Developer check: what to look for when buying an apartment in a new building?

Many real estate investors have been “burned” more than once when purchasing an apartment in a new building. The developer company may turn out to be dishonest and not complete the building. For that, to successfully choose a reliable developer – it needs to be checked. You can do it yourself and with the help of an experienced real estate expert..

What can happen to the object, if the developer is unscrupulous:

• failure of the developer to fulfill its obligations, as a result, construction is frozen;
• inconsistency of permits and the facility being built, eg, according to the documents, a five-story building can be built on the site, while the skyscraper is being built;
• fictitious construction documents, permissions, presented on the developer's website, may not be in the state register.
• untimely delivery of the object;
• one object can be sold to several buyers at once;
• the apartments are pledged by the bank and can be withdrawn to repay the developer's loans.

According to statistics, near 20% apartment buildings under construction in Ukraine will be frozen or their delivery will be suspended. In this regard, a full verification of the developer is required before making a deal.. This procedure can be trusted like professionals, and do it yourself.

Common list, according to which it is necessary to check the developer looks like this:

1. Certificate of ownership of the land, on which the house is built.
2. Building permit.
3. Contract for design and construction.
4. Construction and design licenses.
5. Agreement for participation in shared construction.
6. Certificate of no debt for housing and communal services.

Next, we will consider some points in more detail., as well as give additional recommendations for checking the developer company.

Developer reputation

The developer of the object must be a company with a positive reputation. It is necessary to check the developer according to EDRPOU. The Unified State Register will help you find out the date of foundation of the company, its founders, authorized capital, type of permitted activity. Here you can also find out about the presence of debt obligations and litigation from the developer.

Additionally, it is necessary to check the developer and related companies through the Unified State Register of Court Decisions. The portal of the tax service will allow you to determine if the company has debts to the state.

A reliable developer must have completed projects. Make sure, that they were delivered on time, and also the work was carried out with high quality. Additionally, you should familiarize yourself with the materials of the Association for Assistance to Affected Investors. maybe, the company was previously involved in major scandals.

List of required documents

The developer must have the following documents:

• The documents, confirming his rights to the land. This role can be played by a statement of ownership, lease or superficies agreement. In the latter cases, it is necessary to check the terms of the agreement. Land rights, as well as its intended purpose can be verified through the State Register of Rights to Real Estate and the Public Cadastral Map. The intended purpose of the site must correspond to the construction of an apartment building, what in the state classification corresponds to the marking 02.03 or 02.07. If the site is not intended for residential construction, the project can be frozen or arrested.
• Urban planning conditions and building restrictions. This document contains design and construction requirements, in particular, the number of storeys and the level of building density of the site is indicated. It is required to perform construction work, financing the object, connecting it to centralized engineering networks and communications.
• Project documentation – it is developed on the basis of urban planning conditions, its expert evaluation is carried out, during which the class of construction complexity is revealed.
• Agreements on joint construction activities. Often, apartments in one complex are sold by several developers. In this case, the client should examine the relationship between them., distribution of space after the end of the project. This will avoid selling the same apartment twice.. If there are litigation between partners, buying such a home should be abandoned.

Additionally, it is necessary to check the availability of technical conditions for connecting communications, as well as an agreement between the developer and the company, selling apartment, often these are different legal entities.

Building permit

Apartment buildings belong to the third category of complexity, complexes of several houses or sections belong to 4 and 5 class. Buildings of the third category can be erected on the basis of the declaration of the beginning of construction work. For buildings 4 and 5 class building permit required. Only after obtaining permits can the company start construction. The availability of documents can be checked on the website of the State Architectural and Construction Inspection. It is not only permission that is subject to verification, but also its content, in particular the type of the object, number of storeys, number of buildings.

For objects 4 and 5 level of complexity, you will additionally need a contractor's or general contractor's license.

Conclusion of a contract

When buying an apartment from a developer, it is possible to execute agreements of the following types:

• preliminary sales contract;
• equity agreement (membership in a housing construction cooperative);
• investment agreement;
• property purchase agreement;
• FSF participation agreement.

Unscrupulous developers often offer to conclude a preliminary contract. In this case, the customer cannot check, What are the funds transferred for real estate used for?, and also whether this apartment has been sold for the second time. Experts consider the most optimal conclusion of deals on targeted investment and participation in the FSF. These transactions are strictly regulated at the legislative level.

When concluding a transaction, the buyer must check whether the document contains the specifications of the purchased apartment.: project area, number of rooms, floors, numbers. This information will allow you to accurately identify the purchased property during registration. The document must contain the dates of completion of construction, putting the facility into operation, as well as the deadline for transferring the apartment to the buyer. In the absence of exact dates in the contract, the developer will be able to postpone the deadlines at his discretion. The amount of interest in the event of delinquencies should be set, which the developer will be obliged to pay, as well as responsibility for poor quality performance, terms and conditions of correction.

It is the buyer's responsibility to ensure, that the contract clearly states the cost of the apartment. When making an installment plan, a payment schedule is additionally prescribed.