A NEW MORATORIUM ON FORECLOSURE UNDER CURRENCY LOANS

On October 08, 2020, the Law of Ukraine No. 895-IX “On Amendments to Certain Legislative Acts of Ukraine Concerning the Moratorium on Foreclosure of Ukrainian Citizens’ Property Provided as Collateral for Foreign Currency Loans” (hereinafter - the “Law No. 895-IX”) entered into force.

We remind that the moratorium on foreclosure of Ukrainian citizens’ property provided as collateral for foreign currency loans had to end on October 22, 2020. This norm was provided by the Final and Transitional Provisions of the Bankruptcy Code of Ukraine. However, the Law No. 895-IX extended the moratorium for another 6 (six) months.

The new Law prohibits foreclosure (i.e. alienation without the owner’s consent) not only on property classified as housing facilities, but also on unfinished housing objects and property rights to them. The moratorium is applied if such property / unfinished housing object /property rights act as security for fulfillment of obligations of an individual (borrower or property guarantor) under loans granted to him/her by credit institutions - residents of Ukraine in foreign currency and such collateral is registered in accordance with the Law of Ukraine “On Mortgage”.

The conditions for applying the moratorium have also changed somewhat:

1.As before, the total area of such real estate or unfinished housing object shall not exceed 140 square meters for an apartment and 250 square meters for a residential building.

2.The borrower or guarantor does not own any other real estate.

3.Such real estate is used as a place of permanent residence of the borrower/guarantor or is an unfinished housing object, or such real estate was purchased with credit funds and the terms of the loan agreement prohibit registration of place of residence of the borrower or guarantor at the address of real estate.

In addition, the credit institution is still unable to assign its right of claim to borrowers under loans secured by property/property rights that is subject to moratorium. Exceptions are still banks, which are subject to procedure of withdrawing from the market in accordance with the Law of Ukraine “On Deposit Guarantee System for Individuals”. However, the Law No. 895-IX provides that all restrictions related to the moratorium will be maintained for new owners who will acquire such rights of claim in insolvent banks.

Igor Kalitventsev

Managing Partner

KPD Consulting

Should you have any questions with respect to above or require any additional information, please do not hesitate to contact Mr. Igor Kalitventsev (i.kalitventsev@kpdconsulting.com.ua). We will be pleased to assist You. The information contained in this overview is not intended to provide legal advice and should not be relied on or treated as a substitute for specific advice concerning individual situations.