The Commercial Cassation Court of the Supreme Court clarified the conditions for renewing a land lease agreement with a water body

The renewal of a land lease agreement in conjunction with the water body located on it cannot be carried out exclusively according to the rules of Article 33 of the Law of Ukraine "On Land Lease." The new agreement must comply with the requirements of land, water, and special legislation, contain all essential conditions provided for the lease of a water body, and be accompanied by the necessary documents. The decision of the local self-government body on the renewal of the agreement, without following the established procedure, does not create a legitimate expectation for the lessee to conclude the agreement.

This conclusion was reached by the Commercial Cassation Court of the Supreme Court in case No. 911/786/25.

Case essence

An individual entrepreneur filed a lawsuit against the village council to recognize an additional agreement on the renewal of the lease agreement for a land plot of the water fund as concluded. The plaintiff stated that the council made a decision to renew the agreement but unjustifiably avoided signing the additional agreement.

The Commercial Court denied the claim. The Appellate Commercial Court overturned this decision and satisfied the claim.

Position of the Supreme Court

Reviewing the case, the Supreme Court indicated that although according to paragraph 2 of Section II "Final and Transitional Provisions" of the Law of Ukraine dated November 4, 2020, No. 963-IX "On Amendments to Certain Legislative Acts of Ukraine Regarding Clarification of the Procedure for Leasing Water Bodies in Conjunction with Land Plots," the renewal of water body lease agreements is carried out without land auctions, this cannot be interpreted as an unconditional basis for automatic renewal of such agreements on previous terms solely based on the provisions of Article 33 of the Law of Ukraine "On Land Lease."

The Commercial Cassation Court of the Supreme Court emphasized that the Law of Ukraine "On Land Lease" defines the general essential conditions of a land lease agreement, and for lease agreements of land plots in conjunction with the water body located on them, the law establishes additional mandatory conditions. In particular, the agreement must contain information about the amount of rent for the water body determined according to the Methodology for determining the rent for leased water bodies, the volume and area of the water body, the list and characteristics of hydraulic structures, the lessee's obligations regarding the protection and operation of the water body, and its integral part is the water body passport.

However, the parties did not agree on essential terms of the agreement, in particular regarding the amount of rent for the water body and the procedure for its calculation according to the specified Methodology. In addition, the water body passport and approval of the agreement by the central executive authority in the field of water management were absent.

The Commercial Cassation Court of the Supreme Court also stressed that the legislative provisions at the time of the start of the renewal procedure were clear, explicit, and understandable and had to be complied with by the parties. The mere appeal of the lessee (business entity) to the village council and its decision to renew the lease agreement without complying with legal requirements does not create a legitimate expectation and does not exempt the parties from the obligation to comply with the imperative provisions of land, water, and special legislation, does not eliminate the need to agree on all essential terms of the agreement, and does not replace the presence of documents necessary for concluding a lease agreement for a water body in conjunction with the land plot beneath it.

The Commercial Cassation Court of the Supreme Court satisfied the cassation appeal of the village council, canceled the appellate court's ruling, and left the decision of the court of first instance unchanged.

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