In Ukraine, may prohibit the hostels and offices in residential buildings: what will change (infographic)

The Verkhovna Rada of Ukraine on Thursday, January 19, is preparing to re-consider the bill No. 5473, which prohibits the placement of business offices and hostels in residential buildings. To accept the document, the parliamentarians have been trying since December, but then on the background of the budget process didn’t accumulated the required number of votes.

According to the explanatory Memorandum, the bill aims to protect the rights of inhabitants of apartment houses. “Segodnya” and the project experts PolitEyes found out what needs to change the law.

Key innovations:

A ban on the construction of offices, hostels and other commercial spaces in the apartments of residential houses.

The establishment of a fine for the violation in the amount of from 34 to 80 thousand UAH.

Positive features of the bill:

  • the imposition of restrictions that are used in world practice;
  • will not prevent free competition;
  • will increase the demand for commercial property will have a positive influence on the owners of office centers;
  • reduce the workload in the homes, will have a positive impact on residents of apartment buildings (for example, reduce the use of elevators, internal communications, Parking lots, etc.);
  • the owners of the apartment are permitted to pursue commercial activities without employees.

Andrew Erashov
partner organizations EasyBusiness

Bill No. 5473 proposes to prohibit the use of premises for offices and hostels. This will solve the immediate problem for the Ukrainian real estate market without negative consequences for the free and transparent competition. Potentially, the bill could change the demand for construction of non-residential premises. In addition, the bill will have a positive impact on the residents of apartment buildings, because the lack of offices will reduce the load on internal communications and external infrastructure (for example, free up space for Parking, will reduce the cost of Elevator maintenance, etc.). However, entrepreneurs will be forced to rent non-residential premises, which can increase the price of their goods/services to users. I believe that the bill proposes changes that are worth supporting and promoting. However, I consider it necessary to provide in the bill a clear explanation of the phrase “activities that violate the rights and interests of the owners” and “misuse of flats”. Detailing avoids manipulation of the regulatory authorities authorities. Therefore, I recommend to take # 5473 in the first reading.

Negative features of the bill:

  • the increase in the cost of doing business due to the need of renting expensive commercial real estate;
  • the threat of closure of part of the micro, small and medium business;
  • potential problems with registration of natural persons-entrepreneurs in residential areas;
  • additional opportunities for corruption from law enforcement, registration and regulatory bodies;
  • the risk is the reluctance of developers to provide the homes the residential status;
  • increased pressure on apartment owners who rent their homes in the lease;
  • the emergence and practice of making entrepreneurs fictitious lease contracts of uninhabited premises;
  • the high cost of fines, which increases the risk of corruption;
  • does not take into account the local context (at the level of region, municipality, etc.) establishes common rules for the whole country;
  • does not provide a mechanism to coordinate business in a residential house with the consent of the neighbors and / or permission from local authorities;
  • does not regulate the procedure of transfer of residential premises in the residential and Vice versa;
  • provides only administrative responsibility for violations is not in the interests of neighbouring residents.

Dmitry Romanovich
project Manager reform, deregulation of the National Council reform

Bill No. 5437 clearly establishes the prohibition of the use of premises as offices and facilities and significantly increases the penalties for failure to comply with the law. The bill will have negative consequences for small and medium businesses. The use of premises as offices is a necessary step for entrepreneurs associated with the shortage of office space and very high cost of their rent. In fact, the bill makes a small business or moving offices, or to pay bribes, because it will be cheaper than to pay the fine. The bill operates only in the interests of the owners of offices and controlling authorities. I recommend to reject the bill No. 5437. Declared to solve the bill problem by simplifying the coordination of the activities of office/hostel residents. For example, after obtaining the consent of the inhabitants.

Thus, 7 of 9 experts (77.8 per cent) which take part in the project PolitEyes recommended to reject the bill. 4 out of 7 experts (57,1%) believe that advocacy is not the time. 2 out of 7 experts (28.6 per cent) believes that the bill has lost relevance.