By signing the Association Agreement with the EU, Ukraine committed to harmonizing Ukrainian laws with EU directives in several stages. These requirements applied to many areas of the economy. They also covered public procurement in construction.
As the state spends a significant portion of the budget on construction orders, the rules under which such services are procured should ensure equal access for all participants and reduce corruption risks during public tenders.
One of the necessary solutions is the introduction of a legislative possibility to hold architectural competitions during procurement. Currently, the majority of architectural design contracts in the ProZorro system are purchased through the open tender procedure, where the only criterion is the price of the lot. I.e., roughly speaking, during the auction, an architect is first selected, and then does he/she propose a project of a certain building or complex. Thus, the contracting state often buys a “pig in a poke” without being able to evaluate a future development project at the tender stage.
Instead, being a common practice for Europeans, architectural competitions allow assessing the creative component at the initial stage of project selection and, in addition to a reasonable price, to choose the best architectural proposal. For example, thanks to open architectural competitions, Khreshchatyk Street was rebuilt after the war in 1944, and the Memorial of the Heaven’s Hundred Heroes and the National Museum of the Revolution of Dignity will appear in the center of Kyiv soon.
If you look at the procurement statistics in construction, their amount is growing year by year in all areas. At the same time, non-competitive procurement methods for architectural design services still prevail over competitive methods both in terms of the number of lots and in terms of cost. Thus, in 2018, the contracted cost of such services under non-competitive procedures was 5 times higher than under competitive ones.
In Ukraine, the international practice of architectural competitions is still not developed, although there are some positive dynamics. For example, in 2010-2017, only 65 architectural competitions were announced, and in 2016-2017, their number increased almost threefold. As for procurement funded by the budget, the situation is worse. Since 2016, there were only 8 negotiating procedures based on the results of architectural competitions. Currently, the state, acting as a customer, still focuses exclusively on price and can not assess in advance the quality of the proposed architectural solutions of tender participants.
A striking example of the unsuccessful selection of contractors without competitive tendering is the project of a health complex on Raiduzhna Street in Kyiv, which has provoked extensive public discussions. The project was strongly criticized after the architectural design of the future building was announced. The project owner was completely satisfied with the price criterion, but the citizens and the professional architectural community, mildly speaking, were not impressed with the author’s creative approach.
Source: delo.ua
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For the last two weeks, the draft law No.3618 “On realtor activities in Ukraine” has been discussed by everyone interested, including anti-corruption activists, economists, lawyers, and realtors themselves. The authors of innovative ideas argue that the draft law does not oblige Ukrainians to use the services provided by realtors, but rather protect citizens from unscrupulous real estate agents, whose activities also lead to a loss of revenues to the state budget. Opponents say the draft law will oblige Ukrainians to use the services provided by realtors on a fee-paying basis in case of sale or lease of real estate while duplicating the scheme related to a paid evaluation database (infamous “Yatsenko’s platforms”), but now it is related to realtors.
Lawyers and analysts of the Better Regulation Delivery Office (BRDO) have analyzed the text of the draft law, the explanatory note to it, and arguments of the drafters, and offer an expert assessment of the regulation proposed.
Why is this draft law needed and what problems does it solve?
Having analyzed the arguments of the drafters, we concluded that the draft law aimed to address the following issues:
We did not analyze the scale, dynamics, and severity of these problems and did not determine their causes. We also did not find this analysis in the supplemental materials and explanations of the drafters, who promised to provide an analysis of effects and their calculations later. At the same time, I emphasize that this analysis of problems and their causes is a key element because the effect of the draft law cannot be measured without assessing its impact on the problems it has to solve, as well as without comparing this assessment with the assessment of its implementation costs and negative side effects it creates.
For example, the drafters argue that the draft law is aimed at making the provision of real estate services official and increasing revenues to the state budget of Ukraine. However, no documents state the current level of the shadow economy in the sector and the expected level that will be achieved as a result of policy implementation. There are also no specific figures regarding the growth of state budget revenues. Finally, it is not specified which executive body will be responsible for implementing this policy.
The draft law and supplemental documents do not contain answers to the questions, which are important for market participants. Will consumers of real estate services pay more in case of real estate transactions? Will real estate agents be forced to increase the cost of their services due to the need to gain access to the profession (as mandatory certification and professional accreditation of realtors are introduced)? What is the expected cost of entering the profession? How will this affect the cost of real estate services? The lack of answers to these questions does not allow us to fully assess the advantages of adopting the draft law.
