І. FORMALIZATION OF PROPERTY
1. Essence of the problem
Ukraine has an immensely low level of property formalization (5-8%, depending on the calculation technique), thus only a very insignificant percentage of material objects has the corresponding titles. The rest of the property is “underproperty”, as its disposal or other usage in civil circulation (as investment or a way to guarantee liabilities etc.) — is possible only in the “extralegal” (shadow) sector of economy, which leaves Ukrainian owners weak competitors, practically not integrated into the world economical system.
At the same time, huge amount of non-formalized property being available means inability, on the one hand, to establish the legality of one’s current ownership of such property, and on the other — the defenselessness of bona fide holders from “the right of the strongest", which leads to corporate raids and corrupt acquisitions.
It’s the availability of a huge quantity of non-formalized property and comparative easiness of its misappropriation using authority abuse urges criminals to get elective offices or high civil service positions. Because the criminals — corrupt officials, fraudsters and raiders — practically always win the competition from effective managers, who are ready to work for the benefit of the state and local communities, provided some stated reward is paid. This is an objective reality, which we can change only by increasing the percentage of the formalized property.
The pattern of direct dependency of the formalized property percentage in the state from the size of its GDP and corruption level was researched by a world famous Peruan economist Hernando De Soto in his “Mystery of Capital”. But although formalization is indispensible, it’s insufficient for cardinal changes in Ukraine.
2. Registration mechanism
Unlike civilized countries, where estate constitutes a parcel of land with inseparable elements on it (houses, plants etc), in Ukraine the words “immovable property” (or estate) is used only in the meaning “a house”, “a building”, while “land” exists separately. This absurd situation practically means that land and buildings are registered by different institutions — land is registered by the land resource administration offices, and buildings are registered by the technical inventory bureau. Integral property complexes - either an enterprise or a condominium - are not registered as integral objects at all.
Also the legal mechanisms for solving disputes, when land and buildings on it have different owners, are absent. This leads to law enforcement bodies and courts being overload with civil cases, which are impossible to solve by law (so they are solved by “who motivated the judge more substantially” or “who has more influence”), and criminal cases, as parties unable to solve the disputes legally often commit criminal offences.
Surely, the interested parties of the economical activity must have the reliable information on registered property titles.
For this we need to implement a unified automated system for state registration of titles and to develop electronic exchange of information between registration, inventory and taxation bodies. Such a complex information system should cover the whole Ukraine territory.
А. Inventory of land
The main purpose of land inventory is getting or updating information on land status:
- its actual location, area, borders;
- shares of parcels, including those upon which some natural objects are located, and those which have limitations in usage;
- quality of land: ground and geobotanic characteristics;
- usage of land: unauthorized acquisitions, condition of land, stages of soil degradation, shrub invasion, erosion etc;
- legal regime: purpose, allowed kinds of land tenure, volume of property rights of the owners, holders, third parties and all the subjects of land relationship.
Information on legal status of territories is surveyed during inventorying previously accounted data from land committee archives, municipal committees on land resource management and state data funds.
Inventory results are used not only as a source of outgoing information for the local land survey, but also for: - cadastral valuation of land as the data source about land quality change;
- land monitoring on base level;
- developing documents on local planning for the base planning.
В. Inventory of permanent structures includes:
- discovering availability and location on a certain parcel;
- basic description;
- establishing inner and outer borders of area and volume;
- establishing economical characteristics, including inventory and market price;
- discovering possible contradictions between the technical documents and the actual condition of the objects.
To solve this task a powerful infoanalytical system is required, which would have certain features:
- Industrial data capacity;
- Realtime networking features with unlimited number of simultaneously working users;
- Geoinformational system (GIS), which lets inventorying required objects, searching objects on the detailed map of Ukraine, conduct a dimensional data analysis, model situations, display query results on the map in a user-friendly way, which helps explanation and understanding the results of the analysis;
- Usage of complex math analysis methods.
The choice of geoinformational system tie, meaning all-Ukraine geodetic coordinate connection system, is also highly important. The thing is that lack of such system creates a huge amount of “hidden” lands, as there is inconsistence of local cadastres and actual lands, which become misappropriated by corrupted politicians and officials, while specific delimitation depends on land surveyor involvement.
