How the Business Ombudsman Council helped real estate and construction companies?

How the Business Ombudsman Council helped real estate and construction companies?
The construction and real estate sector is consistently among the TOP-5 industries, which most often turn to the Business Ombudsman Council (BOC) for support. During five years of its operation, the BOC has received 654 complaints on malpractice of state bodies from real estate and construction companies and closed 426 cases. Of these, more than half (59%) were closed successfully in favor of business.
The BOC helped the industry to return and save almost UAH 475 million. In particular, this amount consists of cancelled unjustified tax charges, refunded VAT and registered tax invoices. At the same time, the institution did not receive a penny from the business – its services are free of charge for entrepreneurs.
Despite the fact that a lot has been done, we feel that we can help even more. Therefore, in this post we would like to focus on the most common subjects of complaints, give examples of resolved cases as well as encourage entrepreneurs to address the BOC in similar situations.

What issues were addressed to the BOC by real estate and construction companies? 
More than half (53%) of complaints were tax-related – companies disagreed with results of tax inspections, couldn’t receive the VAT refund or encountered suspension of tax invoices. Almost every fifth (19%) appeal concerned actions and/or inaction of law enforcement bodies (procedural abuses, inactivity and ungrounded criminal proceedings). Actions of local government authorities (allocation of land plots, issuance of permits and licenses) and actions of state regulators (in particular, the State architectural and construction Inspectorate (SACI), State Service for Geodesy, Cartography and Cadastre) created problems for business in 9% and 7% of cases, respectively. Complaints concerning actions of the Ministry of Justice, including cases of raidership, accounted for 5% of appeals.
Examples of solved cases 
BIIR Property finally becomes the legal owner of purchased real estate
A subsidiary of a Danish engineering company faced difficulties in becoming the legal owner of a recently acquired office with an area of almost 2,000 m2 and worth more than UAH 9 million due to an active criminal proceeding.
It appeared that soon after its acquisition through the Prozorro system, 1/10 part of the building was arrested by the court on the basis of an individual citizen’s appeal the respective criminal proceeding under the “fraud” article. In a month the arrest was lifted, but the criminal proceeding was not closed. The BOC requested in writing the Prosecutor’s Office of Odesa Oblast and the Main Directorate of the National Police in Odesa Oblast to verify the legal grounds of the pre-trial investigation. In particular, the investigator emphasized that it was important to meet time-limits for examining the lawyer’s request regarding the investigation. The Council introduced the company’s case to a meeting of an expert group formed on the basis of a Memorandum of Cooperation between the BOC and the Prosecutor General’s Office.
In February 2020, Odesa Oblast Prosecutor’s Office instructed the state law enforcement officer to intensify the pre-trial investigation. This secured the expected desired result – at the end of March 2020, the criminal proceeding was closed.
Unsuccessful raidership attempt by minority shareholders
The state registrar of the utility company, at the initiative of minority investors of the development company, changed the Head of the company and certified a new charter of the enterprise. The authorized capital of the company was increased in such a way that the share of minority shareholders increased from 8% to 84%. The fact that several criminal cases were at that time opened against new owners did not particularly bother the state registrar. Moreover, the Complainant stated that soon after respective changes were introduced to the Register about 100 people of athletic build surrounded the perimeter of the residential complex where the developer’s office was located. They took control of the checkpoints of the complex, as well as blocked entrances to construction sites.
The next day, the BOC investigator was already studying the case documents. In the opinion of the Council, changes regarding the Head of the company, its authorized capital and constituent documents could be illegal. The Council stated this in its letter to the Deputy Minister of Justice of Ukraine for State Registration. The Complainant’s questions were submitted to the meeting of the expert group established on the basis of the Memorandum of Partnership and Cooperation between the BOC and the Ministry of Justice.
The Ministry of Justice considered the complaint taking into account all the circumstances and ordered to cancel abovementioned illegal registration actions. The access to the State Register of Real Property Rights was blocked for the “black registrar”.
With the assistance of the Council SACI approves commissioning of the supermarket
The Business Ombudsman Council received a complaint from a developer, a contractor and a customer of a supermarket construction in Kyiv Oblast. The SACI did not allow developers to commission a ready-made object and declared all already approved documents invalid. The Architectural Service got interested in the facility after an NGO complained about developers. In the activists’ view, the developer violated the urban planning legislation during construction, in particular, might not have had due permits (as it turned out later, it was not true). Therefore, during the year SACI tried several times to conduct an unscheduled inspection of the facility, issued a series of orders to companies, fined them and eventually canceled registration of the notice of construction commencement. The Complainant insisted SACI’s orders and decisions were illegal and civil servants’ actions were unlawful.
The Council’s investigators started working on such a controversial case. Having examined the circumstances of the case and parties’ positions, the Council upheld the company. In particular, investigators found out activists’ appeal had no nitty-gritty, except for suspicion the developer might not have permits. The law provides for such situations and prohibits initiation of unscheduled inspections based on anonymous or other clearly unreasonable inquiries.
However, supervisory authorities are usually afraid of being accused of lack of attention to activists’ complaints and proceed from the logic: “it’s better to double check” without taking into account how much inconveniences an inspection will cause to a business.
The Deputy Business Ombudsman and the Council’s investigator met with the SACI top management and comprehensively discussed complaints from the developer, the contractor and the construction customer. The SACI decided to help the company and, despite certain disputed issues on the object, which would be resolved in court, promised not to interfere with its commissioning. Developers re-submitted the notice of commencement of construction works, and then – a declaration of commissioning of the completed facility. The documents were successfully approved and the supermarket was put into operation. The complainants thanked the Council for its assistance in resolving the case. 

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