Each person or family (hereinafter – the Buyer) wants to have their own housing. When a buyer finds a housing he likes, and above all at appropriate price, he forgets about the main thing – about the hidden catch that unfair development companies (hereinafter – the Developer) could have prepared for him.
In this article you will learn how to check the Developer, insure yourself from a bad purchase and arrange for your dream of own house not to turn into a nightmare.
Nowadays it’s an open secret that the task of the Developer is profit-making (property sale on the most favourable terms), and the task of the Buyer is to get housing (purchase of an apartment on beneficial and safe terms).
In order that you don’t have problems with the newly acquired housing, you have to do the following:
1. Check the “history” of the Developer
First of all, you need to check out the Developer in EDRPOU (Ukrainian “Unified State Register of Businesses and Organizations”). Here you need to look at the Director, if he is a legal entity in the process of termination, if there are any enforcement proceedings opened against the legal entity, creation date (the longer the legal entity exists, the better) and share capital (the more capital, the better).
Then, you need to check the Developer for debt owed to tax agency. Tax clearance indicates the reliability of the Developer.
Also you need to check the Developer in Unified State Register of Court Decisions. In the register you need to find information if there are any legal proceedings being conducted against the Developer and the matter of those proceedings.
You need to “google” some reviews about the Developer, what projects he has implemented and how successful they are. Several objects under construction that have not been commissioned yet and are being constructed simultaneous can be a reason for distrust of the Developer.
2. Check the land parcel documents
You need to check the Developer’s documents confirming the right of ownership, right of permanent use or lease of a land plot, where the construction will be conducted.
If the Developer rents the land plot, then you need to clarify the date of the lease end. This is very important given that if the Developer does not have time to complete a house before the end of the lease, it is possible that it will not be extended and a house will not be completed.
3. Check out the building documents
The main document that the Developer should have to begin construction activities is the construction permit, issued by the State Architectural and Construction Inspectorate. Without such permit it is impossible to start construction.
Also, the Contractor must be licensed for construction. Here you should check if the license period has expired.
The Customer must have the technical conditions for communication lines, the project and its expertise.
You need to pay attention to duration of all documents, according to construction period.
4. Acquire information about the contractors who will carry out the construction
You need to check the contractors in EDRPOU. There you also need to check the Director, if a legal entity is in the process of termination, creation date (the longer a legal entity exists, the better) and share capital (the more it is, the better).
Also, you need to check contractors in the Unified State Register of Court Decisions. In the register you need to check if there are any legal proceedings being conducted against the Contractor, and the matter of those proceedings.
5. Analyse the price and compare it with the market price
The buyer should remember that low prices are often offered at the beginning of construction (when only a foundation pit for the object is ready) or the Developer is unstable. The reason for low price per square meter can be serious problems of the Developer, that can lead to building halt or even mean that the Developer has not originally planned to bring it to fruition.
6. Visit the construction site
It takes a few times to visit the construction site. You should pay special attention to the number of workers and equipment present on the construction site. This will let you estimate if the Customer will meet deadline and if the house will be built at all.
7. Whom to sign a contract with and what type of a contract exactly to choose
The buyer has to choose a contract (method) and whom to sign it with.
Nowadays the most secure method is the purchase of future housing through the Construction Financing Fund (hereinafter – CFF). The presence of the third party – the Bank in CFF will let you feel safe and more confident as the Bank guarantees availability of funds for completion and depending on the type of CFF exercises control over the activities of the Developer. Before you become an investor of the construction financing fund, check the Fund Manager (the Bank), as it affects reliability of the method. Thus, the participation of a large bank as the Manager of the Fund can be a guarantee that you will receive the desired housing.
Also, to obtain housing safe enough, you may become a member of the housing association.
Another method of house-buying is the conclusion of sale and purchase agreement in the already built house. Although it is significantly more expensive than the above mentioned methods, it is safer as you already see what you buy.
There are other doubtfully legal methods of investment: a preliminary agreement, mortgage, assignment agreement – however, we do not recommend to get mixed up with them as they may cause you lots of problems.
From practical experience we may say that most of buyers do not read the contracts they sign with the Developer (hereinafter – the Agreement) to the end. Also, people are not familiar with the construction industry and are often unable to properly study the agreement and provide its quality legal evaluation. To keep the Buyer from problems in the future, our Patriot Law Firm advises to contact professional lawyers, who will accompany the Buyer during a house-buying.
Settling accounts with the Customer should be implemented by bank transfer, because the entire payment history is being saved. If you are asked to pay with cash or to bypass the Bank (to transfer funds to the account of unknown company with unknown requisites), then it is better to continue to look for housing and not to deal with this Customer.
The essential terms that a contract must contain:
- The contract should specify the section and floor where an apartment you buy is located;
- There should also be total apartment space and its number, the cost of one square meter;
- Operation due and commissioning dates;
- An apartment building plan;
- Order of payment, terms, stages and amount of payments;
- A list of all the documents which a construction of a project by the Developer is based on;
- Description of an apartment;
- Liability of parties and dispute settlement procedure;
- Contract duration and requisites of the parties.
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Author of the article: Patriot Law Firm