Changes to small-scale privatisation: leased property will be sold at auction
This was announced by Prime Minister Yulia Svyrydenko.
The Cabinet of Ministers has amended the rules governing the small-scale privatisation of state and municipal property.
From now on, leased properties where the tenant has carried out repairs or modernisation will only be sold through open online auctions on the Prozorro.Sales platform.
This concerns property with so-called non-removable improvements – where the tenant invests funds in a property that is state- or municipally-owned.
How the old system worked
Previously, a mechanism of non-competitive buy-out was often used.
The property was leased, funds were invested in repairs or modernisation, after which the tenant was granted the right to purchase the property without an auction.
According to Svyrydenko, this mechanism allowed state or municipal property to be purchased at a significantly lower price.
As a result, local authorities and the state could lose out on revenue from the sale of property.
How much did budgets lose?
According to estimates by Transparency International Ukraine, in cases of non-competitive buyouts, budgets received on average 45% less than during sales via open auctions.
According to data cited by Svyrydenko, open auctions generated over 3 billion UAH in revenue in the 2021–2024 period alone.
This is more than double the revenue from buyouts.
How prices will now be determined
Following the changes, the price of leased state and municipal property is to be determined by competition.
The property will be put up for an open online auction, and the final price will be determined by the market.
In this way, the government aims to remove the possibility of direct buy-outs without competition following repairs or modernisation.
What will happen to tenants’ investments
The government states that protection for bona fide businesses will be maintained.
Confirmed investments by the tenant in integral improvements will be compensated or offset during the final settlement for the property.
In other words, the tenant will not lose the confirmed costs of repairs or modernisation, but the property itself must be sold through a competitive procedure.
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