Arrest of Business Real Estate: Protection and Removal of Arrest

Arrest of Business Real Estate: Protection and Removal of Arrest

An arrest on business real estate can significantly affect a company’s operations because it restricts the ability to dispose of an important corporate asset. The following may be subject to arrest:

• office premises;
• shops;
• warehouses;
• production complexes;
• business centers;
• land plots;
• commercial buildings;
• unfinished construction projects;
• other real estate owned by a legal entity or individual entrepreneur.

In enforcement proceedings, an arrest on the debtor’s property is used to ensure actual enforcement of a decision and may be imposed by an order of a state or private enforcement officer. For a business, this may mean the inability to:

• sell the property;
• include it in a transaction with an investor;
• mortgage it;
• carry out a reorganization involving the asset;
• complete certain registration actions;
• dispose of the property as part of a planned business transaction.

For a business, it is important not only to achieve removal of the arrest, but also to prevent the situation from progressing from a restriction on disposal to forced sale of the asset.

Benefits of Working with Prikhodko & Partners

We analyze the arrest of real estate not in isolation, but in the context of the company’s overall financial and litigation situation. Our lawyers help:

• check the arrest entry in the State Register of Property Rights;
• identify the court, enforcement officer, or other authority that initiated the restriction;
• analyze the enforcement document and amount of recovery;
• review the commercial court case;
• assess the risk of forced sale of the real estate;
• prepare an application for removal of the arrest;
• challenge unlawful actions of the enforcement officer;
• file a motion to cancel interim measures;
• protect the asset in criminal proceedings;
• monitor actual termination of the encumbrance in the register.

Why a Company’s Real Estate May Be Arrested

An arrest most commonly arises for three main reasons. 1. Enforcement proceedings. The company has an unenforced decision concerning:

• contractual debt;
• a loan;
• recovery of funds in favor of a counterparty;
• compensation for damages;
• another obligation for which an enforcement document has been issued.

2. Interim measures. A counterparty or another claimant asks the commercial court to temporarily arrest the property in order to prevent its disposal before the dispute is resolved. 3. Criminal proceedings. An arrest may be imposed by an investigating judge or court in cases provided by the Criminal Procedure Code, including in relation to property that is treated as evidence, may be subject to special confiscation, or is needed for other purposes permitted by law.

Arrest of Commercial Real Estate in Enforcement Proceedings

If a legal entity is a debtor under an enforcement document, the enforcement officer may impose an arrest on its property. The arrest must be connected with the actual purpose of enforcing the decision. The lawyer checks:

• the principal amount of debt;
• the enforcement fee;
• the private enforcement officer’s main remuneration;
• enforcement proceeding expenses;
• penalties;
• what other assets the debtor has;
• whether the scope of the arrested property corresponds to the amount of recovery;
• whether the enforcement officer has moved to the sale stage.

The Law of Ukraine “On Enforcement Proceedings” provides for recovery against the debtor’s real estate and separately regulates the procedure for arresting property.

Risk of Forced Sale of Business Real Estate

An arrest and sale of property are not the same thing. An arrest primarily restricts the owner’s ability to dispose of the asset. However, if the company does not comply with the decision, enforcement proceedings may move through the following stages:

1. identification of property;
2. imposition of arrest;
3. inventory of the property;
4. valuation;
5. preparation for sale;
6. sale under the established procedure;
7. application of the proceeds toward satisfaction of the claims.

Therefore, it is advisable to seek legal assistance before the property is transferred for sale.

Removal of Arrest by an Enforcement Officer

The Law of Ukraine “On Enforcement Proceedings” provides specific grounds on which an enforcement officer may or must remove an arrest. Depending on the case, relevant factors may include:

• full performance of the obligations;
• receipt of the required amount of funds;
• a court decision ordering removal of the arrest;
• violation of the procedure for imposing the arrest;
• other statutory grounds.

It is important to check more than the principal debt. Even after it has been paid, there may still be:

• an enforcement fee;
• expenses;
• the private enforcement officer’s remuneration;
• other amounts due within the proceedings.

For this reason, payment of the amount awarded by the decision does not always mean that the arrest will be automatically removed on the same day.

Arrest of Real Estate as an Interim Measure in a Commercial Dispute

A commercial court may secure a claim by imposing an arrest on the defendant’s property or funds. This mechanism is used where there is a risk that, without temporary restrictions, a future judgment may be difficult to enforce or effective protection of the right may be impaired. The interim measure should be:

• connected with the subject matter of the dispute;
• properly justified;
• proportionate to the claims;
• such that it does not impose unjustified restrictions on the other party.

If the grounds for the arrest no longer exist or the measure is unjustified, the lawyer may prepare a motion to cancel the interim measure.

When a Business Can Request Cancellation of Interim Measures

The grounds depend on the specific case. For example:

• the circumstances that led to the arrest have changed;
• the risk of disposal of the property no longer actually exists;
• the arrest is clearly disproportionate to the amount or subject matter of the dispute;
• the claim has been left without consideration;
• the claim has been dismissed;
• the proceedings have been terminated;
• another mechanism can adequately balance the parties’ interests.

It is also necessary to separately assess whether the ruling imposing the interim measure can be appealed.

Arrest of Business Property in Criminal Proceedings

Commercial real estate may also be arrested in criminal proceedings. The Criminal Procedure Code defines arrest of property as a temporary restriction of the right to dispose of, manage, and/or use property on the basis of an order of an investigating judge or court. For a legal entity, this may concern an asset that the prosecution claims:

• is connected with a criminal offense;
• has evidentiary value;
• may be subject to special confiscation;
• is required to secure a civil claim;
• is connected with another purpose of arrest provided by the Criminal Procedure Code.