3. Choice of property owner's rights fixation.
There are two different alternative ways: registration of titles (property rights) and registration of deeds with estate. The difference lies in the subject of registration. There are title systems of registration (e.g. systems of rights registration), and deed systems of registration. Ukraine has an old and ineffective deed system, meaning the state merely keeps the books on deeds, applied for registration. During the registration the official body does not take decision on if the deed is legal or not.
Thus the state bears no obligation, except keeping a copy of a registered deed, and surely cannot guarantee that the rights, derived from it are valid and legitimate. In Ukraine from 1/5 to 1/3 of court and law enforcement cases are connected with disputes about legitimacy or validity of deeds. Thus a third part of the country’s resources is wasted on settling disputes which should not arise at all. Proceedings on such cases last for years, benefit only fraudsters, while honest people suffer. Bona fide buyers finally lose the disputed object, but there’s no one to claim restitution from; fraud victims, who could not use the stolen property for many years also don’t have anyone to claim compensation from.
The feature of the title system is that the right itself is registered, or to be more precise all the rights, burdens and limitations regarding certain object. An entry about all possible rights and obligations regarding the object in the public register gives evidence and guarantees them, and the sequence of burdens sets their priority.
In this case the State guarantees that the rights and burdens are registered lawfully, and in case of damage caused by the errors in the title entries, compensates it from a special fund. This fund is created by amounts, coming from dues and fees for title registration and for providing information about equity in the form of official extracts from public registers and cadastres. Trust to the system is created by a strict regulation of the registrars work, and their high status, which is equal to the court status in most of the countries which follow such systems, or in general the function of registrar is put upon courts. In the countries where the title system works, bona fide purchaser have the full guarantee from the state that no third party can have a claim.
This means that even one reveals, that the property rights were alienated because of the criminal actions, the injured party gets compensation of damage from the state, while the specific object remains in the property of the bona fide purchaser. This is even more logical, taking into consideration that a new owner usually does substantial reconstruction of the object, so the return of the specific object in the previous state becomes impossible.
It is clear, that the states where the title system works apply maximum efforts to register only absolutely “clean” titles, and take all possible measures to collect from the guilty parties their expenses on compensation to the injured parties as a regressive claim.
Title registration system (Torrens system, or “Central European” system) - works in most of the civilized countries and justifies all the trust, while the deed registration system used in most Ex-USSR countries — and in the USA, where a powerful legal and insurance corrupted lobby ensures its preservation. That’s why in the USA the parties of the deed must spend 8-10% of the equity cost on transactional expenses, where 4-6% is insurance, and the rest is expenses on lawyers and "detectives". Meanwhile in the countries where the title registration system works, general expenses on equity transactions rarely exceed 1-2% of equity cost. Comparing the practice of the most countries in the world we can prove that deed registration system is much more expensive and ineffective comparing with the title registration system. The countries which introduced electronic processing of titles data now completely cover all costs on registration and surveying.
So, Ukraine’s choice of the title registration system for equity would free a substantial part of the society’s resource (work resource of law enforcement bodies, courts and the owners) lowering the crime and corruption and increasing external and internal investments. Unfortunately, draft laws, applied to the Parliament, propose an absurd system of a “closed semi Torrens”, meaning registration of both rights and deeds with a special body in the Ministry of Justice, a limited access to information on objects and their owners, no guaranty of ownership for bona fide purchasers, etc. and all that — for the money of owners, which surely would sabotage the registration on such conditions, so the reform would not bring benefits, but simply waste budget money. Nevertheless, the problem can be solved technically and legally quite easily, if there is political will.
Estonia is a good example, as it had similar starting conditions to Ukrainian, but managed to create from scratch a highly effective legislation for property rights registration. Estonian laws “on real rights”, “on tenure book” and “on cadastre" are renowned by world comparativists as one of the most effective on such subject in the world. As a result Estonia now has formalized (e.g. entered into open registers and cadastres) 97-98% of available land and equity (the rest is still under court disputes).These results Estonia (sparsely populated and having a small area) reached in 17 years. Considering that, it’s not hard to evaluate Ukrainian perspective, but there is no other path to development. Adaptation of the Estonian law to Ukrainian realities is not complicated and can be done by a small group of lawyers in short terms.
