A new bill is intended to solve the problem of unfinished constructions
The benefits of investing in real estate in the Ukrainian market are quite obvious. Compared to completely finished objects, a significant 20% discount is provided for housing under construction. However, the lack of guarantees of protection of the invested capital significantly increases the risk of losses for depositors. Waiting for the start of operation and registration of documents confirming the ownership sometimes takes many years, and the most common reason is the lack of necessary permits.
According to experts, there are at least a hundred of unfinished housing complexes in Kyiv, some of them are included in the structure of “building pyramids”, others can resale the living space to other investors. In search of a way out of this situation, a bill, published at the end of 2020, “On Amendments to Certain Legislative Acts of Ukraine Concerning the Protection of the Rights of Creditors of Construction Projects” was created and served as the basis for the revised and submitted to the deputies for consideration in the new edition of the law “On Guaranteeing Rights to Real Estate Objects to be Built in the Future”.
What will the adoption of a new bill bring
- Tightening control over operations with living space
After the entry into force of the new rules, the contribution of money to the construction of residential buildings by individuals will become possible only after the entering into sales contracts for the facility under construction. When building a high-rise building, the developer will be able to register contracts only after registering in the State Register of rights to real estate not only as the owner of the entire building, but also as the owner of each apartment in it. That is, apartments in high-rise buildings under construction will be equated with real estate objects, and not only the houses themselves, whether they be divisible or indivisible objects. Thus, investors will be protected from the resale of apartments, which was often carried out at the initial stage of construction, without their knowledge and acceptance.
- The bill applies only to those objects, the construction permit for which will be obtained after its entry into force
As follows from the preamble of the document that its action is aimed at resolving the situation with new future buildings. It won’t be able to provide any influence on controversial situations regarding residential buildings that have already been launched into construction, since it was originally developed to prevent them, and not to be used in decisions on claims that had time to go to the courts.
- For the first time, a definition of certain notions has been introduced in the laws of Ukraine
For the first time, the authors of the draft bill define the term “developer” and other notions that have been used in practice for a long time, but have not been legally formalized.
- In case of bankruptcy of the developer, guarantees are provided
One of the new notions defined by the draft bill is the guaranteed share of the construction of an immovable property. Now, in cases of bankruptcy of a developer or refusal to continue construction, the living space that, according to the previously existing legislation, could have been sold by him even before the end of construction, is protected from such actions by encumbrances imposed under the new provisions. Thus, the owners of apartments in unfinished houses can become the investing in the construction people even before its completely finished.
- List of significant conditions contained in agreements between developers and persons investing money in construction
The bill defines significant conditions for the following documents:
- Sale and purchase agreements for unfinished real estate;
- Agreements for the implementation and financing of construction works, concluded on the one hand by the developer, with the investors from the other hand;
- Purchase and sale agreements for an apartment or the whole object.
In this case, in accordance with the existing legislation of the contract, only certified notaries are accepted for consideration. In addition, the project defines the conditions that allow the preparation of agreements for the sale and purchase of the facility being built, namely:
- Urban planning rules existing at the moment;
- A valid building permission;
- No actual interruption of construction or commissioning;
- The existence of a guaranteed share;
- No encumbrances of ownership rights for the real estate under construction.
As a result of achieving such transparency of the applied schemes when concluding agreements on financing the construction of apartment buildings, the protection of investments in dubious arrangement should reach the highest possible level today, according to the expectations of the developers of the draft bill.