Investment in housing

Specificity, risk minimization – Investment in housing

Housing problems for the majority of residents of Ukraine for many years do not lose their relevance. In order to save money, many citizens are forced to enter into investment contracts for the construction of residential premises, focusing primarily on the relatively low prices per square meter of housing under construction. But, as always, the cheapness is closely in contact with significant risks. These are errors in economic calculations (lack of financial opportunities for the developer to complete the construction), and the poor quality of construction work, and errors in the design, as well as many other problems. It should be noted that the developer is not insured against a number of risks. Construction of a residential building is a long process, during which the ever-growing inflation index leads to a rise in the price of building materials and the work itself. Thus, a significant increase in construction costs can lead to bankruptcy of the construction company itself. Inflation also affects the purchasing power of the population, which varies depending on seasonal demand, which also does not help to attract new funds for the construction of the facility. All this increases risks and can cause significant property damage to investors.

In order to better understand the process of investing in housing under construction, we propose to consider the specifics of contracts of investment in housing construction.

THE LEGAL NATURE OF THE CONTRACT INVESTIGATION

Despite the fact that the right to investment construction is declared by a number of regulations, none of them regulate the procedure for concluding such contracts. That is why investing in housing construction is associated with significant risks for investors. The absence of the procedure established by the legislation for the conclusion of such agreements, clearly defined rights and obligations of the parties, the registration of ownership of the constructed object, leads to a number of negative consequences for investors.

By its nature, an investment contract for the construction of housing is a kind of investment contract, but has its own specific subject, a special subject composition, the order of conclusion and the term of obligations. Investment agreements for the construction of housing are primarily aimed at the construction and acquisition of property (houses, apartments). The investor pays the developer a certain amount of money, and receives the apartment, i.e. in essence it is the contract of purchase and sale with the provision of goods (housing) in the future. The seller in this case is the developer, and the buyer is the investor.

In this regard, it is appropriate to apply the provisions of the Civil code to the legal relations between the investor and the developer, which regulate the procedure for concluding contracts of sale.

According to part 1 of article 656 of the Civil code of Ukraine the subject of the contract of sale may be the goods to be created (purchased, received) by the seller in the future. In addition, article 673 of the Civil code of Ukraine provides that the seller must transfer to the buyer the goods, the quality of which corresponds to the terms of the contract of sale. Since at the time of conclusion of the contract the seller (developer) does not have the appropriate goods, in order to ensure the necessary quality of the goods (housing) in the investment agreement it is necessary to clearly define the object of “sale”, its parameters and main characteristics. The data can be partially specified (changed) both in the process of construction and upon its completion.

Existing legislation does not provide for state registration of investment contracts for the construction of housing, although given the specificity and importance of the relationships which arise on the basis of investment contracts for the construction of housing, to protect the rights of the investor and verification of the credentials of the developer, and such registration could be a significant mechanism for the protection of investors ‘ rights.

THE RIGHTS AND OBLIGATIONS OF THE PARTIES

Investment agreements for housing construction are bilateral – each of the parties to the agreement (investor and developer) has rights and responsibilities. Under the investment contract for the construction of housing, the investor is obliged to make investments in the manner provided for in the contract, and has the right to acquire ownership of housing after the completion of construction works, and the developer is obliged to build housing at the expense of the investments received.

In addition, taking into account the peculiarities of investment contracts for housing construction, the following rights of investors can be identified: to choose the object of investment; to assign property rights under the investment agreement to third parties; to change the object of investment by the consent of the developer; to obtain documents necessary for registration of ownership of the object of investment; to demand compensation for losses in case of improper performance by the developer of its obligations. As for the obligations of the investor, in addition to timely investment in the manner provided for by the investment agreement, the investor may be charged with the obligation to compensate the losses of the developer for the late performance of obligations, to accept the investment object under the act of acceptance, notify the developer of a change of address or details, etc.

The scope of the rights and obligations of the developer in investment contracts for the construction of housing depends on the functions that are assigned to the developer. The universal rights of the developer include: the right to require the investor to fulfill its obligations under the investment agreement, including the investment; the right to engage third parties to perform works on the construction of housing; the right to demand the adoption of the investor in the ownership of housing; the right to terminate the contract in case of failure by the investor

As a rule, investment contracts for housing construction display the following obligations of the developer: to use investments transferred to him by the investor exclusively for the construction of the object provided in the contract; to issue to the investor the documents necessary for registration of the investor’s property rights to the investment object; to provide the investor with information regarding the implementation of the investment agreement, the use of investments and the construction of the investment object; to ensure the commissioning of the residential building and to register it in the bodies of technical inventory.

By agreement of the parties, the range of rights and obligations under the investment agreement may be expanded and specified.

SEPARATE TERMS AND CONDITIONS OF INVESTMENT CONTRACTS

One of the main conditions of the investment agreement is the transfer of funds to the investor for the construction of a residential building. The procedure for making investments by the investor is determined by separate provisions of the contract, investments can be made both in full and in part. In order to minimize the risks, investment contracts for housing construction should contain comprehensive data on investments, namely: the size of investments, the order and terms of their introduction; regarding the object of investment – data on the location of the residential building (building address), the floor on which the apartment should be located, the location of the apartment, the total and living area of the apartment, layout, arrangement of the apartment (installation of plumbing, plastic Windows, etc.).

As mentioned above, the developer under the investment agreement is obliged to ensure the transfer of property to the investor. In order to avoid difficulties in the performance of these obligations in the investment contract for the construction of housing should be specified clear terms in which the investor provided the necessary documents, and the terms in which the act of acceptance and transfer of housing to the investor. Also, persons responsible for registration of ownership of the investment object should be identified.

As for the legal documents, according to Art. 662 of the Civil code of Ukraine, the seller (developer) at the same time with the goods is obliged to transfer to the buyer his accessories and documents (technical passport, certificate of quality, etc.), which relate to the goods and are subject to transfer together with the goods under the contract or acts of civil legislation. Thus, in the text of the contract, it is desirable to initially provide a list of documents that the developer is obliged to transfer to the investor at the same time with the signing of the act of acceptance and transfer.

Categories: Housing Real Estate

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