Ignoring this problem already has leaded to the fact, that land surveying officials, law enforcement servicemen, judges, notaries, social and municipal workers all over the country created numerous criminal groups for alienation of land, houses, and apartments by fraud — usually from defenseless citizens (alcoholics, drug addicts, underage, disabled, old, sick etc.) for resale to bona fide or pseudo bona fide purchasers. These criminals have a simple idea — document forgery is much faster and easier, than claiming them forged, and also many of the defenseless victims aren’t even able to institute a criminal case or a civil action, considering that their statements to law enforcement bodies and courts are reviewed by members of these criminal groups.We can’t overcome the problem by fighting concrete corrupted officials and judges, as the profite from this activity is so strong, that it clouds the judgment of most of them, as it exceeds all possible risks, even connected with criminal responsibility or jail. This problem can be solved only globally — by eliminating the feeding environment for corruption, using the title system and open registers and cadastres.
4. Open registers and cadastres
The tendency to register equity is stimulated by two reasons. Firstly it is owner’s interest to protect his property rights, which is a limited and sensitive resource. Secondly — it’s the wish of any government to tax objects, which are impossible to hide. Second reason is quite clear for the Ukrainian government, as we can see from numerous draft laws on property tax, lodged by different political parties, who don’t understand that without open registers and cadastres, which should have about 100% of the formalized property, taxation system simply won’t work. Unfortunately, far not all members of our society understand the first reason. Maybe the understanding of the problem requires at least a basic legal education, which a priori an average person here lacks. In Ukraine, despite common sense and international experience, masses still don’t recognize the principal idea that owning equity cannot be secret (as equity cannot be hidden) and thus information about equity owners should be in easy and open access for anyone. Equity registration can be only open, as firstly it can’t be hidden, and secondly — if two people (the owner and the registrar) know something, this means anyway “everybody knows”. So it is merely a question of access rights. The more open the information is, the less possibilities for corruption upon its disclosure exist, and so if it’s completely open, the corruption in this sphere is eliminated. Ukraine has numerous separate secret private registers and cadastres with data being stolen or otherwise extracted from land resources administrations whose owners have business on selling such info. Also it is not a problem to get the necessary information about anyone’s property with a small bribe to a corrupted land resource administration official.Registers and cadastres (as any other database) get more valuable if the data in them gets more complete and reliable (like a “completed puzzle"). So if we have a complete and reliable registers and cadastres, we basically make corruption and unlawful acquisitions impossible.
It is clear that people who purchased equity (land etc.) in doubtfully legal ways are stubborn opponents of the idea that equity owning cannot be secret in general. But at the same time, these people who use either governmental authority, or corrupted connections, or generally criminal actions, run the same risks to lose this property when they lose power or connections, and also their heirs will doubtfully be able to protect such property, as it is generally not formalized, or the documents can be easily and legally claimed invalid. For all the years of Ukraine's independence practically nothing was done to increase the level of equity formalization in Ukraine. Moreover, we are under impression that the changes to the current legislation (which is already far from ideal) — are deliberately aimed at making formalization more complicated. As for new draft laws on integrated register of equity and state cadastre (even with restricted access), we have grounds to think that they are deliberately sabotaged and hampered.
All the national politicians do merely verbiage on “struggle with corruption”, diligently avoiding the obvious fact that the initial reason for corruption is an extremely low percentage of formalized property and total absence of the open laws and cadastres, without which (at least “semi-closed") one cannot get rid of corruption, as the effect would knowingly be around zero. For the beginning they have to do inventory of at least state owned lands and create an open state register and cadastre at least in a paper format, and as a separate layer of an electronic cadastre map, with nature conservation zones defined.
5. Finalizing housing privatization
Current statistics shows, that 87% of housing in Ukraine is privatized. Having 13% of non-privatized housing is an essential obstacle to the massive creation of condominiums (association of co-owners of an apartment building). These 13% of still non-privatized housing include all the mistakes of the post-Soviet Ukraine concept of private property and prevent moving towards a civilized property concept.
The problem is that privatization is possible only upon consent of all the people, registered on this lodging. And in 13% of cases this like-mindfulness is absent on understandable reasons: some (young) wait until the elders die, somebody drove out neighbors to rented lodgings and wants to continue like that as long as possible, somebody just doesn’t give consent to privatization because of cruel intentions or senile dementia.
