Houses usually are countryside or garden cottages or residential houses. Cottages usually are located in the lands of horticultural associations and are built on land plots “for conducting horticulture.” Residential houses are built on land plots “for construction and maintenance of residential houses.” The legal status of a residential house unlike that of a cottage allows its owner to register their residence in it. A house may be built on privately-owned land, leased land or municipally-owned land. If a house is located on a land plot near a lake or a river, be careful – in most cases these are leased lands.
The size of a land plot and its cadastre number are obligatory terms of the agreement stipulating the vesting of title to the house. For example, these are purchase and sale or gift agreements for a residential house (Article 377 of the Civil Code of Ukraine). The land itself on which the house sits must have a purpose “for construction and maintenance of residential house, economic structures and facilities.” The agreement specifies the data on the land plot for the following purpose: when purchasing a residential house, in accordance with Article 120 of the Land Code of Ukraine, you acquire the ownership or the right of use of the land (or its part), which is directly under the house and which is needed for house maintenance. Therefore, the fact of purchasing land together with the house, even if you did not sign a separate document on land purchase, imposes additional responsibilities on you as the owner related to maintaining your property, for example, as regards paying the land tax.
It is advisable to learn the status of the land plot on which your future house is built in advance. You need to get clear answers to the following questions:
- is the land privatized or is being used?
- has the state certificate of ownership or right to use the land been obtained?
- does the land plot have a cadastre number?
Taxes upon sale and purchase of a house (cottage)
Before signing the agreement it would not hurt to discuss obligatory payments and taxes and which party pays those. If the house is owned by a resident seller for more than three years or if the seller inherited the house and the first sale of real estate occurs in the current year, no tax needs to be paid. In this case a non-resident seller is equalled to a resident seller. If the house has been owned by a resident seller for less than three years or if they already sold real estate this year, the tax will be 5% of the amount of sale which may not be lower than the appraisal value recorded in the Bureau of Technical Inventory or by an independent licensed expert. The amount of tax for a non-resident in this case will be 15-17%. The tax must be paid before signing the agreement. When purchasing a house, the buyer will pay an obligatory Pension Fund contribution in the amount of 1% of the amount of sale (the price of the house without land).
The envisaged costs must also include the amount of notary’s fee for certifying the agreement.
Such fee is no less than 1% of the amount of the agreement which will also include payment for extracts from Unified and State Registries.
Documents for a house sale/ purchase deal
When entering into a residential house purchase and sale agreement, the following documents need to be provided to the notary:
- title deed for a house (certificate of ownership, sale and purchase agreement, gift agreement, certificate of inheritance, etc.)
- an extract from the registry of real estate titles (it is issued by a bureau of technical inventory)
To ensure the rights of underage residents who are, probably, registered in the house, a form No. 3 is provided on the residents registered in the house (in the capital city, such forms are issued by the building maintenance offices) or an extract from the house register (in the regions, it is issued by the Passport Office);
- a certificate (in essence, this is an extract from the state registry of lands that is electronically maintained by the State Agency for Land Resources in accordance with the rules established by the resolution of the Cabinet of Ministers of Ukraine of 09.09.2009) of the size of the land plot on which the house is located with an obligatory indication of the cadastre number of such land plot (unless the seller has the title to the land);
- if the land is in use and is not owned – a certificate of the State Agency for Land Resources that the land plot has not been privatized, or a lease agreement;
- an expert appraisal report specifying the value of the house that must be prepared by a licensed appraiser;
- other documents required to enter into deals in the presence of a notary (a passport, a tax identification number certificate, a power of attorney, if necessary, a statement of spouse’s consent to enter into the deal, etc.)
An expert appraisal act is always required upon change of owner except where property is transferred by donation. To formalize a purchase and sale of a cottage or a garden cottage, the same set of documents is required save for form No. 3.