"Fool the farmer." New scheme on the land market

“I’ll buy a share at an expensive price.” Scammers have found a way to deceive both the tenant farmer and the land owner...

The state guaranteed entrepreneurs who cultivate the land the priority right to buy out leased land, but swindlers found a way to deceive both the farmer and the shareholder.

2.5 years have passed since the land market was introduced in Ukraine. And from January 1, 2024, its second stage came into effect: legal entities whose founders are exclusively citizens of Ukraine or the state or communities became market subjects. Land reform is one of those that Ukrainian President Vladimir Zelensky is pleased with. He announced this at the end of 2021.

The agricultural land market in Ukraine started on July 1, 2021. On January 1, 2024, a new stage of land reform began. Now legal entities have the right to purchase agricultural land. Sales are permitted only on private plots of no more than 10 thousand hectares. However, the sale of communal and state land remains prohibited.

Let's find out what reasons for pride and optimism the current situation provides, and what do we have after 2.5 years? Which fears and prejudices were justified, and which turned out to be just populist manipulations of individual politicians. Let us also pay attention to problems that the legislator did not foresee. So to speak, we’ll tell you about places where we didn’t expect problems, but they appeared...

From the history of the promises of power

The draft law “On the Land Market” was registered on February 28, 2008, paradoxically, by the government of Yulia Vladimirovna Tymoshenko. One of the safeguards for the dispossession of peasants in this government project was the rule about the second stage of buyers - owners and users of adjacent land plots. The so-called toxicity of the moratorium on the sale of land was discussed during the tenure of Viktor Yushchenko.

In April 2009, the president announced the need to pass laws as quickly as possible to organize the land market. However, the Azarov government began to really act in this direction under the presidency of Yanukovych. On July 2, 2012, Cabinet of Ministers Resolution No. 609 “On the creation of the State Land Bank” appeared. The notorious land bank was given, in particular, the task of providing financial support for the development of small and medium-sized agricultural producers and supporting the state program for the development of the agro-industrial complex on the basis of repayable financing.

“We will take on some of the risks and encourage other banks to provide loans to our agriculture, in particular, secured by land. Loan rates will be from 8% to 10%, and due to compensation up to 2.6% and 3% per annum,” said the head of the bank, Svetlana Skosyrskaya. The bank never made money.

Then the next head of state, Petro Poroshenko, took up land reform and promises to the villagers. The government of Vladimir Groysman announced a system of preferential lending to farming, small and medium-sized businesses in rural areas, support for the production of niche crops and niche businesses, as well as investments in improving soil quality.

“Answers have been found on what to do and how to support the Ukrainian farmer,” Poroshenko emphasized.

Four options for introducing a land market in Ukraine, developed by a working group under the Verkhovna Rada of Ukraine Committee on Agrarian Policy and Land Relations, were first presented during the “All-Ukrainian Land Forum” in Kyiv on April 10, 2019.

In particular, the law should have established qualification requirements for buyers. The person would have to have an agricultural education, at least five years of experience in agriculture, or be involved in commercial agricultural production. Secondly, one person, according to the recommendations of scientific institutions of the National Academy of Agrarian Sciences, could not purchase more than 1,500 hectares in Polesie, and 1,750 hectares in the Forest-Steppe; in the Steppe - 2100 hectares; Carpathian mountain region - 900 hectares; Crimean mountain region - 1100 hectares. Such restrictions were provided to prevent excessive concentration of land in the ownership of one person and the monopolization of land as a resource for human and economic development in rural areas.

Vladimir Zelensky continued to reassure farmers with promises. “Even greater benefits should be available to those who are already working on this land and want to become its owner. And only then, when Ukrainian farmers receive land, will it be possible to allow foreign companies to purchase it,” Zelensky emphasized. Goncharuk's government planned to partially compensate small farmers for the interest rate on loans so that they could compete for the purchase of land.

The government assured that sales transactions would be transparent and protected from any fraud.

