A New Form of Property Right Introduced in Ukraine for State and Municipal Sectors

Law No. 4196-IX “On the Specifics of Regulating the Activities of Legal Entities of Certain Legal Forms During the Transitional Period and Associations of Legal Entities” (hereinafter – Law No. 4196-IX), which came into force on February 28, 2025 and will become effective on August 28, 2025 (with the exception of certain provisions), introduces amendments to legislative acts. These changes align the rules for acquiring ownership of property transferred to legal entities under state control, and of property acquired by them on lawful grounds, with the Civil Code. The amendments also provide the ability to obtain property rights over assets owned by others (not prohibited by law), and to use or manage such property in accordance with concluded agreements.

This clarification was provided by experts from the Southern Interregional Department of the Ministry of Justice (Odesa).

Introduction of “Usufruct” as a New Real Right

Among the key innovations introduced by Law No. 4196-IX is a new type of real (property) right — "usufruct."

What is usufruct?

Usufruct of municipal property is the right of personal, free-of-charge possession and use of municipal assets. It constitutes a real right to municipal property.

Who is it for?

Usufruct is granted to usufructuaries, such as:

• local self-government bodies,
• municipal organizations (institutions, facilities),
• municipal non-profit companies,
• and other legal entities that are non-profit and fully owned (founded) by a territorial community.

Similarly, the right of personal, free-of-charge possession and use of state property (usufruct of state property) is established as a real right for state bodies, state institutions, state organizations, and state-owned non-profit companies and other legal entities that are non-profit and fully owned by the state.

Who establishes the usufruct?

• Usufruct of municipal property is established by the authorized local self-government body for any type of movable or immovable property (excluding land plots) owned by the territorial community.
• Usufruct of state property is established by a decision of the authorized state management body for any type of movable or immovable property (excluding land plots) owned by the state.

Term of usufruct

Usufruct may be granted for a fixed term of five years or on a perpetual basis.

In addition to the rights of possession and use, the usufructuary has the right to receive fruits, products, and income derived from the use of such property.

However, the usufructuary may not:

• alienate the property received under the right of usufruct,
• transfer it into trust ownership or management,
• contribute it to the charter capital of legal entities,
• assign it for joint activity,
• or carry out any other actions that may result in alienation or a change of designated use of such property, except for leasing the property under cases and procedures defined by law.

Transition from Traditional Property Rights

Thus, in the near future, traditional forms of real rights, such as economic management and operational management, will be gradually replaced by usufruct of state and municipal property.