Ukraine: Trust ownership as an alternative to a mortgage

Ukraine: Trust ownership as an alternative to a mortgage  

Iryna Kalnytska, Partner, Attorney at law GOLAW looks at a new form of securing performance of obligations—a trust ownership, introduced by Law No. 132-IX from 17 October 2019, which has started operating in Ukraine.

The concept of trust ownership is not new to Ukrainian legislation and it has long been enshrined in the Civil Code of Ukraine (hereinafter referred to as the Civil Code of Ukraine), but only from the end of October 2019, the trust ownership began to exist as a form of securing performance of obligations.

We propose to analyse in detail the legislative regulation of the Trust Agreement and the benefits of using such a method of securing performance of obligations.

The essence of Trust Agreement

According to a Trust Agreement, one party (the trustor) transfers the property (movable/immovable) to the other party (the trustee) upon trust to secure the debtor’s obligations under the loan agreement.

From the moment of establishing the trust ownership, the trustor’s ownership right is deemed to be terminated, whereas the trustee receives the right of trust ownership of such property. However, the trustee does not have the right to alienate such property on its own, except for the purpose of the foreclosure, as well as for its redemption for public needs in accordance with the procedure established by law.

At the time of establishing the trust ownership, the property may be used by: the trustor, the trustee or a third party. The user shall be identified in the Trust Agreement. The law does not impose any requirements for the compensatory nature of such use, so the use may be free of charge.

Notwithstanding the foregoing, the law establishes some peculiarities for the realisation of the trust ownership rights in relation to the land plots. In particular, a trusted land plot may be used by a user (who is not a trustee) only on a leasehold basis with the following characteristics:

  • the term of lease of the land plot is

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About the author:

Zahra started working as a paralegal at Lexis Nexis in Banking and Insolvency teams in April 2019. Zahra graduated with a 2.1 honours in a BA French and Spanish, completed the GDL at BPP University and is seeking some experience before commencing the LPC. She has undertaken voluntary work for law firms in London, Argentina and Colombia.