But when considering the amendments in the relevant committee of the Rada, one of the most reliable safeguards for farmers, which all presidents and governments promised, was rejected. We are talking about the norm, which was provided for by the amendment of the deputy from the Batkivshchyna party Oleg Meydich, according to it, citizens of Ukraine who permanently reside in the territory of Ukraine, respectively, the territorial community, the united territorial community where the sale is carried out, have the preemptive right to acquire ownership of an agricultural land plot. land plots, have agricultural education and experience in agriculture.

The law was eventually passed with a one-year delay in its entry into force. To avoid speculation and abuse, a complex purchase procedure was indeed provided. There is a restriction on the circle of persons, and a limitation on the area, and verification of the acquirer, and compliance with the pre-emptive right of tenants, and the like. All market participants, in particular notaries, carefully prepared for the launch of the market. They showed high professionalism and readiness for land turnover. And already in July 2021, the first sales contracts were certified.

But promises to support farms in the context of the turnover of agricultural land remained the promises of all governments and presidents.

Today, the legislation does not provide preferences for farms and their members who work and live in the village, have an agricultural education, experience in agriculture and a desire to engage in agricultural production, and not just receive passive income from renting land.

The promised priority right for the acquisition of adjacent land plots, for the formation of a land mass, which, by the way, would solve the problem of striping, has not been established.

There were and are no programs for preferential lending secured by land with the opportunity to purchase one’s own land bank.

The only positive thing is the rule on the repurchase of communal property lands that were provided for permanent use on preferential terms - according to the normative monetary value. And then, it depends on the will of the community, and there these issues are not always considered transparently. And this norm is belated, because from the analysis of judicial practice it follows that during the years of delaying the reform of the institution of permanent use, many farmers were deprived of their land through criminal means.

It is not clear why, before the adoption of land reform, the rule on the right to acquire ownership of agricultural land plots under a rent agreement was removed from Article 131 of the Land Code of Ukraine: when one party (the rent recipient) transfers property to the other party (the rent payer), and the payer In return, the annuity undertakes to periodically pay the recipient an annuity in the form of a specified sum of money or other form. What does this mean in practice? That the long-term reliable and trusting relationships that shareholders have developed with their farms could be continued after the alienation of the land plot under such an agreement. For example, a shareholder transfers ownership of a plot of land to a farm at a price determined by them, but the agreement also establishes for the recipient of the annuity a lifetime payment in the form of 200 kilograms of wheat and services for plowing the plot.

In addition to the sale of land to foreigners, one of the biggest “horror stories” that sounded before every announcement of land reform was the hypothesis that share owners would be deprived of land. Predictions that people would sell their land one day for next to nothing did not come true! People do not intend to sell on this too liberal market, but the basis of this phenomenon is economic. It proves that rental relations were well developed in Ukraine even before the adoption of the land market.

Competition in the market has set the rent for fertile land at $220 per hectare, which is not lower than the level in eastern Europe. This indicates that supporters of the free circulation of land, critics of the moratorium on the sale of land, also manipulated: they specifically used low rent rates in their articles: they gave examples of payments for shares with poor soil quality, or deliberately omitted information about the area of ​​the plot, compared rent in different communities.

“Free circulation of land will increase rent,” they promised, and did not say a word about the profitability of production, on which the cost of rent depends.

Along with these myths, there was one more. Agricultural holdings were portrayed as a threat: they were allegedly supposed to be the first to buy up all the land and dispossess the owners of agricultural land. And even governments that offered protection against abuses in the land market offered precisely protection against agricultural holdings, or at least pretended that it was. But even here the experiences were not justified.

Agricultural holdings, of course, are powerful producers with financial resources significantly greater than those of farms. They really occupy a monopoly position in some communities. But in the realities of the free land market, it turned out that they also calculate the cost of grown products, plan expenses for sowing and harvesting campaigns, develop a fleet of equipment, therefore they fully understand the realities of the market and the objective price of a hectare. And if all landlords offered to buy 100% of their own land bank, this is simply impossible to do even for large agricultural companies.

