Kyiv authorities want to force state institutions to sign lease agreements for communal spaces they've been using free of charge for years. These include 91 properties with a total area of approximately 135 square meters. According to Oleksandr Kharchenko (pictured), Deputy Head of the Kyiv City State Administration (KCSA), this reform will allow the city authorities to comply with rental legislation prohibiting "freeloading" and replenish the city budget by at least UAH 90 million annually. The government's reaction to this initiative is currently unknown. It is known that in 2019, they categorically opposed lease agreements, in part due to a lack of funds for such an expense item.
As KV has learned, on April 13, 2021, the Kyiv City Council's Property Committee supported the draft resolution "On organizational and legal measures to regulate the use of property of the Kyiv city territorial community" (No. 08/231-1208/PR dated April 6, 2021).
The parties to submit this document were the Deputy Head of the Kyiv City State Administration for the Exercise of Self-Government Powers, Oleksandr Kharchenko, and the Department of Municipal Property of the Kyiv City State Administration.
According to the draft resolution, city authorities want to strip several government agencies of the right to free use of the capital's municipal property. These include 91 properties, totaling approximately 135 square meters, which the Kyiv City Council has transferred to state agencies for management or loans over the past two decades. These include, for example, the building at 27/2 Lesi Ukrainky Boulevard (used by the Kyiv Regional Prosecutor's Office), the building at 10 Marshal Malinovsky Street (used by the Kyiv Prosecutor's Office), property of the Teteriv sanatorium and preventorium in the urban-type settlement of Peskivka in the Buchansky (formerly Borodyansky) district (used by the Security Service of Ukraine), and a group of buildings of the Chaika sanatorium and preventorium in the city of Irpin in the same district (used by the Ministry of Internal Affairs), among others. To implement their idea, city authorities plan to repeal 37 Kyiv City Council decisions on the transfer of said property to state bodies, which deputies adopted between 2002 and 2015.
The document stipulates that all users of municipal property will be offered lease agreements with the Kyiv City State Administration's Department of Municipal Property, bypassing the competitive bidding process. City authorities want these government agencies to pay only 1 hryvnia in rent by the end of 2021 (since their budgets do not allocate funds for rent – KV), 1,5% of the market value of the relevant property per month in 2022, and subsequently 3% of the market value of these properties. If government agencies refuse to lease, they will be asked to vacate the buildings and premises they use. In the future, officials plan to lease the vacated properties "on the open market" (to other potential tenants, including private ones – KV).
As stated in the draft resolution, its goal is to increase revenues for the Kyiv city budget. As an example, the document's developers cite the amounts paid to the city budget by other government agencies for the rent of municipal property. For example, the National Children's Hospital "Okhmatdet" pays 35 hryvnias per month for the rent of its premises at 28/1 Vyacheslav Chornovola Street, and the National Technical University of Ukraine "Igor Sikorsky Kyiv Polytechnic Institute" pays 15,9 hryvnias per month to the city treasury in rent for its premises at 19 Panasa Myrnoho Street.
It should be noted that this Kyiv City Council decision will take effect on the day of its official publication. However, officials have not specified a timeframe for implementing this initiative—the deadline within which government agencies will be required to either sign lease agreements or vacate the premises.
During a meeting of the Property Committee, Deputy Head of the Kyiv City State Administration Oleksandr Kharchenko announced that the draft resolution was developed in compliance with the new Law of Ukraine "On the Lease of State and Municipal Property" (which entered into force on February 1, 2020). According to the official, under this law, the transfer of municipal property for free use (economic management, operational management, or loans) is no longer permitted in Ukraine; only leasing is permitted.
Kharchenko clarified that over the past 14 years, the capital has transferred approximately 700 square meters of municipal buildings and premises to the state. This includes both the transfer of such facilities for free use and their permanent transfer to state ownership. Among the properties that city authorities can no longer return, Kharchenko named the buildings of the Ivan Franko National Theater, the Ministry of Foreign Affairs, the National Philharmonic, the Heart Institute, and others. In turn, leasing property that is still municipally owned and currently used by state institutions will help replenish the capital's budget, regardless of whether these entities agree to enter into lease agreements.
"We're essentially subsidizing the state today by providing free use of our property in central locations. According to a minimum estimate, Kyiv will receive approximately 90 million hryvnias per year if all entities currently located there decide to switch to lease agreements. If anyone refuses, the buildings will be put up for auction. I'm confident that in that case, the rental rate will be over 3%," stated Oleksandr Kharchenko.
It's worth noting that the city authorities have previously attempted to reclaim a number of buildings and premises from state institutions. For example, on February 23, 2017, Kyiv City Council, by its Resolution No. 946/1950, obligated approximately three dozen state entities to enter into lease agreements for municipal property. Oleksandr Kharchenko did not specify the extent to which this decision had been implemented. It can be assumed that there were issues with its implementation, as a number of the facilities specified in the resolution are now "present" in the draft resolution submitted to Kyiv City Council. This was likely due to the fact that previously, legislation did not obligate property users to enter into lease agreements. Oleksandr Kharchenko partially confirmed this theory, hinting that after the adoption of this decision, new lease rules came into effect based on the new law, which necessitated a new City Council resolution.
As KV reported, in 2019, the Kyiv City Council also raised the issue of forcing state institutions to pay rent for municipal property they use free of charge. Public sector employees resisted this. They pointed to the illegality of the aforementioned Kyiv City Council Decision No. 946/1950, which "forced" them to enter into lease agreements, and complained about a lack of funds to pay rent. Meanwhile, the then head of the Property Committee, now First Deputy Head of the State Property Fund, Leonid Antonenko, estimated that the lack of lease agreements with such entities was causing the city budget to lose approximately 50-100 million hryvnias annually. In May 2019, the Property Committee created a working group to study this issue.
It seems that the outcome of this group's work was familiar and predictable – deputies and officials simply "talked" about the issue.
As previously reported by KV, in 2020, Kyiv's city budget received only UAH 88,6 million from municipal property rentals (against a target of UAH 89,9 million). This is one of the worst figures in the past six years. This low revenue is partly due to the fact that, at the beginning of the quarantine, in March 2020, the Kyiv City Council granted several rent benefits to entrepreneurial tenants.
Andriy Gudz has headed the Kyiv City State Administration's Department of Municipal Property since November 5, 2014. Since April 2, 2021, the aforementioned Deputy Head of the Kyiv City State Administration, Oleksandr Kharchenko, has overseen the department's operations. He also oversaw the department's operations from September 3, 2020, to December 31, 2020.
Photo: collage by KV
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