If we decide to invest in real estate at the construction stage, we are convinced that without a proper legal verification of possible risks and terms of the transaction, we can not do. After all, the right of ownership will not be registered immediately after payment of the cost of the object, but only after the construction, commissioning and provision of all necessary documents for state registration.
Our practice shows that in most cases, developers offer the following investment options:
– contract of sale and purchase of property rights;
– investment agreement;
– a contract for the purchase and sale of securities (bonds);
– agreement on payment of share contributions and participation in a construction cooperative;
– a preliminary contract for the sale of real estate.
As a rule, the conclusion of the main transaction will be preceded by a booking agreement with a small advance price, which will be taken into account when paying the cost of the entire facility.
Noteworthy is the legal conclusion of the Supreme Armed Forces in cases 6-265сс16 and № 6-290сс16 of 16.03.2016. According to which the property rights to real estate, which is the object of construction (investment), are not considered material rights to someone else’s property, as the object of these rights is not someone else’s property, nor is it considered a property right. So, the property right, which can be defined as the “right of expectation”, is an integral part of the property as an object of civil rights. The property right is a limited proprietary right, according to which the owner of this right is endowed with certain but not all rights of the owner of the property and certifying the eligibility of his owner to obtain title to real estate or other proprietary right to the corresponding property in the future.
In other words, if the developer has not completed the construction site on time and violated the established terms of the contract of sale of property rights, then it is impossible to recognize the ownership of real estate through the court. Recognize the property rights to the property – it is inappropriate because they will not be held their state registration in the register of rights. At the same time, from a practical point of view, the most transparent, and therefore beneficial in the possible prospect of a judicial resolution of a dispute in favor of an investor (buyer) is the purchase of property rights. According to the transaction, the investor (the buyer), the person who, in the term provided by the contract, is granted the right of property claim to receive property on the invested real estate. Without other postponing conditions – legal facts contained in other options for contracts. That is, if the time for satisfying the property claim for transfer to ownership has come and the investor has applied to the developer, the latter must fulfill the obligations otherwise the delay in the performance of the monetary obligation will occur. Therefore, the method of protecting the rights will be the recovery of funds and all possible losses. The success and effectiveness of such a method will directly depend on the solvency of the debtor.
Concerning the ratio of the size of purchased bonds, the issuer of which is the enterprise-developer, then in proportion to the amount of investments made, the contract specifies clearly the terms for the completion of construction, after which the developer is obliged, as a result of using the relevant invested funds, to transfer / cede the right of claim for property (type, the area, the location of the property is indicated in the contract) to the buyer. This involves transferring the necessary documents to the disposal of the buyer (investor), with the aim of registering the title to real property.
In addition, according to the APU analysis, “it is important to determine the ownership of the property in movable or immovable property in accordance with the current legislation for the courts to decide cases involving the creation, modification and termination of the ownership right.
According to Art. 181 CC to real estate include land, as well as facilities located on the land, the movement of which is impossible without their depreciation and changing their purpose. According to movable things there are things that can be freely moved in space. The objects of the real estate of the Civil Code are residential houses, buildings, structures, other real estate (Articles 331, 376). Real estate is divided into buildings, structures, premises (Article 4). In accordance with the Law of 1 July 2004 No. 1952-IV “On State Registration of Rights to Immovable Property and their Encumbrances” (hereinafter – Law No. 1952-IV), real property is residential buildings; apartments; buildings, structures, residential and non-residential premises (Article 5). The definition of “apartment house”, “apartment”, “estate” is contained in Ch. 28 GK. The concept of “residential real estate” – in the Tax Code of Ukraine. The objects of residential real estate are divided into the following types: dwelling house, manor house, annex to the house, apartment, cottage, rooms in multi-family (communal) apartments, garden and cottage house (article 14.1.129.).
According to ab. 3 tbsp. 4 of the Law of Ukraine “On Investment Activities”: “Investing and financing the construction of housing construction facilities using non-state funds raised from individuals and legal entities, including management, can only be carried out through construction finance funds, real estate funds, joint institutions investment, as well as by issuing target bonds of enterprises, the fulfillment of obligations by which is carried out by transferring the object (part of the object ) of housing construction. Other ways of financing the construction of such facilities are determined solely by laws. “
Therefore, buying an apartment through participation in such a construction financing fund (hereinafter referred to as “FSF”) is a good investment mechanism. Legal regulation of the FSF is carried out in the Law of Ukraine “On financial and credit mechanisms and property management in the construction of housing and real estate transactions.” According to the current legislation, the construction financing fund is the funds transferred to the manager of the FSF in the management, which are used or will be used by the manager in the future on the terms of the Fund Rules and contracts for participation in the FSF. The FSF includes a manager who keeps records of funds, controls their use, has the right to change the developer. Often you can find the sale of an apartment from the builder through the FSF. In addition, despite all the attractive features of this mechanism, it does not guarantee the rational use and conscientious implementation of the obligations taken by the developer, as developers often create “hand” funds. Since the manager’s face, including the function of controlling the construction time, remains important for the person (in most cases the bank) to be independent and authoritative. In the event that the risk manager discovers violations of the terms of the contract, he has the right to stop financing the construction, demand termination of the contract, return by the developer of all the funds aimed at financing the construction of this facility, compensation for damages caused by the developer.
