Auction on extension of the lease agreement of the property that is on the balance of the state enterprise “Kyiv Central Design Bureau of Valves” was canceled due to the need to disclose information on leased objects in accordance with the law
The State Property Fund of Ukraine instructed to cancel the online auction on extension of the lease agreement of the state separate individually defined property which is on the balance of the state enterprise “Kyiv Central Design Bureau of Valves”, that was to take place on April 8, 2021. The Fund’s Regional Branch in Kyiv city canceled the auction on April 6, 2021.
The canceled lot included the lease right of the property complex of the former state enterprise “Kyiv Central Design Bureau of Valves”, which consisted of the following property:
· Laboratory and Production building No. 1 with the total area of 6953 sq. m., located at: 9, Polkovnyka Shutova, St., Kyiv city;
· Fixed assets – 1410 units;
· Intangible assets – 47 units;
· Recreation Center on the land plot of 0.7817 ha, located at: 54, Rudiakivska St., village of Kyiliv, Boryspil district, Kyiv region.
The lease agreement that was to be extended at this auction, was concluded between the Regional Branch of the State Property Fund of Ukraine and PJSC “Kyiv Central Design Bureau of Valves” on December 29. At that time, the subject of the agreement was the property complex of state enterprise. Subsequently, the court on the tenant’s claim changedthe subject of the agreement. The court determined that instead of the “property complex”, the subject of the agreement should be “individually defined property”. It seems that the purpose of this court decision was to withdraw the property complex from the banning on privatization, which was established by the Law “On the List of State Property Objects that are not Subject to Privatization” of July 7, 1999 No. 847-XIV.
However, as of the date of the auction announcement, the legal field has changed. The Law No. 847-XIV was canceled in October 2019 along with a ban on the privatization of this state enterprise. In addition, the new Law “On Lease”, which came into force on February 2020, provides for peculiarities of the individually defined property lease. In particular, the State Property Fund, its regional branches can act as landlords only of property complexes and real property (buildings, constructions, its separate parts). The landlords of another separate individually defined property are the balance holders of this property, not the Fund or its branches.
Thus, when deciding on the announcement of the auction, the provisions of Article 4 of the Law “On Lease” have been violated in terms of the inclusion of another separate individually defined property into the object of lease, namely fixed assets of 1410 units and intangible assets of 47 units, since, under the law, the Fund’s Regional Branch cannot act as the landlord of this property.
The Fund also notes that according to clause145 of the Procedure “On Lease of the State and Communal Property”, approved by the Resolution of the Cabinet of Ministers of Ukraine of June 3, 2020, the announcement of an auction for the lease agreement extension should contain full information on the leased object.
Important information on real estate should be disclosed to potential tenants: technical condition, capacity of power network and availability of communications at the object; superficial plan of the object or floor plan; information on the availability of individual personal accounts for the leased object opened by utility providers, etc. We emphasize that the information should be disclosed for each property separately.
Thus, in the published announcement, the information is partially disclosed only about one object, which is real property – "Laboratory and Production Building No. 1". Instead, there is no information, to the extent specified in clause 26 of the Procedure, regarding another leased object, “Recreation Center”, which is real property. There is no information on other lease objects.
In addition, if the lease object is a separate individually defined property (except vehicles), then the amount of starting rent payment is determined on the basis of the Methodology for calculating rent payment, and not on the basis of the Procedure for property lease, which is used to determine the starting rent payment for real property, vehicles and property complexes.
"So, before announcing a new auction, the landlord should bring the formal status of the property in line with the essence of property relations, that is, apply to the lease subject the requirements for the lease of a property complex, disclose information on this complex, including its market value as a unified production mechanism, disclose the tenant's financial statements, information on the main obligations, etc.", - Leonid Antonenko, First Deputy Chairman of the State Property Fund of Ukraine noted.