One of the key issues is determining the starting amount of annual rent. The law explicitly prohibits setting it below the minimum threshold established by the state. For agricultural land, this indicator is at least 7% of the normative monetary valuation (NMV).
Ignoring this requirement may call into question the legality of the conducted auctions and become a reason for challenging their results. According to the provisions of the Tax Code of Ukraine, the starting price at a land auction should be formed taking into account the established limits, with the basis being the normative monetary valuation of the plot.
The main rules are as follows:
– General approach: the annual rent cannot be lower than the land tax amount set for the respective land category;
– For agricultural land: the starting rental rate is set at a level not lower than 7% of the NMV;
– Maximum amount: the annual rent generally cannot exceed 12% of the NMV, but within competitive auctions, the final value may increase depending on the participants' demand.
If the auction organizer (in particular, the local self-government body) sets the starting rate below the legislatively established minimum, this may lead to a number of legal consequences:
– Identification of violations by state financial control bodies and failure to receive budget revenues;
– Judicial challenge of the results of land auctions;
– Risk of recognizing the lease agreement as not complying with legal requirements.
To avoid legal risks, before announcing an auction, it is worth:
– Checking the relevance of the NMV – this indicator is the basis for the correct calculation of the starting price;
– Analyzing the decisions of the local council, as the community may establish increased rental rates for certain land categories;
– Considering the indexation mechanism, as the rent is subject to annual adjustment according to the official inflation index.
A correctly determined starting price is not only compliance with the law but also a real tool to ensure stable revenues to the local budget and effective management of the community's land resources.
