The State Inspection of Architecture and Urban Planning has started operating in Ukraine. Risks for business

On September 15, 2021, the State Architectural and Construction Inspection (SACI) was officially liquidated. Instead, on September 16, 2021, the State Inspection of Architecture and Urban Planning of Ukraine (SIAUP) began operating.

From now on, the State Inspection of Architecture and Urban Planning of Ukraine (SIAUP):

• Will license construction activities for objects with consequence classes CC2 and CC3 (medium and significant consequences) and monitor compliance with these licensing conditions.
• Has the right to inspect the compliance of building materials and construction work with building regulations, standards, and rules.
• Will control architects, design engineers, and experts to ensure they comply with legislation in the field of urban planning.
• Will verify the legality of decisions in urban planning and state architectural and construction control, made by executive bodies of local councils (based on the regulation approved by the Cabinet of Ministers of Ukraine on December 23, 2020, No. 1340).
• Has the authority to issue orders to eliminate detected violations by developers, local government bodies, architects, project designers, contractors, experts, expert organizations, responsible work performers, consulting engineers, building owners, and construction customers.
• Can issue orders to suspend preparatory and construction work.

Thus, the state has granted the State Inspection of Architecture and Urban Planning of Ukraine (SIAUP) broad powers, creating certain risks for businesses in the construction sector.

However, it should be noted that the so-called construction reform is not yet complete. As of September 15, 2021, DIAM had hired just over 200 employees, which accounts for only 30% of the planned staff. Therefore, DIAM still lacks the full human resources needed to operate at full capacity.

Additionally, as of now, the Verkhovna Rada of Ukraine has only approved in the first reading the draft law “On Amendments to Certain Legislative Acts of Ukraine Regarding the Reform of Urban Planning” (No. 5655) and the draft law “On Amendments to the Code of Ukraine on Administrative Offenses and the Criminal Code of Ukraine to Strengthen Liability in the Field of Urban Planning” (No. 5877).

As an example of increased liability, carrying out construction work without obtaining the proper authorization under the law or in the event of the suspension of such authorization, if related to objects with SS1 consequences, will result in a fine of up to 51,000 UAH.

The fine for the same violation concerning an object with SS3 consequences will reach up to 85,000 UAH.

The operation of objects with SS1 consequences that have not been properly accepted into operation will result in a 51,000 UAH fine, while for objects with SS3 consequences, the fine will be up to 85,000 UAH.

The draft law also introduces fines for failing to ensure the implementation of architectural and technical supervision, which will be imposed on project owners, as well as fines for violating legal requirements during the supervision process, which will be imposed on those responsible for such oversight.

Furthermore, it is proposed to include a new Article 197-2 “Unauthorized Construction” in the Criminal Code of Ukraine, with the maximum penalty being imprisonment for a term of three to five years.

Thus, it is proposed to significantly strengthen liability for violations of legislation in the field of urban planning.

It is also proposed to make DIAM’s operations as digitized as possible. If the aforementioned laws are adopted, there will be no need to obtain permits for either the commencement of construction work or the commissioning of an object, regardless of its class of consequences.

The developer will independently register a construction start application and submit a declaration of readiness for operation via their electronic account in the Unified State Electronic System in the Field of Construction. The registration of these documents will be carried out automatically by the system after verifying the submitted data. For example, if a developer has the necessary land ownership documents and a construction project that complies with the law, their application will be automatically registered in the system, regardless of the class of consequences of the object.

The decision to conduct an inspection will also not be made by a DIAM official but rather by the electronic system based on the analyzed data and identified risks or violations of the law.

At the same time, it is proposed to remove the requirement that inspections must be conducted in the presence of the urban planning entity. This change aims to eliminate a loophole in the current legislation, which allowed developers to avoid inspections simply by not appearing on-site, enabling them to challenge the inspection results in court on formal grounds.

However, as previously mentioned, draft laws No. 5655 and No. 5877 have not yet been finally adopted, meaning that both DIAM and developers will continue to operate under the current legal framework. DIAM will still be responsible for issuing construction permits for objects with SS2 and SS3 consequences and for accepting these objects into operation.

It is worth noting that during a press conference on September 15, 2021, regarding the launch of the State Inspection of Architecture and Urban Planning of Ukraine (DIAM), Minister for Communities and Territories Development of Ukraine Oleksiy Chernyshov emphasized that DIAM must soon conduct a thorough review of the decisions previously made by DABI. In the last two weeks of its operation, DABI issued an unusually large number of permits for construction work and commissioning of objects, raising concerns about possible corruption risks in these decisions.

Therefore, developers who recently obtained construction permits or certificates of readiness for operation from DABI should expect DIAM inspections to verify their legality. This may result in the revocation of such decisions and the imposition of fines on urban planning entities. In such cases, affected entities will likely have to seek justice in court.

Thus, to assess the risks associated with the launch of DIAM, it is advisable to conduct a thorough legal analysis of the construction permit documentation and title documents for each construction project.

The lawyers at WinnerLex have many years of experience in providing comprehensive legal support to developers, including during architectural and construction control inspections. This allows us to objectively identify and assess risks for each construction project, based on its specific circumstances.