If an apartment doesn't have a room with the size as equal as possible to the hypothetical ideal share of a person willing to privatize it, then it is impossible to make a separate renting agreement, and the situation is a dead end. Legislator, which set the obligatory consent of all the renters, had the intention to avoid communal flats. But finally this wasn’t achieved, as 13% of the people still couldn’t get into an agreement with neighbors.
So for the fastest completion of housing privatization, individual privatization of ideal shares should immediately be allowed, regardless of other renters consent.
The society should be informed about the coming “Day X", until which everybody has the possibility to finish privatization, even without potential co-owners consent. All those who will reject this right on some reason will remain simple renters of flats or its parts, owned by local communities, which would then act on their own will, e.g. put the market level renting prices or evict non-payers.
6. Apartment buildings as integral property complexes. Condominiums.
Miserable condition of apartment building management and a poor percentage of the condominiums created is a logical result of the situation, when co-owners lack rights-setting documents even for their shares, and moreover lack of documents for the whole property.
As a result of an openly populist 1992 law “on privatization of the state housing fund” , apartment buildings were legally transformed into a collection of separate apartments, cut off from the building as a whole, and from land parcels, upon which they stand.
This happened on the background of 1989 - 1992 period when a resolution of Ukrainian Soviet Republic government “on regulations for selling flats from state and public housing fund, their maintenance and repair" of 19.05.1989 №142 (it was quite good, even though it didn't resolve the land issue as in 1989 there was no private property rights for land), which introduced:
• buyout (not a free giveaway) of flats by residual value;
• issuing the rights-setting documents, where an apartment was defined as an ideal share of the whole housing estate;
• ordering the plan of the whole building in the technical inventory offices;
• creating associations of individual owners of apartments for effective maintenance of buildings using collective management;
• all owners bear obligations on maintenance, repairs and overhaul of the house and grounds in proportion to the living area of their apartments.
And only by decision of the Constitutional Court of 02.03.2004 all the apartment buildings were recognized as integral property complexes, and the owners of all the premises recognized as co-owners of the estate in general, and the law of Ukraine “on OSBB” (condominiums) recognized the right of the condominium as a legal entity to get the land, upon which the building is located, and the adjacent grounds into permanent use or property. But this right for land is practically a fiction, as it is the discretionary power of the local authorities to give this land, and they are not interested in a free giveaway of the land, especially in the centers of big cities.
But it was too late. A great quantity of attics and cellars, which should have belonged to the co-owners as common indivisible property were unlawfully proclaimed local communal property and alienated. At the moment each court has hundreds of cases where tenants demand returning these premises, and proceedings will last forever, as by p.4 art. 268 Civil Code of Ukraine, the limitation of action does not cover demands to recognize a governmental unlawful act, which damages one’s property right. Also the adjacent grounds, which are inseparable parts of many apartment buildings as integral property complexes but not allocated specifically, in recent 15+ years were developed a lot, and this “legal bomb” would explode during defining specific borders of lands, which will sooner or later start.
Since 2004 nothing was done to implement the decision of the Constitutional Court — no changes to the Civil Code or to the Law of Ukraine “On condominiums” so that at least the legal condition which existed in в 1989-1992 could be reinstated. Apartment buildings, despite common sense, are not registered in technical inventory bureaus as integral property complex, and its lands and adjacent grounds are registered by other bodies (land resources administration). So it’s no surprise that a lot of apartment buildings are not registered anywhere at all. Thus the level of formalization in this segment of equity (most part of equity in Ukraine!) reaches around zero.
This problem should be also solved on the legislation level — with a simple implementation of the world experience, adapting to Ukrainian reality. In legal sense, joint owning of an apartment building is not different from joint owning of a car or an apartment, because a number of co-owners is not important really. Meanwhile, as any management theory states, the more the number of joint owners is, the more complicated taking decision on control and usage of the object would be. But current legislation suggests only inapplicable algorithm for making decisions by co-owners of apartment buildings regarding usage and maintenance issues.
