State challenges Kyiv land deal in court

The State Enterprise “Research and Production Agro-Combine “Pucha-Vodytsia” (hereinafter SE “RPAK “Pucha-Vodytsia”), jointly with the State Property Fund of Ukraine and the Cabinet of Ministers, has been attempting for over three years to challenge an investment agreement related to the development of nearly 52 hectares of land in the Vinohrady district of Kyiv through the courts. 

As early as 2013, LLC “Citybudservice”, part of the orbit of the developer “Stolitsa Group”, linked to Vladyslava Molchanova, began developing this land plot. Over the past period, four residential complexes comprising 40 buildings have already been constructed on this territory. The plaintiffs’ main argument is the lack of approval of this investment agreement by the Cabinet of Ministers of Ukraine prior to its signing.

However, in 2023, the State Property Fund definitively lost the case regarding the cancellation of the change in the target designation of the lands, which allowed them to be used for residential development. Meanwhile, court proceedings continue regarding other investment agreements for adjacent plots, where “Stolitsa Group” is also carrying out development.

Court case: current status

The Cassation Commercial Court is hearing case No. 910/7983/21, within the framework of which an investment agreement concerning several plots in the Vinohrady district is being challenged. The plaintiff is SE “RPAK “Pucha-Vodytsia”, which is the land user, while the defendant is LLC “Citybudservice”, the development investor. The proceedings have lasted more than three and a half years, with the state enterprise losing in the first two instances. The cassation court’s decision may put an end to this prolonged dispute.

Background

The investment agreement between SE “RPAK “Pucha-Vodytsia” and LLC “Citybudservice” was signed on 5 March 2013. It concerned the development of a plot of approximately 42.35 hectares between Pravda Avenue and Polkova Street in the Podil district of Kyiv. The land was in the use of the state enterprise, although it had not been fully formed in nature de jure.

Under the terms of the contract, the state enterprise acted as the land user and construction client, while LLC “Citybudservice” acted as the investor, undertaking to finance the works. In return, the agro-combine was to receive 5% of the residential area in the built houses, their equivalent in property rights, or similar areas in other developer objects. The remaining 95% of the area remained with the investor.

On 31 October 2014, the Main Directorate of the State Land Agency in Kyiv changed the target designation of two land plots with a total area of 51.96 hectares, allowing them to be used for residential development, including transport infrastructure facilities and green areas. In November of the same year, “Citybudservice” compensated the agro-combine 4 million hryvnia for the loss of agricultural designation of the lands, and the enterprise wrote off 17 real estate objects with 100% wear on the plot.

Territory development

On plots of 44.06 hectares and 7.9 hectares, the residential complexes “Warsaw Microdistrict”, “Warsaw-2”, “Fifth Quarter”, and “Krister Grad” were built by 2019. The developers were “Stolitsa Group” and “Perfect Group”. The total population in the new residential areas has grown significantly, creating additional load on the district’s social and transport infrastructure.

Court proceedings

In May 2021, SE “RPAK “Pucha-Vodytsia” initiated court proceedings in the Kyiv Commercial Court, demanding the invalidation of the 2013 investment agreement. The plaintiff cited the need for the agreement to be approved by the Cabinet of Ministers, which had not been done. However, the court of first instance refused to satisfy the claim, citing the presence of approval from the Ministry of Agrarian Policy and Food.

The appellate instance also refused to satisfy the appeal of the state enterprise and the State Property Fund, which claimed damage to state interests. The case was referred to cassation, where the Cabinet of Ministers additionally joined the proceedings.

In parallel, the State Property Fund attempted to cancel the 2014 order of the State Land Agency regarding the change in the target designation of the lands. However, all three court instances dismissed the claim, pointing to the legality of the State Land Agency’s actions and the presence of approval from the Ministry of Agrarian Policy and Food.

Context

SE “RPAK “Pucha-Vodytsia” is known for its numerous agreements on the transfer of lands for development. In particular, more than 1,000 hectares were transferred to third parties, including companies linked to “Stolitsa Group”. These deals have repeatedly attracted the attention of law enforcement agencies. However, there is no information about anyone being held liable.

Currently, proceedings are ongoing regarding other contracts related to the development of Vinohrady, including a plot of 86 hectares where the construction of several dozen more high-rise buildings is planned.