Transparent leasing procedure: getting down to details
Svitlana Panaiotidi, Deputy Minister of Economic Development, Trade and Agriculture of Ukraine
Why come up with property “lists" and how can lessees take advantage of them?
Let's say your friends decided to start their own business. They have already found a beautiful space right in the city center that meets all their criteria, and they like it a lot. Only now it turns out that the property belongs to the state. Is that the end of the story? Not anymore! Thanks to the new transparent leasing procedure anyone can lease state or communal property. And here's how to do it – read on.
The Law of Ukraine “On Lease of State and Communal Property” №157 stipulates that in order for a property to become available for lease, it must first be included in the property “lists”. This procedure was introduced to give potential lessees a chance to review a large number of state and communal properties. To ensure openness and equal access to information for all, the property “lists” are published in the electronic trading system (ETS) Prozorro.Sale.
Simply put, all property owned by the state or local authorities and planned to be released for lease should be inventory checked, added into the unified public register and, of course, made available to all potential lessees.
In addition, the transparent procedure for leasing and introducing property “lists" is another safety measure to prevent property leasing on pseudo-preferential terms.
Two lists: where to register or look for the desired property?
1) Property List I (one) includes property that will be leased according to the results of an auction.
2) Property List II (two) includes property that will be leased without an auction.
Governmental organizations and other organizations mentioned in Article 15 of the Law “On Lease of State and Common Property” have the right to lease a property without an auction. If the potential lessee is one of the beneficiaries defined in Article 15 of the Law "On Lease of State and Common Property", they should submit an application to include the property in the Type II list. After the object is included in the Type II list, the property owner enters into a lease agreement with the "beneficiary" without an auction procedure. If a potential lessee wants to lease state or municipal property, but does not have the right to lease such a property without an auction, they should submit an application to include the property in the Type I list. The lessor considers this application within the established time limits, includes the property in the Type I list and announces the auction. The right to lease the property is given to the lessee who offers the highest lease bid at the auction.
Type I and II property lists must be uploaded by all lessees into the electronic trading system "Prozorro.Sale". It is already possible to add Type I and II property lists into the Prozorro system. The state enterprise Prozorro.Sale has tested the functionality of ETS-accredited sites for the publication of lists of Types I and II, so this function is operational in the personal accounts of lessors.
To enter a property for lease into the ETS, lessors must choose an electronic platform accredited by Prozorro.Sale, register on it and gain access to a personal account. In the personal account, the lessor can add in an object, which they plan to put up for lease and which they have included into one of the lists. When creating an object for lease, the lessor enters information about the object into the appropriate fields. In particular, the following information should be noted:
- type of object: single property complex, real estate, vehicle, other property;
- ownership: state or communal;
- initial and residual book value of the object;
- lease payment and lease rate (if applicable);
- lease term;
- intended end-use of the object;
- about the lessor and the balance holder of the object;
- location and technical characteristics of the object depending on the type of object;
- other information provided for in the procedure for leasing state and communal property.
In addition, the lessor has to upload documents related to the object: for example, photos, technical passport, floor plan, decision on the intention to transfer the property for lease and the decision about the inclusion of the leased object in the Type I or II list, and the lease agreement, if it is already concluded. The lessor then publishes the object.
The object published by the lessor is entered into the central Prozorro.Sale database and appears on all sites connected to the system. Therefore, potential lessees can find the desired lease object from the lists of type I or II in the system "Prozorro.Sale" through any of the sites and lease it.
All electronic platforms connected to the system have created interfaces for easy object search. For example, lessees can filter property by the list type (I or II), by the square footage of the object, by location, the name of the object or other criteria. This interface allows the lessees to find the desired state and communal property object in any corner of Ukraine and conveniently and easily lease such property.
In what other cases do lessors use the list of property in ETS "Prozorro.Sale"?
The list of property in the ETS may include other property, in addition to objects that are planned to be leased at an auction or without an auction in the following cases:
- it is planned to extend the lease agreement at an auction. In this case, the information about the object that is the subject of the contract is entered, and the lease agreement is uploaded;
- the lease agreement is planned to be extended without an auction. In this case, the information about the object that is the subject of the contract is entered;
- a lease agreement concluded before the entry into force of the Law №157 is added into the system;
- a sublease agreement is entered into the system, which is concluded in respect of the object that is the subject of an agreement concluded before October 1, 2020;
- an agreement on amendments to a lease agreement concluded before October 1, 2020 is entered into the system.
In the above cases, lessors can only technically enter information about the leased objects into the property lists in the ETS. Legally, lessors should not include them in the list of type I or II in accordance with Art. 6 of the Law. Technically, these properties must be included in the ETS, in order for a consolidated database of state and communal leased facilities to be maintained.
How can a lessee use the list of property in ETS to lease property?
The potential lessee has the technical ability in his/ her personal account to submit applications related to specific objects available for lease. For example, a potential lessee has found the desired property in one of the lists in the ETS. They then apply to lease this property through their personal account on the electronic platform. This application appears in the personal account of the lessor, and they must announce an auction based on the results of such an application.
If the potential lessee used the search for objects that are in the lists of Type I or II in the ETS and did not find the desired object, they may, in addition to the aforementioned procedure, apply for the inclusion of any property in the Type I or II lists of property. When the lessor receives such applications through the Prozorro.Sale system, they must consider such applications and include the relevant object for lease in the Type I or II lists, or refuse to add the property to the system, if there are grounds for it.
The transparency of this procedure means equal opportunities for all, competition and a fair price, and, of course, attracting investment and budget revenues.