7. Solving disputes between the co-owners of common indivisible property.
Absence of co-owners dispute solving algorithms in Ukraine is much more global, than it seems at first glance. This is so, because all the property in the world is joint ownership of a certain level. It’s a “Russian matryoshka doll” principle — the Earth is in a joint ownership of the human kind, Ukraine belongs to all Ukrainians, cities and villages belong to the corresponding local communities, apartment buildings or enterprises belong to its co-owners/shareholders, separate apartments, cars etc belong to their individual or collective owners.
So, all the so-called “politics” is simply debating on setting these algorithms. The Civil Code of Ukraine lacks the algorithm for solving disputes even between ex-husband and wife, co-owning an inseparable one-room flat or a car. This leads to a complete mess regarding joint managing, command and solving disputes regarding joint owning of higher level — apartment buildings, enterprises, municipal or state property.
Citizens, who can’t even on household level make a quick, reasonable and just decision on a car or a flat surely can’t effectively solve apartment houses issue with dozens or hundreds of co-owners, or take decisions on the level of local communities of some thousands, or the national level of some dozens of millions.
The main and generally the only algorithm on solving disputes between Ukrainian co-owners of indivisible property when the rules are not set, is the right of the strongest in all its manifestations: from bribing of judges to buying members of parliament. All the attempts to set out the algorithms for high level joint owning (regulations of parliament, law “on local governments, “on condominiums”, "on joint stock companies" etc) before these algorithms would be installed for solving primitive disputes with the lowest level of joint owning are highly ineffective.
But amending several articles of the Civil Code of Ukraine is technically not complicated, as the appropriate algorithms have been developed by the international civil jurisprudence, and confirmed its effectiveness in all the civilized countries. This issue can easily be solved by amending the Civil Code in this way:
Introducing the concepts of ideal share and real share Joint property share can be ideal or real. Ideal is an abstract share in joint property, which is defined as a fraction. Real share can be separated specifically and may correspond or not correspond to the ideal share.
Guaranteed issuing a right-setting document for a share Each co-owner has the right to get from the corresponding state body, which registers equity rights, a formal title, e.g. e separate right-setting document on equity, that belongs personally to him, which indicates his ideal and/or real share in joint property.
Introducing algorithm for solving disputes on owning and usage of shared property - Co-owners own and use a common object by agreement and by decision of the majority of co-owners, if this majority has the bigger part in a shared object; - The size of the profit, corresponding to the owners’ share, which he is entitled to obtain, cannot be reduced by the majority without the agreement of the minority of co-owners.
Introducing algorithm for solving disputes when splitting the object If the co-owners can't agree on the way to split a shared object, the court decides depending on the circumstances: • to split an object between co-owners in real shares, and if the cost of real shares does not correspond to the cost of ideal shares, which belong to co-owners, the court can also rule the financial compensation in order to make the shares even, or burden a party with servitude (easement) for benefit of other shares, if necessary the decision of the real shares, defined by court, can be done with drawing of lots; • to pass an object to one or several co-owners, burdening them with obligation to pay the cost of their shares in money; • to sell and object from public auction or by bids between co-owners, dividing the money according to sizes of their shares.
But the current Ukrainian legislation and court practice actually force citizens to violate co-owners’ rights and not to return debts in time, as this unlawful behavior is financially beneficial. According to p.2 art. 364 of the Civil Code of Ukraine, the compensation to co-owner for his part in joint indivisible property can be given only by his consent. This rule leads to the situation when co-owners with equal status and power can’t divide property for years, which gets “necrotized” and excluded from civil circulation, and if one of the co-owners is more influential — they use all the property independently, thus unlawfully violating rights of less influential co-owners, who don’t get any compensation for the usage of their shares.Ukrainian civil legislation on co-ownership is so primitive and poor that even the concept of ideal and real shares is absent, though court practice tries to compensate this defect. Also the owners of ideal shares who want to alienate their property experience many artificial obstacles in getting separate titles on their shares.
For example privatization offices refuse to give copies of privatization certificates without IDs and personal presence of all the co-owners (while usually part of co-owners is not interested in getting the titles by others, then the only way to get a title is going to court); if a spouse is not listed in the title for the property, purchased while in marriage, he/she can confirm his ownership and get a separate title only in court; notaries refuse to give heritage titles to heirs, if other heirs obtained the titles of the testator and refuse to come for the reissue, and this problem can be also solved only in court.
