Renovation in Exchange for Rent: How to Agree It With the Owner

Renovation in exchange for rent is legal in Ukraine: the Civil Code expressly lets a tenant offset the cost of improvements made with the owner's consent against the rent. But the rule only protects those who put everything in writing. Without an agreed cost estimate, an addendum and completion certificates, the tenant risks losing the money spent, and the owner risks getting work nobody ordered. Here is how to agree it, what to put in the documents and which taxes apply in 2026.

What Ukrainian law says about repairs in a rented home

• Routine repairs (painting, wallpaper, minor plumbing) are the tenant's job by default, unless the contract says otherwise (Art. 819 of the Civil Code of Ukraine).
• Major repairs (replacing pipes, windows, screed, wiring) are the landlord's duty by default, unless the contract says otherwise (Art. 819).
• The tenant may not alter or rebuild the home without the landlord's consent (Art. 815).
• The tenant may improve the property only with the landlord's consent. With consent, the tenant is entitled to reimbursement of necessary costs or to offset them against the rent (Art. 778).
• Improvements made without consent that cannot be removed without damage are not compensated (Art. 778).

The takeaway is simple: get the owner's consent in writing and fix the scope of work and the compensation method before work starts.

How to agree it with the owner, step by step

1. Inspect the flat together, photograph it and describe its condition.
2. Decide what work is needed and who pays: routine repairs, major repairs, improvements the tenant wants.
3. Draw up a cost estimate: list of works, materials, prices, who buys the materials.
4. Agree the compensation method: rent-free months, a reduced monthly payment, or reimbursement after completion.
5. Put it all in the tenancy agreement or an addendum to it.
6. When the work is done, sign a completion certificate stating the amount to be offset.

The scheme only makes sense for a long tenancy. With a short contract, the tenant will not recover the outlay, and the owner risks an unfinished renovation.

What the contract must say

• the exact list of works and the cost estimate as an annex;
• the maximum amount the owner agrees to offset, and what happens with overspending;
• start and finish dates, who does the work and who is responsible for quality;
• the offset mechanism: which months and by how much the rent is reduced;
• which documents prove the costs: receipts, invoices, contractor agreements;
• what happens on early termination: whether the owner refunds the part not yet offset;
• what happens to removable improvements (appliances, furniture) at the end of the tenancy;
• a contract term long enough to offset the full amount.

A residential tenancy agreement must be in writing (Art. 811). Notarisation is not required for an ordinary residential tenancy, but the parties may choose it for extra certainty.

Certificates that protect both sides

• Handover certificate at the start: condition of each room, photos, meter readings, list of furniture and appliances.
• Completion certificate after the renovation: what was done, for how much, signed by both parties.
• Reconciliation statement: how much has been offset and how much remains. Signing it quarterly is convenient.
• Return certificate at the end: condition after the renovation and normal wear and tear.

Risks for the tenant and the owner

The tenant risks	The owner risks
The owner sells the flat or ends the contract before the full offset	Poor workmanship or cheaper materials than in the estimate
The owner refuses to recognise costs without receipts and certificates	Work drags on while no rent comes in
Improvements made without consent are not compensated	Unauthorised layout changes that later need to be legalised

Note: if the flat is sold, the landlord's rights and duties pass to the new owner (Art. 814), so a written contract with clear offset terms protects the tenant in that case too.

Rental income tax in 2026

When an individual rents a flat to another individual, the income is taxed as follows:

• personal income tax: 18%;
• military levy: 5% (the rate applies since 1 December 2024);
• total: 23% of the rent.

The landlord calculates and pays the tax within 40 calendar days after the end of each quarter, and files an annual income and property return by 1 May of the following year. The tax base is the rent stated in the contract, but not less than the minimum rent payment, which depends on the minimum monthly rent per square metre set by the local council.

Offsetting renovation against rent does not cancel the rent itself: the owner is paid in the form of work, so the tax is calculated on the contract rent. Check your specific case with a tax adviser or the State Tax Service.

When the scheme works and when it does not

It works when the flat needs mostly cosmetic repairs, the tenant plans to stay for several years and the owner has no time or wish to manage a renovation. The tenant gets a home to their taste and a lower effective rent, and the owner gets a refreshed flat without spending money or time.

It is unprofitable or risky when:

• a major renovation with new pipes and wiring is needed: the costs are high and the offset stretches over years;
• the owner plans to sell soon;
• the parties cannot agree the estimate and the quality of materials;
• the tenant is not prepared to keep receipts and sign certificates.

In those cases it is fairer to separate the two: the owner renovates, then lets the flat at the market rent.

FAKTOR helps owners and tenants in Odesa agree tenancy terms, prepare the contract with annexes and certificates, and check the flat's documents. We recommend putting a renovation-for-rent arrangement in writing before any money is spent.

Related: renting without risk: what the contract must include, flats for rent in Odesa, let or sell your flat through FAKTOR.