Effective June 6, 2026, significant amendments to the Law of Ukraine “On the Privatization of State and Municipal Property” will take effect, radically changing the mechanism for privatizing assets through purchase by the lessee. The legislature has provided for a one-year transition period to complete privatization procedures through purchase initiated by lessees under the previous rules, and this period expires on June 6, 2026.

Accordingly, tenants who do not manage to complete the privatization procedure through buyout—that is, to enter into a purchase and sale agreement with the privatization authorities by the specified date—will be subject to the new legal regulations.

Currently, Part 2 of Article 18 of the Law of Ukraine “On the Privatization of State and Municipal Property” establishes the lessee’s right to purchase the leased property at a price determined based on the results of an independent appraisal. To exercise this right, the lessee must comply with a list of conditions clearly defined by law, namely: making essential improvements to the leased property in an amount of at least 25% of its market value, as determined for lease purposes; the lessor’s prior written consent to make such improvements, which entitle the lessee to privatization; completion of the essential improvements within a three-year period from the date the market value of the property was determined; confirmation of the fact that the improvements were made, their composition, and their essential nature by a construction expert’s report, and confirmation of their value by a licensed appraiser; proper fulfillment of all terms of the lease agreement, with confirmation that there are no outstanding rent payments; and the lease agreement must be in effect at the time of privatization.

Pursuant to Part 3 of Article 18 of the aforementioned Law, if the privatization authority decides to privatize the property through a buyout, a preliminary purchase and sale agreement is concluded between that authority and the lessee, which serves as the basis for the subsequent conclusion of the main agreement and the lessee’s acquisition of ownership of the property.

Effective June 6, 2026, the direct targeted buyout procedure is completely abolished and replaced by an auction mechanism for the privatization of the leased property along with its integral improvements.

In accordance with the new version of Part 2 of Article 18 of the Law of Ukraine “On the Privatization of State and Municipal Property,” the lessee will no longer have the right to purchase the property at a fixed appraised value minus the market value of the improvements made by the lessee, but rather at the highest price offered by other participants during an open electronic auction.

To exercise their right to privatization, the lessee will be required not only to participate in the auction but also to pay the sale price equal to the highest bid submitted by the winning bidder. The cost of previously made improvements will be offset by a proportional credit applied during the final settlement.

In my opinion, these legislative changes worsen the legal and financial position of lessees of state- and municipally-owned property compared to the current regulations. Determining the price of a property through open competitive bidding creates an obvious risk of a significant increase in the asset’s value, as the final price will depend on market demand. Such a legislative model undoubtedly fully serves the property interests of the state and local communities, aiming to increase budget revenues; but it places a burden on tenants who have already invested significant personal funds in improving the property, forcing them to compete for it under unpredictable market conditions.

Given the approaching end of the transition period, the issue of procedural inaction on the part of privatization authorities—entities exercising governmental powers—has become particularly acute. The law does not specify a timeframe within which privatization must be completed. And the privatization authorities are taking advantage of this. In practice, it is not uncommon for an independent appraisal of the property to have already been conducted and approved, and for all necessary procedural steps to have been completed, yet the privatization authority, without any valid legal grounds, delays the conclusion of a preliminary purchase and sale agreement, as if waiting for the new version of the Law to take effect. If one sits idly by, such delay will inevitably result in the lessee losing the right to purchase under the procedure that was in effect prior to the amendments.

Under these circumstances, the most effective way to protect the infringed right is to file a lawsuit. As a practicing attorney in such disputes, I recommend initiating legal proceedings by June 6, 2026, with a claim seeking a declaration that the preliminary purchase and sale agreement has been concluded. This approach is consistent with the established practice of the Supreme Court in pre-contractual disputes regarding privatization, which permits the recognition of agreements as concluded by a court decision in cases where the privatization authority unjustifiably refuses to sign them, provided that the existence of all prerequisites specified by law is proven. At the same time, the court sets forth the text of the preliminary agreement in the operative part of the decision, which is deemed to have been concluded on the date the court decision takes legal effect.

Filing a lawsuit by June 6, 2026, will allow tenants who, due to the inaction of privatization authorities, are unable to complete the privatization procedure for state or municipal property through redemption, to acquire ownership of the property under the procedure of the old Law and avoid the transition to the procedure of selling the property via an electronic auction under terms that are unfavorable to the tenant.