Very rarely there is a scheme for buying an apartment through the issuance of bonds of the enterprise. This scheme looks different – the investor buys not square meters, but the target bonds. After putting the house into operation, a contract of sale or barter is concluded between the builder and the buyer, while the buyer is paid for the apartment by bonds. The cost of bonds and the order of their turnover is determined by the issuer-developer. It is important to pay attention to the fact that the issue and registration of the issue of shares is an open information and must be published by the issuer. Under the reference of the National Commission of Securities and the Stock Market – https://smida.gov.ua it is possible to familiarize with the state register of the securities issue. The website contains information on the completed issues of shares, bonds, securities of the joint investment institution, mortgage certificates, mortgage bonds. And most importantly for the investor – the order of circulation of securities and the existence of violations on the part of the issuer.
Less popular is the contract on equity participation in construction. When concluding such an agreement with the developer, a housing cooperative is formed, whose members (potential future apartment owners) pool their cash contributions for the construction of the house. And although this way of investing in construction is not directly stipulated in the Law of Ukraine “On Investment Activities”, it is used in accordance with the norms of civil legislation, the Law of Ukraine “On Cooperation”. When building with the formation of a housing cooperative, the apartment after the completion of construction will be owned by the cooperative. Then you need to conclude an agreement to exchange a share of a member of the cooperative to a premise (apartment) and register your ownership of this apartment. Possible problems in choosing such an investment option is that an unscrupulous developer can accept disadvantageous conditions for members of the cooperative. Such conditions are approved in a separate provision and by-laws. Then the position of the developer is the following: you need to apply corporate legal relations between a member and a cooperative, rather than civil law, that is, the rights and obligations are set out in the contract. Sometimes such cooperatives make a decision to exclude from the number of members for formal violations of corporate rules.
The most common in the market of new buildings is the conclusion of a preliminary contract for the sale of an apartment in cases where the developer is an individual. Unfortunately, this is a “gray” investment scheme, which has many risks for the buyer of the apartment, because the apartment itself does not yet exist, it has not been assigned a number, the house has not been put into operation. Therefore, under the preliminary contract of sale, money is invested in something amorphous and unknown. It may be that apartments with prescribed characteristics do not exist at all in the house, several such preliminary contracts are concluded for one apartment and the like. In addition, there is a risk that the developer will refuse in the future to conclude the main contract of sale and real mechanisms to force him to do so, even if the entire amount of money for the desired apartment has already been paid. Therefore, when concluding such an agreement, one should carefully approach the study of its conditions and the reputation of a citizen-builder. The presence of open criminal proceedings in such a citizen.
All listed investment options do not give a guarantee of registration in the property of the acquired object, however, it is necessary to carry out all possible legal checks to minimize possible risks.
We advise before you conclude an investment contract to clearly understand for yourself on the basis of what documents will be held state registration of property rights in the future. An exhaustive list of documents, depending on the investment option chosen, is defined by paragraphs 77-80 of the Resolution of the Cabinet of Ministers of Ukraine of December 25, 2015r. №1127. For example, in the case of the acquisition of property rights to the property by documents, the following documents will be required for registration: an application, a receipt for the payment of an administrative fee, a contract for the purchase and sale of property rights, a technical passport, a document, in accordance with the requirements of legislation, is indicated by the acceptance into operation of the completed facility, document , confirming the assignment of the immovable property of the address, the document certifying the ownership of the immovable property object to e of reconstruction – in the case of state registration of ownership of immovable property reconstructed, approved person, attracting funds of individuals and legal entities, the list of investors and approved by the general meeting of the cooperative list of members of the cooperative.
Experience convinces that when investing in real estate, first of all, it is important to check the identity of the builder (a natural or legal person, its head and founders). Including the presence of prohibitions, arrests, encumbrances, court cases, open executive and criminal proceedings. Perhaps, at the time of investing, an unscrupulous seller did not fulfill monetary obligations for significant amounts of money or even opened criminal proceedings in connection with fraud or violation of licensing procedures in construction.
Depending on the complexity of the construction site (the effects class CC2 – average, CC3 – significant consequences), the developer can perform construction work only after the message of GASK, obtaining a declaration or permission to start construction work. Even if the permit is granted by the representatives of the developer – it may be that this permission at the time of investing was canceled by GASK or the court.
The developer for reliability can provide you with information, on the legal basis for using the land plot allocated for the construction of the real estate object in which the funds are invested. There are cases of construction work without land registration, which in the future will be an obstacle to registration of ownership.
In any case, if you are reluctant to provide permits and documents that confirm real rights to land, this information can be obtained from government agencies.
So, the trustworthiness and legality of actions of the builder-seller is checked by the following information and analytical way of information verification, including in: the Register of legal entities, individuals-entrepreneurs and public formations; The register of rights to real estate and their encumbrances; Public cadastral map of Ukraine; Automated system of enforcement proceedings (public, free); The GASK database; Database of GFS of Ukraine; Register of court decisions; A section of announcements and bankruptcy messages on the official website of the VHSU; The Register of the National Commission for Securities.
The availability of articles and news on the Internet is an additional and exclusively subjective aspect when studying the business reputation and virtue of the builder-seller. Often, competitors use this resource for greedy purposes, so you need to be critical of such information. If possible, verification of the constituent documents and the powers of the signatory on the part of the builder.
Also, we are tasked with leaving the construction site of the builder to conduct direct negotiations and agree on the possibility of buying real estate.
When registering the title to the secondary market, we will take care of everything “on a turn-key basis”, namely, notarization of the contract, state registration, appraisal of property, receipt of extracts from the SLC and certificates of registered residents in housing, non-cash transfers if necessary and a preliminary verification reliability of the builder.