That is why, at the end of 2023, it was very strange to hear from colleagues and so-called farming pseudo-communities, associations and experts that the opening of the land market to legal entities is a threat to farms, precisely because of the proximity to agricultural holdings. This is nonsense! There is competition for rental rights even today, it’s true. Regarding land ownership rights, the agricultural holding is purchasing its own land bank.

And here small and medium-sized farms find themselves on almost equal terms with agricultural holdings. All producers, from small to large, have formed the same priorities: investment in production, and even in conditions of war and falling prices, finding ways to reduce the cost of agricultural products, buying out their own leased land bank. That is, why do we need a neighbor’s land bank if we cannot buy out our own.

Scheme “Fool both the farmer and the shareholder”

But where no one expected trouble, given the rather complex procedure for acquiring land, was its unfair acquisition by deceiving the subject of the preemptive right, which cannot always be verified and proven. Lawmakers have left a loophole through which slick businessmen and their agents crawl through, often acting dishonestly, in a well-established pattern of fraud that the government has promised to prevent. The essence of the scheme is a conspiracy between a potential buyer and a seller about an inflated contract amount. This figure is sent to the enterprise that leases the site in the form of an offer, with the expectation that they will waive the preemptive right. As a result, the land owner will not receive the full amount of funds stated in the offer: he will have to return the difference in cash after receiving the funds in his account in cash.

The shareholders, the owners of the land, ultimately feel used and deceived, but it is too late because they accept the offer of the schemers not to inform the tenant of the land about the intention to sell, even by telephone. They are convinced to immediately go to a notary and register their intention to sell at a pseudo price. Often peasants have to pay for these services in advance with their own funds. The so-called buyers do everything to avoid direct communication between the land owner and the tenant, who has a pre-emptive right determined by law or a use agreement, and can, during the conversation, find out the real price of the transaction.

We all know about customary law: to shake hands, to receive a deposit, to request a magarych. But in the scheme of the newest brokers, the seller does not take a deposit, but pays in advance, supposedly to the buyer, the funds that he loses. As we see, with the introduction of too free circulation of land, the business of land scams to deprive peasants of land, described more than one hundred and twenty years ago by Karpenko-Karim in the play “The Boss,” came to life, where, through the image of Bubble and the broker Mayufes, the Ukrainian classic depicts the moral degeneration of the grabber, for whose profit is above all, and who does not stop at any scams.

Land owners do not always realize that in case of unlawful actions, in order to protect their rights, a tenant or land user can go to court, which will seize the land plot.

Who are these new and mysterious latifundists, with whom even agricultural holdings do not compete? Basically, land owners deal with representatives of the so-called buyers, who not only do not live in the community, but are generally located abroad. And here it would be useful to edit the agrarian committee on the acquisition of ownership of agricultural land by citizens of Ukraine permanently residing on the territory of Ukraine. And she, as mentioned above, was rejected...

Since its adoption, the reform has been improved, the law has been edited, so today the legislator is faced with the task of developing and adopting appropriate changes taking into account the described abuses. After all, this is of no benefit to either the owner or the farmers who work on the land, invest, pay taxes, and have not received protection from fraudsters, financing and lending for the purchase of the main means of production - land, which instead becomes an asset for speculation.

It is worth noting that during the war, the regulation of land relations underwent changes. The privatization of land plots has been stopped, in particular those included in the land cadastre, submitted for consideration by local councils, but not transferred due to the introduction of the ban. The plots do not have owners, and therefore no land tax is collected from them, which entails losses for the budgets of communities.

Access to the public cadastral map is closed, which limits the rights of participants in the agricultural land market and complicates transactions.

So the question arises: why were these restrictions introduced, but there are no restrictions on the purchase and sale of agricultural land of private property, in particular due to the catastrophic fall in product prices and restrictions on exports due to Russian aggression, due to the lack of lending mechanisms for the purchase of land etc.?

The legislator limited the alienation of communal lands for the duration of martial law, and left agricultural producers alone with land swindlers? Agricultural enterprises, instead of focusing on the production of products that bring foreign exchange earnings to the country, spend time maintaining a land bank, fighting off unscrupulous buyers of agricultural land at notary offices.