Experts name competition and business involvement critical for successful property rights registration reform


Kyiv, May 21, 2015. The property rights registration system proposed by the Ministry of Justice of Ukraine is unlikely to bring about a more efficient system, but rather presents new risks for the development of local corruption, said experts who took part in the round table discussion on the registration of the real estate in Ukraine at Ukraine Crisis Media Center.

Representatives of the business community suggested the Ukrainian authorities to divide the procedure of registering property rights in two parts. The so-called front offices would accept and process documents, while the back offices would be responsible for the property registration. Today these functions are united in one body. Experts argued that front office functions should be delegated to the private sector – solicitors and banking institutions – while the state would register property through state registrars (back office). Such a model proved its effectiveness in many countries around the world.

“Efficiency of registration systems in the developed countries is assessed on the extent of the business involvement,” said Dzhaba Ebanoidze, leading expert at the Ukrainian NGO International Reforms Center.

Inna Bohatykh, coordinator of National Banks Association Committee for the creditors’ rights protection said that delegating front office functions would not cost anything to the state. It may sooth social tensions and save budget expenses.

“There are about 17,000 bank offices and around 7,000 solicitors in Ukraine. All of them could be transformed into centers that would accept documents from ordinary citizens, adhering to procedures defined by the state, and forwarding them to state registrars (back offices) to register the right of property,” Ms. Bohatykh said.

Curling the pilot project has been launched in one of the branches of the state-owned Oshchadbank in Kyiv. Andriy Stetsevych, Deputy Chairman of Oshchadbank, said the project was successful and should be implemented on a wider scale. “750 customers came to the office in the last 1.5 months; 70% of them were legal entities. It significantly simplified the whole procedure,” he said.

Vitaliy Boychuk, head of the land law and real estate practice at Constructive Lawyers law firm stated that the participation of private solicitors is going to create alternatives for customers and enhance competition. “Reputation is an invaluable asset for the private solicitors, while the state registrars are not motivated to provide high quality service, which results in low level of competence and numerous facts of corruption,” Mr. Boychuk said.

Experts also told about the “roulette principle” that may reduce the levels of corruption: front office that accepts the document would not be aware of what state register is going to process the documents.

Ministry of Justice chose to unite front office and back offices functions and pass them to the local authorities, arguing it is unable to fight corruption on its own. Experts are convinced the move will cause opposite results. “There has already been the experience when the authority of property registration were shifted to the local authorities – it achieved nothing. If we do it again, we have no guarantees that these functions will be performed efficiently and similarly all over the country. In fact, the proposal is to concentrate registration in a single pair hands and fight corruption at the same time. It is impossible. Corruption can be fought only by allowing competition,” Oleksandr Didyk emphasized.

Dzhaba Ebanoidze said that there is a common practice of only those functions are transferred to the local authorities that relate solely to a certain area, which local authorities can handle more efficiently.  Nevertheless, real estate registration rights should be conducted according to the same procedures across the whole country. Local authorities are unable to guarantee it due to the conflict of interests, whereby they would seek to impose owners of the real estate with additional liabilities while conducting constitutive procedures.

Other participants of the round table included:

Vitaliy Hrusevych: member of the board of the Confederation of Constructors of Ukraine

Dzhaba Enoidze: author of the Concept of registration system of Ukraine reform, former deputy Minister of Justice of Georgia

Dmytro Zhuravlyov: Director of Institute of theoretical legal studies in the sphere of justice and innovative projects

Vitaliy Boychuk: Head of the land law and real estate practice at Constructive Lawyers law firm

Oleksandr Didyk: Head of UDP approval department

Olena Korobkova: Executive Director of the Independent association of the banks of Ukraine (NABU)

Inna Bohatykh: Doordinator of NABU committee for creditor’s rights protection

Andriy Stetsevych: Deputy Chairman of Oshchadbank