All these issues could be considered petit, except that the absolute majority of Ukrainians' property is in ideal or real co-ownership, and, as it was said, about one third of appeals to the law enforcement and court are about conflicts between co-owners, that can’t be solved in general because of the gaps in current legislature. So in case of even a slight mismatch of ideal and real shares the problem becomes unsolvable at all, so people, driven to despair, commit criminal offences, even up to murders. The paradox is that co-owners with rights impaired perceive these obstacles to exercise their rights as robbery (which it actually is, as the owner cannot get the profit in any form, for which he has full rights), while the co-owners that infringe the rights of the others perceive their behavior as a procedural trick which is in full accordance with the law.
All these factors transform joint property to “underproperty”, which exists in theory, but the possibility to be a full-fledged owner of a share (i.e. have free ownership, usage and what’s most important disposal of the property) for Ukrainians is substantially limited.
8. Formalization of apartment buildings and the problem of house maintenance.
Condo creation in Ukraine is not obligatory, so apartment buildings are in fact uncontrolled. This is abused by local building-utilities administrator offices (known as ZhEK) which do not fulfill the adequate services, but receive payment according to calculations without proper economic substantiation, according to the principle «not too low, so that we would have profit, and not too high, so that people wouldn’t stop paying».
The margin between the amount spent on maintenance and amount, collected from tenants, is misappropriated either by the owners of private ZhEKs, or by actual owners of municipal enterprises which formally belong to local communities. In this way there is no practical possibility to charge payment from deliberate non-payers, who know that Ukrainian courts and bailiff service (which is practically inoperative) cannot provide effective charging of small maintenance debts, which provokes tension between neighbors - co-owners.
So, the co-owners of apartment houses should be legally obliged to create condominiums. But for this at least minimal amendments to the current law on condos should be adopted. The main rule which currently stops the condos creation is that “every owner on the assembly has one vote, regardless of the area and number of apartments or premises he owns». This rule means that even to find a quorum we need to know the exact number of co-owners for every apartment building. Practically every house has 13% of non-privatized flats (this problem is reviewed separately), owned by a local community represented by a local council, and also an essential number of co-owners who don’t have separate titles for their shares — like a spouse or heirs, who own a share after inheritance opens, but sometimes for decades cannot get the ownership certificate etc. Clearly it is practically impossible to calculate a general amount of co-owners in buildings of 50 apartments and more. The absurdity of this rule also lies in the fact that co-owners who have unequal shares in the integral housing estate cannot have equal rights. But if co-owners had their right according to their shares, then to calculate quorum it would be enough to know the general area of the housing estate. This is how it is solved by the Estonian Law “on housing associations”: «Housing association is a noncommercial association, created for joint maintenance of ideal shares. Housing association is created by the decision of the majority of apartment owners in equity object, divided into housing ownerships, if the majority through ideal shares in the housing ownership owns the bigger part of the building and grounds. »
If we could introduce such rules in the current law of Ukraine “on condominiums”, these co-owners assemblies would be unnecessary, as even now they are impossible to hold because of the complicated procedure multiplied by inability to create at least a general roster of voting co-owners of the building. Many condos in Ukraine were not created simply because for example the owner of a private ZhEK, interested in keeping the source of profits, urged a petit co-owner to appeal against the assembly procedure, for example upon the fact that he was not informed in time about the place and time of the assembly.Though it would be completely enough to get written applications from the owners of 50+% ideal shares to create an association and to conduct an assembly from only these people, adopting a typical for a non-commercial associations statute with some specific items on voting at the general assembly, procedures of payments for maintenance of the ideal parts etc.
If a condo is created by the decision of the majority of ideal shares, then participation in it should be unconditionally obligatory for the owners of the rest of ideal shares. Same goes for the decisions of the ruling office of the condo, if they are adopted according to the set procedure. Debates that this is a violation of the “freedom of contractual relationship" principle are absurd, as none of the co-owners can separate his premises from the building as integral property complex. Therefore, a co-owner should have the right to appeal against the decision of the condo governing body only regarding procedural violations, but not regarding its contents.
