The State Property Fund has reclassified the leased object, recognizing it as the single property complex, for the first time

For the first time the State Property Fund of Ukraine has reclassified a state-owned real estate object, the lease contract of which is being extended at an online auction. The object type has been changed from «individual defined property” to «single property complex” (SPC).

This is the property of the State Enterprise «Kyiv Central Design Bureau of Valves», which was leased as a single property complex under the agreement dated December 29, 2004.

Subsequently, at the request of the tenant the Court changed the subject of the contract. The Court determined that instead of a single property complex, the subject of the contract should be «individually determined property». On April 8, 2021, this contract was to be renewed at an online auction. However, the State Property Fund canceled this auction in order to prepare the object for lease under the new procedure provided by the new lease legislation. The State Property Fund has previously reported on the situation surrounding the auction for this object lease - https://bit.ly/3itVQ2I.

The leased object includes property of various types: production and laboratory building, fixed assets, intangible assets, recreation center, cars and more.

On February 1, 2020, the Law of Ukraine «On Lease of State and Communal Property» came into force. Among other things, the law prohibits the lease of real estate of state-owned enterprises with a specific purpose and guarantees auction winners the right to use the leased object at their own discretion, except in cases where a single property complex of a state-owned enterprise is leased. In this case, the law allows tenants to keep the intended purpose of the property, for example, for the production of machinery and equipment. In addition, the Law prohibits the Fund from leasing fixed assets that are not real estate, except when they are leased as part of a single property complex.

The State Property Fund analyzed the norms of the new lease legislation, as well as the provisions of the lease contract of individually determined property of the State Enterprise «Kyiv Central Design Bureau of Valves» and concluded that it belongs to the type of objects «SPC».

At the end of July, in pursuance of the SPFU’s decision to reclassify the leased object, the lessee and the SPFU enshrined the new status of the property in an additional contract to the lease contract.

At the same time, the interest rate at which the property was leased was adjusted, as a result of which it changed from 10 to 12% per annum in accordance with the new Methodology for Calculating Rent for State Property established by the Cabinet of Ministers dated April 28, 2021, No. 630 «Some Issues of Rent Calculation Payments for State Property». The monthly rent under the contract, respectively, increased from UAH 397.07 thousand to UAH 476.5 thousand per month.

The State Property Fund also informs that prior to the announcement of a new online auction to extend the lease contract of the single property complex, an assessment and inventory of all property within it will be conducted, as well as an independent audit of the lessee’s financial statements.

Such measures are necessary in the process of preparing the SPC for the auction to fully disclose all the information necessary for potential tenants and to establish the fair value at which the object will be put up for auction.

For reference: On July 15, 2021, the Verkhovna Rada of Ukraine adopted in the first reading the draft Law of Ukraine No. 4572 «On Amendments to the Law of Ukraine «On the State Property Fund of Ukraine» and other legislative acts of Ukraine to promote investment in privatization and lease of state and municipal property», according to which the State Property Fund receives the right to bring the leased objects under current contracts in accordance with the new legislation by reclassifying it from «group of inventory objects» to «single property complex».