The lease of municipal property will continue to be carried out bypassing public tenders

On Thursday, July 2, a meeting of the Kyiv City Council`s Standing Committee on Property was held. The subject of discussion among the city councillors was the new Law of Ukraine «On Lease of State and Communal Property» and the Resolution of the Cabinet of Ministers of Ukraine No. 483 «Some Issues of Lease of State and Communal Property» dated June 3, 2020, which interprets some of its provisions. The key issue was how to lease municipal property in the capital.

The Law of Ukraine «On Lease of State and Communal Property» (the «Law»), adopted by the Verkhovna Rada of Ukraine in early October last year, sparked lively discussions among the Kyiv authorities only in early February. The reason for this was to bring the Regulations «On the Lease of Municipal Property in Kyiv» (hereinafter – the Regulations) into compliance, which were approved on the basis of and pursuant to the previous version of the law, which had already expired as of February 1.

At the meeting of the specialized commission, a group of deputies tried to «sneak through» a series of agreements favorable to third parties, in fact, renegotiating them under the old procedure, but no real action was taken to harmonize the Regulation with the Law. As a reminder, on February 4, 2020, a meeting of the Kyiv City Council’s Property Commission (the «Commission») was disrupted. It is believed that this could have been due to the desire of some deputies to renegotiate lease agreements for municipal property favorable to a number of third parties, bypassing the newly adopted law «On Lease of State and Municipal Property». This law was voted by the
Verkhovna Rada on October 3, 2019. As stated in the transitional provisions of the document, the law comes into force on February 1, 2020. In other words, the deadline given to city, village and town councils to bring the «local». Regulations on the lease of municipal property, which were approved on the basis of and pursuant to the previous version of the law, which has now expired, into compliance has expired. However, the local government body has the right to use the time allotted to it at its own discretion. Thus, as of February 4, 2020, the capital of Ukraine still did not have a Regulation on the lease of municipal property that would meet the requirements of the new law.

The Kyiv cinema was also leased at an auction, but it «managed» to bypass the electronic bidding procedure

And now, almost six months after the Law came into force, members of the Kyiv City Council again gathered at
the Kyiv City Council’s Standing Committee on Property (hereinafter – the Committee) to finally agree on a common position on its practical application and, as the new Chairman of the Committee, Maksym Konobas (Solidarnist faction), noted «to find out for themselves what the deputies of the Kyiv City Council have not yet adopted for themselves so that the Law can start working».

Why did it take so long?

«The Department understands it (the Law – author’s note) the way it understands it…» Andriy Gudz, Director of the Kyiv City Department of Communal Property (hereinafter – the Department), emotionally commented on the deputies’ reproaches for inaction.

In his opinion, the law does exist in a new version today. «However, unlike the previous version, it does not contain a designated «methodologist» – a body that can issue official explanations on the application of certain provisions of the law (previously, the State Property Fund of Ukraine was designated as such a body). Thus, according to the Director of the Department, the delays in adopting the new regulation are due to the fact that today… there is no need to adopt any additional provisions on the lease of municipal property at all, and the procedure for its transfer can be carried out under the old Regulation, taking into account the amendments and additions specified in the Law.

Leonid Antonenko, a deputy of the Kyiv City Council and former chairman of the Commission, had a different opinion on this issue. He emphasized certain discrepancies and innovations in the law that would be impossible to implement under the «old» Regulations. In particular, Mr.Antoenko noted the direct requirement of the Law for local governments to compile a separate list of objects subject to lease and vacant at the time of the Law’s entry into force.

In the future, the list of such objects should be transferred to the Prozorro electronic procurement system, and the property itself should be leased on the basis of the priority of the best price offered.

What is the problem?

The devil, as you know, is in the details, so the beloved «betrayal»must be found somewhere there. The fact is that the municipal property objects identified in the above list, although they should actually be leased under the new law, are quite successfully avoiding its main innovation – the introduction of an electronic bidding
system.

Thus, despite the fact that the Law has been in force for almost six months, Ukraine still does not have a fully functioning electronic bidding platform, particularly in terms of leasing state and municipal property. Therefore, there is a requirement for publicity and openness of bidding by potential tenants, but for some reason there is no actual opportunity to implement it.

There is another, no lesser problem here: tenants who have been paying their rent in good faith over the past years, but whose lease expires, may be left on the street tomorrow. The reason for this is the issue of extending and renegotiating old lease agreements, which, along with the issue of launching the electronic bidding system, is now virtually up in the air.

Under the same conditions

«I’m preparing a rental Maidan, please join the organizing committee» Yaroslav Didenko (Solidarnist parliamentary faction), Deputy Chairman of the Commission, briefly commented on the long and emotional discussion of the problem. In his opinion, the lease issue needs to be resolved here and now, rather than waiting for some additional conclusions and clarifications from government agencies on the procedure and the start of the full-fledged operation of the electronic bidding system.

Попри тривале обговорення, знайти конструктивних пропозицій щодо розв’язання проблеми депутатам так і не вдалося

Despite a lengthy discussion, the deputies failed to find constructive proposals to solve the problem. However, for some reason, the city councillor did not specify how exactly this would avoid manipulations to promote the «right» contracts bypassing open bidding.

In the end, the members of the Commission agreed on the need to continue discussing the key issues at the next plenary session to be held on July 14. When asked what to do with the tenants whose lease expires earlier and who have applied for its extension, the Chairman of the Commission replied as follows: «Write them a letter that we have received your application. The decision to extend your lease agreement will be made. In the meantime, they will pay the same rent on the same terms and conditions».

Dmytro Perov