How Defence City residents can find the property they need, where to apply, what information to include in the application, and what happens after it is submitted — in an explainer by the Ministry of Defence of Ukraine.
The Government has expanded the scope of the special lease mechanism, which was previously available to a narrower range of enterprises.
From now on, the simplified procedure without an auction, established by Resolution No. 634 of the Cabinet of Ministers of Ukraine dated May 27, 2022, covers additional categories of defence industry manufacturers, including residents of the special legal regime Defence City. For the first time, it also applies not only to state-owned but to municipal real estate.
This can significantly reduce bureaucratic delays, enable companies to deploy or scale up production capacity more quickly to meet the needs of the front, and secure favourable financial terms for leases.
In addition to simplified access to property, the procedure takes into account the heightened security risks during martial law. Information about leased properties, the terms of lease agreements and the parties to those agreements is not made publicly available in the electronic trading system, helping protect sensitive information about the location of defence production facilities.
Step 1. Check whether your company is eligible for a lease without an auction
A company can use this mechanism if it meets at least one of the following four criteria:
- has been designated by the Ministry of Defence of Ukraine as a critically important enterprise in the defence industry or as critical to meeting the needs of the Armed Forces of Ukraine and other military formations during a special period;
- is included in the electronic register of participants in the selection process and contractors of state contracts;
- is a manufacturer of unmanned systems, electronic warfare systems, or passive countermeasures against technical reconnaissance; a serial producer of missile systems; a developer of new or upgraded missile weapon systems; or a manufacturer of military explosives;
- has the status of a Defence City resident.
In other words, there is no need to obtain all four statuses separately — meeting just one of these requirements is sufficient.
Step 2. Identify the property you want to lease and its landlord
First, the company needs to identify a specific property: a building, premises, part of a premises, or other state or municipal property.
To ensure that the property can be clearly identified, it is advisable to determine in advance:
- the property's address and location;
- its balance holder, if known;
- the property's area or the required area if only part of it is needed;
- the intended use of the property;
- the desired lease term.
These are the types of information concerning the property, its intended use and the lease term required under the general Procedure for Leasing State and Municipal Property.
The next step is to identify the landlord, as the application must be submitted to the landlord, not directly to the Ministry of Defence.
For state-owned real estate, the landlord is, in most cases, the State Property Fund of Ukraine. For municipal property, it is the body authorised by the relevant local council. In some cases, the balance holder may perform the functions of the landlord.
If a company has found the state-owned premises it needs but does not know who the landlord is, it can clarify this with the balance holder or the State Property Fund of Ukraine.
Step 3. Prepare a written application to the landlord
The company submits a written application to the landlord requesting that the selected property be included in the Type 2 List — the list of property that may be leased without an auction.
The application should include:
- The company's full legal name, EDRPOU code and contact details.
- Information that allows the property to be clearly identified: its address, balance holder, area, and location within the building if only part of the premises is concerned.
- The intended use of the property.
- The desired lease term.
- A request to include the property specifically in the Type 2 List.
- A justification explaining why the company needs the property.
- Information confirming the company's eligibility to obtain the property without an auction.
The State Property Fund of Ukraine also requires applications for inclusion of property in the relevant list to specify the legal entity's contact details, EDRPOU code, desired area, lease term, intended use and justification for including the property in the Type 2 List.
Step 4. State the grounds on which the company is eligible for a lease without an auction
The application must include information confirming that the company meets at least one of the specified criteria.
Depending on the grounds for eligibility, this may include:
- for a critically important enterprise — the reference details of, or a link to, the Ministry of Defence decision designating the company as critically important;
- for an enterprise included in the electronic register of participants in the selection process and contractors of state contracts — information about the relevant decision confirming its inclusion in the register;
- for an enterprise eligible under the production criterion — information about the Ministry of Defence letter confirming that the company meets this criterion;
- for a Defence City resident — information confirming its resident status.
These are the methods of confirming eligibility provided for in the materials on the updated procedure.
Important: the main application for leasing the property is submitted to the landlord. The landlord then coordinates the interaction with the Ministry of Defence as part of the procedure.
Step 5. Wait for confirmation from the Ministry of Defence of Ukraine
After receiving the application, the landlord forwards it to the balance holder and the Ministry of Defence of Ukraine within three business days.
The Ministry of Defence of Ukraine, in turn, sends the landlord, within five business days of receiving the application:
- confirmation that the company meets at least one of the established criteria; or
- a notification that the company does not meet any of them.
In other words, the company does not need to obtain a separate confirmation from the Ministry of Defence of Ukraine after submitting the application to the landlord — the verification is part of the procedure itself.
In parallel, the balance holder considers whether the specific property can be leased. Therefore, meeting the eligibility criteria gives the company the right to use the mechanism without an auction, but the actual lease of a specific property also depends on whether that property can be made available for lease.
Step 6. The property is valued and the rent is determined
For state-owned property, the monthly rent is determined based on an independent valuation. The formula is: 8% of the property's appraised value ÷ 12.
For municipal property, local self-government bodies are recommended to apply a similar approach — 8% of the property's appraised value per year, divided by 12. However, before arranging the lease, the company should check the decision of the relevant local authority, as the final terms for municipal property are determined at the local level.
After the property's value has been determined and the necessary approvals have been completed, the parties proceed to sign the lease agreement and execute the handover and acceptance certificate.
What happens to information about the property
Additional security requirements apply to this special mechanism.
Information about the property leased to a defence industry enterprise, as well as the lease agreement and handover and acceptance certificate, are not published in the electronic trading system. This helps prevent the disclosure of sensitive information about the location of defence production facilities.
After signing the agreement: eligibility for simplified leasing must be maintained
The company must meet at least one of the established criteria not only when it obtains the property.
Throughout the lease term, compliance with the relevant criterion must be confirmed annually. If the company ceases to meet all of the established criteria, the lease agreement may be terminated early.