an independent object of real estate after taking into service, is provided exclusively in the form of a housing certificate. It should be noted that the housing certificate can be used only by its owner or his heir and cannot be alienated to third parties. The certificate can be used for five years. A person entering into an Agreement the purchase of real estate using a housing certificate will need to certify such an agreement at the notarial office.

Also worth noting is the prohibition on the alienation of real estate, which was purchased using a housing certificate. It will be imposed by a notary public and will be valid for five years.

As for the amount of compensation, the law does not limit it, stating that it will be determined based on the total area of the destroyed real estate object and the cost of one square meter of the area of the destroyed real estate.

At the same time, the determination of the cost of one square meter will be carried out according to the procedure to be established by the Cabinet of Ministers of Ukraine.

As for the method of obtaining compensation in the form of construction works and providing materials for the restoration of damaged property, the procedure for providing such compensation is also not available and should be additionally established by the Cabinet of Ministers of Ukraine.

The procedure for receiving compensation for destroyed property

An application for receiving compensation, together with a simple list of documents, is submitted during the period of martial law and within one year from the date of its termination to the Commission for consideration of issues regarding the provision of compensation (they must be established locally).

As a general rule, the application review period is 30 days, and as a result of the review, a decision must be made – to grant or refuse compensation. Such decision may be appealed to court.

The law also provides for the grounds for suspension of the consideration of the application, for example, if the applicant has lost real estate documents and needs time to restore them. The order of consideration of applications is also provided, the accounting of which is supposed to be done automatically for transparency.

In general, the procedure for receiving compensation for destroyed property is not overly complicated and burdensome in itself, the list of documents is quite simple and short, as well as the list of steps that must be taken from the initiation of receiving compensation to its actual receipt.

In conclusion, we must re-emphasize the importance of this law. However, it is not enough to organize an effective procedure, it is still necessary to ensure its proper operation. Practical application of the law will be its first test. The second is money, since we have witnessed insufficient funding in similar cases more than once. Thus, only through successful overcoming of two barriers – bureaucratic and financial, it will be possible to talk about its success and effectiveness in the future.