Additionally, the introduction of some regulation in the sector where there were no state rules before requires constant close consultation with stakeholders, such as market participants, consumers, and realtors. This is a fairly simple but effective principle for effective public policy: nothing for me without me. Taking into account the maximum number of positions of those who will be affected by the regulation, it is possible to avoid unwanted mistakes, improve the market situation, legitimize the rules for those who should comply with them. It can be concluded from this report that no such consultations were held.
While the public waits for the analysis from the drafters, we can analyze at least the content of its provisions and assess whether they meet the declared purpose and what potential risks they contain.
Does the draft law really protect consumers of real estate services from unscrupulous realtors?
Yes, the draft law contains some rules to protect the rights of consumers of real estate services:
Some of these suggestions are useful, while others create significant risks, which are discussed below.
Does the draft law impose the use of realtor services in case of the sale or lease of real estate?
Part 1 of Article 1 of the draft law extends its effect, in particular, to legal relations arising in the process of real estate transactions related to the purchase, sale, lease (rental) of real estate.
The draft law does not contain a direct obligation to use the services provided by realtors to buy or rent real estate. At the same time, certain provisions of the draft law still make it impossible to conclude a real estate transaction without contacting a realtor.
Article 34 of the draft law states that the condition to sell or lease the real estate to a new owner is the inclusion of information about the property and registration of its information card in the Unified Information Database.
When entering such information into the Unified Information Database, real estate units are assigned with an individual registration number. The draft law provides for including such a registration number in the essential conditions (agreements on the alienation, sale, or lease of real estate). Moreover, a notary will not have the right to certify such a transaction without obtaining an extract from the registered information card of a real estate unit contained in the Unified Information Database.
Thus, any real estate unit, for which a person intends to enter into a sale or lease agreement, should be included in the Unified Information Database with the assignment of an individual registration number. A person cannot conclude real estate transactions without entering information on a real estate unit into the Unified Information Database.
However, the draft law does not directly provide property owners with the right to enter information about real estate units into the Unified Information Database independently: only realtors or “other persons authorized by law” have the right to enter information about real estate units into the Unified Information Database.
This text can be interpreted in several ways: 1) a person authorized by law (realtor or other person authorized by law to enter information), 2) a representative of the person entitled to enter information (representative of a realtor or other person authorized by law to enter information). Since no law explicitly provides for the right of anyone other than a realtor to enter information into the system, the owners will not have such a right.
Therefore, although the provisions of the draft law do not explicitly stipulate the obligation to use the services provided by realtors in case of the sale or lease of real estate, it will not be possible to conduct such transactions without entering information about real estate into the Unified Information Database. Since only realtors have the right to perform such actions, property owners will be forced to contact a realtor and conclude an agreement in the provision of real estate services to enter information about a property unit into the Unified Information Database.
Does the draft law really transfer the control over realtors to a “real estate chamber”, which the entire market will pay to?
According to the draft law, a single non-governmental regulator (National Federation of Realtors) will appear on the real estate services market. All business representatives required to pay contributions should become members of such an organization. Each realtor should undergo professional training in an accredited institution and be attested/certified/accredited by the Qualification and Certification Commission within the National Federation to be included in the federation. When realtors receive a positive assessment, information about them will be included in the Unified Register of Individuals, Legal Entities and Professional Associations in Real Estate maintained by the Federation. And only after this procedure, realtors will be able to legally provide their services. Realtors should improve their qualifications by applying to the commission on a paid basis every two years.
The National Federation undertakes to control the quality of services provided by realtors and may impose disciplinary sanctions in case of violation of the rules approved by it.
The idea of professional self-management, or rather self-regulation, could be a stimulus for market development. However, the model of its implementation selected by the drafters carries the risk of an uncontrolled monopoly.
There are several aspects raised by these issues:
Does the draft law harmonize Ukrainian legislation with EU legislation?
Ukraine has no European integration obligations regarding legal relations in the real estate services market. By the way, mostly real estate agents of EU member states act as intermediaries in real estate transactions, providing consulting services, property valuation services, trust property management, document preparation, etc.
Summarizing the above, contrary to the intentions, the draft law provides for an unreasonably burdensome procedure for providing real estate services during the alienation and lease of real estate, which will lead to the increased prices for selling and leasing such property. Despite the drafters’ idea to establish transparent rules of the game in the real estate services market, the draft law may lead to market monopolization by a single non-governmental organization, and this carries additional corruption risks and calls the competitive principles of market development into question. However, the draft law contains some provisions that improve the protection of the rights of consumers of real estate services. The analysis of the experts of the Better Regulation Delivery Office (BRDO) shows that the support of the draft law No.3618 in the proposed version may have a negative impact on both consumers and providers of real estate services in Ukraine.
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