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Permanent use of farm land:
how lasting is this right?

Permanent use is a long-standing and painful problem of the agricultural sector, the urgency of which only sharpens over time.
Why is it painful? Because the word “permanent “, even without reference to legal definitions, means continuously, indefinitely, forever. Why do farmers lose plots that were provided for permanent use? Can they lot upon a certain stability of their activities, at least in terms of sustainable ownership of their land bank?
To identify the root cause, let’s turn a little to the history of the issue.

Legislation adopted in the early 1990s and existed until the early 2000s provided that citizens who intended to engage in farming were entitled to receive land for permanent use. By the way, according to the normative definition, land use is permanent without a pre-established term.
The valid procedure provided that the state act on the right of permanent use was issued in the name of the chairman of the future farm and was, in fact, a prerequisite for the creation of the farm as a legal entity. Only after receiving a state act a person could apply to the competent authorities for registration of a legal entity.

A similar rule exists today. A farm is subject to state registration provided that its founder (founders) acquire the right of ownership or use of land.
That is, we state that the farm is a specific entity, the actual creation of which is possible only if the land is available. Such land will be the basis of the farm activities.
Since 2002, in connection with the adoption of the new Land Code of Ukraine, the possibility for citizens to own land on the right of permanent use has been excluded from the legislative provisions.

There was an attempt by the legislator to bring land relations into line. The Transitional Provisions set a deadline for re-registration of the right of permanent use for rent or ownership. Failure by farmers to take such actions in a timely manner should lead to loss, termination of the right of permanent use.
The Constitutional Court of Ukraine declared such a provision unconstitutional. The conclusion of the decision is that the right, which was legally acquired, is retained by the person and cannot be liquidated by the state without proposing effective mechanisms that would not worsen the situation of citizens and would not create an excessive burden.

The people calmed down for a while. They made no re-registrations and quietly managed their plots.
However, time goes by. The heads of the farms who received state acts more than 20 years ago are now often elderly people. They are dying. But the farms still exist. There are other members of it, the family of this head, who would like to continue the family business and use the land, which has been provided and used for more than 20 years for the same farm.
The problem is that they cannot inherit the right to land. There is a well-established position that succession does not apply to the right of permanent use. The land is returned to the state and distributed among completely different persons.

This situation is not an isolated case. As the Constitutional Court of Ukraine pointed out in its decision in 2005, this land is the basis of life and management of the entire social stratum of the population. There are lots of lawsuits where the heirs tried to protect and retain their right to land. But the case law on this issue has long been unshakable. Constant use is constant only during the life of the head of the farm.

In the practice of our firm, there was a slightly different, specific situation in the context of this right of permanent use.
The farm which besides the former chairman, on whom the state act is issued, also has other members, another chairman, for 17 years used the land on the right of permanent use. Under the influence of some circumstances, this former chairman, without the consent of the current head, submitted to the State Geocadastre Office an application for voluntary waiver of the right of permanent use. The refusal was accepted with lightning speed, the right to the land was terminated, and the land itself was divided and transferred to third parties.

To protect the interests of the farm, which unexpectedly lost a significant part of the land bank, we filed a lawsuit, one of the requirements of which was the recognition of the farm right to permanent use of the lost land.
In the course of the trial, we and the court investigated the following question: who is the subject of the right of permanent use – the land user? Can the founder of the farm alone waive the right of permanent use and does such an action violate the interests of the farm as a separate from this person, an independent business entity?

Our arguments in favor of a farm’s right:

1. Obtaining a land plot is a mandatory precondition for the acquisition of legal personality by the farm. On the other hand, obtaining a land plot for the farm management required further registration of the farm. That is, the law did not stipulate the right of a citizen to use the land plot provided to him for use for the conduct of the farm, without the creation of such farming enterprise.

2. The law clearly assigned the responsibilities of the land user to the farm, not its founder. They are: targeted use and protection of land, payment of taxes, etc.;

3. The right of permanent use was unquestionably recognized by the state under the farm.

To the best of our belief, the connection between rights, obligations and responsibilities must be unbreakable. There can be no situation when one person owns and disposes a certain right, and another one exclusively bears all responsibilities related to possession of a right.

It was a rather high-profile case; its consideration was transferred to the Supreme Court. During the trial, the court sought scientific conclusions on the disputed issue. There were 6 of them, the opinions of scientists were divided 50/50. Unfortunately, the decision was not made in favor of the farm, the positivist position won – the subject of law is a person who is written in the state act. The farm does not have a title deed to the land – and therefore no land rights. Only two judges strongly disagreed with such an unfair decision and set out their views in a separate opinion.

Although even then, in the process of considering our case, the first decisions of the Grand Chamber of the Supreme Court appeared, followed by a legal conclusion, which we tried to convey and defend in court – the duties of a land user are performed by a farm, not a citizen. That is, in the legal relationship of use of the disputed land there is an actual replacement of the tenant and the responsibilities of the land user pass to the farm from the date of its state registration.

Our reference to the given legal position was rejected, because it is a question of rent, and we deal with a constant use which is absolutely another things as the court considered. Both the rent, and the permanent use are alternative titles necessary farm creation. The difference is in the timeliness.

The Grand Chamber goes further. Nowadays there are lots of decisions on the automatic transfer of the lease to the farm at the moment of its state registration, which allows us to say about an established legal position.

And last November, the case was transferred to the Supreme Court for consideration on the issue of permanent use and the subject of this right (922/989/18). The Court concludes that this issue is an exclusive legal issue that needs to be addressed in order to ensure compliance with the requirements of paragraph 1 of Protocol No. 1 to the Convention for the Protection of Human Rights and Fundamental Freedoms. The trial is scheduled for March 31, 2020. We are looking forward to a decision that may give hope or may even put an end to long-standing disputes over the topic of permanent land use of farms.

On the other hand, certain hopes are also put on the legislative settlement of this problem. Back in 2018, a bill was developed that provides for the transfer to the farm ownership of land plots granted to their founders on the right of permanent use, lifelong inheritable possession. Unfortunately, in August this year, the project was withdrawn, its future, the fate of this painful issue for many, remains unresolved.


Partner
Viktoriia Liubych
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