A huge problem for existing Ukrainian condos is nonpayment of separate tenants, as there are no effective tools to collect debts, even if a court lawyer is hired (same for houses without condos). But this problem can be solved only together with total reform of the whole Ukrainian court and bailiff system. The zero level of formalization of apartment houses as integral property complexes leads to inability of solving the global issue with housing and communal services. It’s basically impossible to get quality maintenants of apartment houses, where tenants are practically deficient in the possibility to control quality and quantity of services provided. But the unconditional connection between formalization of apartment houses as integral property complexes and success in housing reform is unfortunately not obvious for the majority of the population, and even for the specialists, because the chain of arguments is too long. The result is wasting societal resource and budget money on housing pseudo reform.
So without condo creation, the co-owners of apartment houses (i.e. the absolute majority of Ukrainian urban population) are unable to control pricing in housing sphere, even at the level of maintenance cost for specific buildings, not even mentioning pricing of gas, heat and electricity providers etc. The reasons were analyzed above — the citizens are not aware of themselves as co-owners of communal enterprises, and perceive prices, centrally adopted by the local government, as something that cannot be avoided. The size of prices and rates are talked over by politicos on a typical script: the majority in the local governments support raise in rates, while the opposition demands lowering. But at the same time the pricing mechanism is not explained as such, as it would require revealing the structure of ownership, governing and the accountancy of these enterprises which is just fabulous, as it would raise questions “how come thate enterprises are under control of these people and why does this money laundering take place”.Complete non-transparency of housing services pricing leads to the fact, that the only aim of the owners of enterprises providing communal services is getting maximum profit “here and now”. They don’t have any motive to invest and they can’t have it, as at least they don't know who owns the service lines and who should take care of it. Energy-saving technologies cannot be installed until everyone would be forced to pay for all kinds of energy from his own pocket by prime cost plus the benefit of energy provider. It is impossible to force water or heat provider to eliminate leaks or improve insulation, until unproductive expenses can be easily covered by issuing increased bills to the consumers.
Only after total formalization of apartment houses as integral property complexes their joint owners will start raising questions: what does the gas, water, plumbing, heat price consist of and aren’t the losses caused by unrepaired lines too high? Then even private owners of energy companies will have to invest in repairing lines, open bookkeeping to the public and have limited for monopolists profit rates.
Defining the owners of the service lines and dividing responsibility between them is a separate issue of the problems concerning both formalization and dividing. Formalization of apartment buildings requires defining borders not only for adjacent grounds (which often overlay or have useless gaps — caused by chaotic allotments), but also the «crossing points» of service lines — i.e. which length of piping or line is the part of housing estate (while the maps or plans are often lost!), and which is the property of municipal enterprise or local community.
Defining the owner of the service line is crucial for finding out, who is responsible for their condition and who eliminates emergencies and leaks. Usually urban areas have systems of service lines that include many different objects. Like in a typical for Ukraine residential districts it was common to build a single service object for a bunch of houses or even for the whole block. The adjacent grounds sometimes can be common for several buildings as it’s impossible by the building regulations to distinguish separate allotments. In this case there is no other choice but to formalize the adjacent grounds of several houses as joint property, though current legislation doesn't contain algorithms of ownership of this authority at all.
A city in general consists of equities which form a strict cellular structure where each cell is a separated property: a parcel of land with all the structures on it. But each cell is connected to the common system of life support. These service lines and networks, roads and streets etc, are the objects of common use and are in communal property. Each object of common use is a line in the city budget and maintenance money, which should be appropriated.
Obviously, it’s impossible to control the budget on the level of the city without formalizing the communal equity. Reality shows that UNTIL reaching a substantial (25+%) level of formalization of 1st and 2nd level of property, i.e. individual apartments and parcels of land (1 level) and apartment buildings with adjacent grounds (2 level) — the citizens en masse will not even understand the essence of problems with property of 3rd and 4th level, i.e. communal and state property, will not associate this property with themselves, and will not consider themselves co-owners of communal and state assets, meaning they would let misappropriators of these assets use the profits from this asset with impunity. This means, citizens will not be able to form a corresponding social request for politicians.
It may happen that formalization of communal property is unfavorable for the politicians and officials. But the problem is that unformalized and no man’s property, with maintenance funds being misappropriated with impunity, is finishing off its physical resource. Especially this concerns service lines in the cities, which are worn-out around 70-90% by specialists’ estimation. So the question is only what happens first — politicians’ insight about the overripe necessity to formalize property or the Ukraine-size catastrophe.