Repair as a Tool for Privatization: Cabinet Closes Scheme That Cost State Budget 45% of Market Price
State property tenants for years have been "improving" premises in order to buy them without competitors — at reduced prices. The government has adopted a resolution that transfers such sales to open Prozorro auctions.
By Tetiana Suchkova-Ladik
May 25, 2026 · 2 min read
The scheme was simple and effective. A tenant would rent a state or municipal property, officially invest funds in repairs or modernization—these expenses were legally called "inseparable improvements"—and gain the right to purchase the property without any auction, at a price below market value. No competitors. No transparency. But legally impeccable documentation.
The Cabinet of Ministers, by decree, changed the rules of small-scale privatization: from now on, rented state property that underwent repairs or modernization will be sold exclusively through open online auctions on the Prozorro.Sales platform.
The cost of this "impeccability"
According to estimates by Transparency International Ukraine, the state and communities on average lost 45% of the market value of properties compared to what open bidding would have brought. The scale: in 2021–2024, online auctions generated over 3 billion hryvnia—more than twice as much as non-competitive purchases over the same period, according to Prime Minister Yulia Svyrydenko.
"Property was rented, funds were invested in repairs or modernization, and then the right to purchase the property without an auction and at a significantly lower price was obtained. Because of this, communities and the state lost funds."
Yulia Svyrydenko, Prime Minister
The Verkhovna Rada laid the legal foundation earlier—bill No. 12230, passed with 243 votes, eliminated the right to non-competitive purchase. The Cabinet's decree is the executive mechanism for this law.
What changes in practice
- Rented property with confirmed repairs or modernization—now only through Prozorro.Sales auction.
- A tenant's good-faith investments don't "disappear": confirmed improvement expenses will be compensated or credited toward the final settlement when purchasing.
- A 12-month transition period for those who have already begun the purchase procedure under the old rules.
In other words, the state recognizes: a tenant who genuinely invested funds in a neglected property doesn't lose those investments. But the preferential right to purchase without competitors is gone.
What's missing from the decision
The decree does not create a mechanism to verify whether "inseparable improvements" were real or merely documented. The issue of cost verification—and that's where a potential new scheme could hide—remains at the level of subordinate regulations and the good faith of oversight bodies.
If the State Property Fund and local councils don't receive clear audit standards for claimed improvements, the new regulation will block the old scheme but won't prevent a new one from emerging—with the same documents, but this time aimed at compensation during the auction.
