On 9 April 2025, Law of Ukraine № 4292-IX "On Amendments to the Civil Code of Ukraine on Strengthening the Protection of Rights of Bona Fide Purchaser" (Law No. 4292-IX) came into force. A bona fide purchaser is a person who acquired property under а repayment contract from another person who had no right to alienate it, provided that the purchaser did not know and could not have known about this.
As a general rule, if the property is lost, stolen, or otherwise left the owner’s possession, the owner is entitled to reclaim it from a bona fide purchaser. The Law № 4292-IX provides for strengthening the protection of the bona fide purchaser’s rights against actions of the state or territorial community concerning the former property of the state or municipal ownership by:
- limiting the authorities' ability to litigate if loss of ownership of the state / territorial community took place over 10 years ago (with certain exceptions)
- imposing an obligation on the state / territorial communities to compensate a bona fide acquirer the value of such property
The 10-year term does not apply if the property at the time of such disposal belonged to:
- critical infrastructure
- state-owned facilities of strategic significance to the economy and national security
- territories allocated for military use
- objects or territories of the nature reserve fund and hydro-technical structures, subject to the availability of documents confirming the status of such objects, territories, and structures at the time of disposal
- cultural heritage monuments that were not subject to privatization
When the government authorities/territorial community files a lawsuit, they must deposit funds with the court amounting to the value of the claimed property (determined by a real estate appraisal, an expert monetary valuation of the land plot valid at the date of filing the lawsuit). If the court satisfies the claim, it must simultaneously decide on the transfer of the funds from the court deposit to the bona fide purchaser. Otherwise, the funds on the deposit shall be returned to the claimant.
If compensation is made to a bona fide purchaser, the state/territorial communities acquire the right to claim against the person whose fault caused the property to have been illegally alienated from its owner.
It should be noted that the law has a retroactive effect, i.e:
the provisions regarding compensation for the value of property also apply to cases that are already under consideration but for which no decision has yet been made by the courts of first instance, and
the 10-year period of limitation applies to legal relations that arose before 9 April 2025 (i.e., in respect of the property withdrawn from the state or municipal ownership before 9 April 2025)
The Law 4292-IX is intended to improve the investment climate and protect bona fide acquirers from abuse of power by the public authorities. This problem has existed for a long time and is reflected in court practice. Thus, courts have flagged the need to adhere to the principle of “proper governance”, providing for the authorities to reveal their mistakes and pay adequate compensation to bona fide purchasers, as well as to ensure a fair balance between the public interest and the claimant’s right to peaceful enjoyment of his property (taking into account the burden placed on the individual or legal entity by such interference).
Whether the aim of Law 4292-IX will be reached depends on the sustainable law enforcement practice. The voices of those who point to the possible non-compliance of Law 4292-IX with the Constitution of Ukraine in terms of retroactive effect (according to the Constitution, laws do not have retroactive effect, except when they mitigate or cancel the legal liability of a person) and ensuring equal access to justice for state authorities / territorial communities remain audible. There are also concerns about certain provisions of Law 4292-IX that may be deemed not in line with the principle of legal certainty. Overall, Law 4292-IX may be subject to review by the Constitutional Court of Ukraine.
Thus, until the new law is clearly applied, a prudent and cautious position should be taken on any issues that may be covered by this law. In particular, historical risks with respect to the properties acquired from the state / territorial community more than 10 years ago cannot be completely excluded.
By Oleg Boichuk, Partner, and Viktoriya Demydenko, Counsel, Asters
