Legal freebies: who will get state property for free and without competition
8 October 11:58
On August 28, 2025, the “usufruct” of municipal or state property comes into force. This is a new real right that allows you to own and use municipal or state property free of charge for five years or indefinitely, or, more precisely, to make a profit from this property and dispose of it at your own discretion. What is usufruct, what are its advantages and risks – analyzed
On August 28, 2025, Law No. 4196-IX comes into force, introducing a new type of real right – usufruct. This is the right to use someone else’s property free of charge and receive benefits or income from it without changing the property itself.
Usufruct can be established on municipal or state property (except for land plots), both movable and immovable.
Who can get an usufruct?
– Local government authorities
– Municipal and state institutions
– Non-profit organizations established by the territorial community or the state
Important: these organizations do not have a profit motive.
Validity period
– For 5 years or indefinitely
The usufructuary (the one who uses the property) has the right to
– own and use the property
– receive income, products or other benefits from it
But along with the right to use, there are restrictions. The usufructuary has no right to
- alienate the property transferred to him/her in usufruct,
- transfer it to trust or management,
- contribute it to the authorized capital of legal entities,
- use it for joint activities,
- as well as perform other actions that may lead to its alienation or change of purpose.
An exception is the transfer of property for lease in cases and in accordance with the procedure established by law.
“Thus, in the near future, traditional forms of property rights, such as the right of economic management and the right of operational management, will be gradually replaced by the usufruct of state and municipal property,” the Ministry of Justice emphasizes.
Usufruct without clear rules
According to lawyers, it can be said that the law was largely created with the introduction of usufruct as an alternative legal form of property management in mind. This legal instrument is widely used in the continental legal system (for example, in France, Germany, Poland), as well as in Roman law, where it originated.
“Here is an example of how usufruct should work. The owner (state or community) owns the building. But it grants a university, municipal institution or non-profit organization the right of usufruct for 25 years. The university can: use the building, lease part of the premises, make a profit, but cannot sell it, mortgage it, demolish it or privatize it,” said
lawyer Sergey Viktyuk. [Kommersant]
The purpose of introducing usufruct is to clearly distinguish between ownership and management rights, increase the responsibility of property users, flexibility and protection of public property, and unify it with European law, a factor important for European integration.
“But it is also important to realize that this is a legalization of existing schemes – many municipal institutions already manage property “as if by usufruct” but without a legal basis. There are other disadvantages. There is currently no clear mechanism for introducing usufruct into Ukrainian civil law. A lot of bylaws are needed. Judges and lawyers may not have experience in applying usufruct, which will cause legal confusion. There is a risk of creating a “semi-private” scheme of control over property without its formal alienation. Who will restore the property if it is destroyed – the owner or the usufructuary? The law should clearly define this. And what about a conflict of interest – let’s say the community provided a building to a school and then decided to transfer it to an investor – how to stop the usufruct?” notes Serhiy Viktyuk.
Corruption and usufruct
In general, usufruct in Ukrainian can be seen as a replacement for the outdated right of economic management and the right of operational management, in order to regulate the management of state and municipal property.
However, in the Ukrainian reality, where corruption continues to reign supreme, any instrument related to the disposal of state property is a cause for concern, economic experts say.
The country’s economy continues to suffer from war and corruption schemes. And in such an environment, usufruct is being introduced, which may not bring anything good, because the law has a number of blind spots that can become loopholes for corruption schemes.
“Imagine that a sanatorium that used to belong to the state is transferred to a new non-profit organization. Formally, everything is legal. But this organization is headed by a relative of the official who used to own the sanatorium. In other words, in fact, state property ends up under the control of a private person. Or another example: a building transferred into usufruct can be subleased and then rented out again. In the end, the shopping center operates, and all the income ends up in the pockets of “their” people. There is another scheme: the company transferred to the usufruct is deliberately driven to bankruptcy – not to invest, to take out equipment, to accumulate debts. Then the debts are simply written off, and the property is sold for nothing, like scrap metal,” describes a series of frauds for
investment specialist Valeria Cherkas. [Kommersant]
Manipulations with the intended purpose are also possible. For example, there used to be a children’s recreation camp, but then the purpose was changed and private houses were built in its place. In other words, under the guise of the law, it is possible to redistribute state property in favor of “your” people, even though formally everything will look legal.
No control means abuse
The problem is that the rules of control are not clearly spelled out now, how exactly to check whether the property is being used for its intended purpose.
If this is not corrected, usufruct can become a tool for stealing state property, experts say.
What needs to be done to prevent this from happening:
- Transparency: everything should be clear – what is being transferred, to whom and why.
- Control: there should be an independent body with real powers to check the use of property.
- Responsibility: If the property is damaged, misused, or driven to bankruptcy, there should be strict liability, including criminal liability.
Restrictions are also needed:
- no transfer of usufruct to newly created organizations;
- not to transfer to organizations with non-transparent ownership.
Because experience shows that even if the state owns 50% of such a company, this is not a guarantee of protection against corruption if control exists only on paper.
In countries with low levels of corruption, usufruct is a modern and effective tool for managing state property. But in our country, without reliable safeguards, it risks becoming a tool for new schemes and abuses.
Author: Alla Dunina