The lawyer analyzes whether the particular asset actually corresponds to the stated purpose and whether the need for continued restriction still exists.

How to Remove an Arrest in Criminal Proceedings

A special procedure under the Criminal Procedure Code applies. Key questions include:

• what purpose of the arrest is stated in the court order;
• the procedural status of the company or owner;
• whether the company was involved in the relevant events;
• whether the real estate has evidentiary value;
• whether there is a risk of concealment or disposal;
• whether the need for continued arrest has ceased.

If legal grounds exist, a motion to cancel the arrest of property is prepared.

Arrest of Property Belonging to a Third-Party Legal Entity

Sometimes the real estate belongs to a company that is not itself the debtor under the relevant obligation. For example:

• the asset previously belonged to the debtor;
• there is an error in the registers;
• an ownership dispute has arisen;
• the enforcement officer incorrectly identified the property;
• the property is linked to another person in a criminal case.

In such cases, the company’s lawful ownership of the asset must first be confirmed. Depending on the basis of the arrest, it may be necessary to use:

• an application to the enforcement officer;
• a court claim;
• a motion in criminal proceedings;
• another special legal mechanism.

Arrest of a Business Land Plot

For land, the following are additionally checked:

• the cadastral number;
• ownership rights;
• lease rights;
• mortgages;
• the designated purpose;
• real estate located on the land;
• other registered encumbrances.

Particular attention is required where the company plans to:

• carry out construction;
• obtain financing secured by the land;
• sell an investment property;
• carry out corporate restructuring.

Even a single arrest may effectively stop the planned transaction.

Arrest of a Production Complex, Warehouse, or Business Center

For large commercial properties, it is necessary to determine exactly what is covered by the arrest. It may be:

• the entire building;
• separate premises;
• the land plot;
• a single property complex;
• an unfinished construction project.

The lawyer compares:

• data from the State Register of Property Rights;
• title documents;
• technical characteristics;
• court documents;
• the enforcement officer’s order.

This makes it possible to understand the actual scope of the restriction.

How an Arrest Affects a Business Sale or Investment

An arrest on key real estate may significantly complicate:

• sale of the asset;
• an M&A transaction;
• raising bank financing;
• an investment transaction;
• mortgaging the property;
• restructuring a group of companies.

During Due Diligence, an investor or buyer will see the registered encumbrance and may:

• withdraw from the transaction;
• postpone it until the arrest is removed;
• reduce the price;
• require additional guarantees.

Therefore, it is advisable to resolve the arrest issue before the active phase of a business sale or fundraising process begins.

What to Do Immediately After Discovering an Arrest

Recommended sequence:

1. Obtain information from the State Register of Property Rights.
2. Identify the underlying legal document.
3. Locate the enforcement, commercial, or criminal proceedings.
4. Review the amount and nature of the claims.
5. Assess the risk of forced sale.
6. Review the company’s other assets and accounts.
7. Develop a procedural strategy.
8. At the same time, assess negotiations with the creditor if this is in the company’s interests.

Negotiations with the Creditor and Removal of the Arrest

Court proceedings are not always the optimal solution. If the debt is legally valid, the business may consider:

• a one-time repayment;
• a payment schedule;
• restructuring;
• a settlement agreement;
• replacement of security;
• another agreed settlement.

Any agreement should be documented in writing and linked to specific actions within the enforcement or court proceedings.

Documents for Handling an Arrest on Business Real Estate

The following may be required for an initial review:

• an extract or information certificate from the State Register of Property Rights;
• real estate documents;
• land plot documents;
• a court ruling;
• a judgment in a commercial case;
• an enforcement document;
• the enforcement officer’s order;
• materials of the enforcement proceedings;
• a loan or other agreement;
• documents confirming debt repayment;
• documents from criminal proceedings;
• corporate documents of the company.

Stages of Cooperation with a Lawyer

1. Initial request. The company provides information about the real estate and the identified encumbrance.
2. Register review. We determine the contents and legal basis of the arrest.
3. Proceeding analysis. We review the court, enforcement, or criminal case.
4. Risk assessment. We determine the threat of forced sale and the impact of the arrest on the business.
5. Strategy development. We choose between an application, complaint, motion, lawsuit, or negotiation scenario.
6. Representation. The lawyer supports consideration of the matter.
7. Obtaining the decision. We monitor issuance of the required enforcement order or court decision.
8. State Register review. We verify actual termination of the encumbrance.

Cost of Legal Support

The cost depends not directly on the value of the asset, but on the nature of the arrest and the complexity of the legal work. The scope of work is affected by:

• the number of arrested properties;
• whether the arrest arises from enforcement, commercial, or criminal proceedings;
• the number of creditors;
• the stage of the forced sale process;
• the need for urgent action;
• the existence of parallel court cases;
• the need for an appeal;
• the possibility of negotiated settlement;
• the number of registration entries;
• the scope of further legal support.

Common Situations Involving Arrest of Business Real Estate

Conclusion

An arrest on business real estate may block not only the sale of a specific property, but also financing, investment, restructuring, and the company’s ongoing operations. Therefore, it is important to quickly determine the legal basis of the arrest, assess the risk of forced sale, and select the appropriate mechanism — from negotiations and an application to the enforcement officer to cancellation of interim measures or court protection.

Has an arrest been imposed on your company’s office, warehouse, production complex, land, or other commercial real estate? Submit a request on the Prikhodko & Partners Law Firm website. A lawyer will review the encumbrance and related proceedings, assess the risk to the asset, and develop a legal protection plan.