The repeal of the Commercial Code by Law 4196 and the transition to new approaches to municipal property management have triggered a wave of changes in municipalities. The transfer of property under the right of operational or economic management is no longer envisaged by law — these mechanisms will be phased out after the transition period ends in 2028. They are being replaced by usufruct, i.e. the right to gratuitous possession and use of property without the option of alienating it.
Legal changes: what the law says
According to the Policy Brief, the Law No. 4196 established a transition period until 28 August 2028. During this period, existing rights of operational management and economic control remain in force, but new decisions can no longer be made on these grounds. Today, municipal property is already being transferred under the right of usufruct, subject to preservation, reporting and targeted use.
Usufruct can be fixed-term (five years) or indefinite, and applies to both movable property and real estate (except land plots). The Resolution of the Cabinet of Ministers of Ukraine dated 8 September 2025 sets out a detailed procedure for transferring property under the right of usufruct: submission of a proposal, preparation of justification, council decision, acceptance certificate, registration of the property right.
U-LEAD helps municipalities navigate the new property management mechanism, gives advice on the use of usufruct and supports teams during the transition period.
How municipalities work: case studies
Liubar municipality: from “mystery usufruct” to a clear procedure
Svitlana Rymarchuk, a Chief Specialist of Economic Development and Investment Department of Liubar Village Council (Zhytomyr Oblast), wryly admits that the word “usufruct” scared everyone at first. Then they figured it out and got to work.
The municipality has already drafted a local procedure for transferring property under usufruct, which outlines the obligations of the parties in detail, from insuring the site to the steps for submitting annual reports on the technical condition and use of the property. The adoption of this procedure by the settlement council session streamlines the procedures and makes the process of transferring property under the right of usufruct clear and transparent.
"Before, municipal enterprises would simply write, “Please transfer the property.” Now they must explain why and provide a feasibility study. This is good, as there will be more control,” adds Ms Rymarchuk.
She notes another important change: annual reports from usufructuary owners. This will ensure that the municipality can monitor the condition of the property and whether it is being used for its intended purpose.
Trostianets municipality: developing its own, detailed procedure
Nataliia Maliarenko, a Leading Expert on Municipal Property at Trostianets City Council (Sumy Oblast), says that they initially planned to use the state procedure for transferring property, but later decided to draft their own regulation.
“We assessed our documents and realised that there are things that need to be detailed specifically for our municipality. We plan to delegate certain issues, such as the analysis of usufructuaries’ reports, to the executive body,” she explains.
The municipality is also conducting an inventory of property that is under the right of operational or economic management.
“There is a lot of property. We need to analyse the effectiveness of its use and, if necessary, make appropriate decisions. Fortunately, there is a three-year transition period, so we have time to figure things out,” says Ms Maliarenko.
U-LEAD firmly believes that usufruct makes property management more transparent
Viktoriia Kopchak, a Policy Advisor on Decentralisation and Local Self-Government of U-LEAD with Europe, notes:
“The legal regime of usufruct is much more clearly regulated by law. There is a resolution outlining the procedure, and municipalities can adopt their own, even more detailed and comprehensible procedures for transferring municipal property under the right of usufruct. This makes municipal property management more transparent and efficient.”
The expert also emphasises that local regulations need to be updated and staff trained, as the new rules require a different approach to implementation and monitoring.
U-LEAD advisers provide local self-government officials with direct explanations of the requirements of the new procedure and help them prepare clear and practical procedures for the transfer of property.
Usufruct is slowly becoming one of the primary mechanisms for managing municipal property. It establishes clear rules, strengthens oversight and ensures transparency in relations between the municipality and the usufructuary. The experience of Liubar and Trostianets municipalities indicates that an effective transition depends primarily on high-quality training of the staff, an updated local regulatory framework and consistent monitoring.
