Today, investors in the primary real estate market are not protected from risky investments, therefore, before making an investment, buyers should conduct a thorough analysis of the investment project of a residential complex, monitoring of the available information on the developer’s rights to the land plot, the relevance of permits, as well as the developer’s involvement in litigations.
The heart of the future relationship between the developer and the investor is the investor agreement. Detailed analysis of such agreements gives an opportunity to estimate developer’s plans and intentions. However, at the same time, it is quite important to mention that this kind of agreement should contain clear conditions regarding the timing of putting the house into operation, the term and procedure for transferring the apartment. The conditions under which such terms can be extended, the developer’s responsibility for failure to fulfill its obligations should be indicated as well, including the procedure for termination of the contract by the investor and the procedure for the return of funds. Otherwise, the buyer runs the risk of losing effective mechanisms to recover material and moral damage from the developer, penalties for late transfer of the house.
At the initial stage of acquaintance with the future housing complex, it is worth paying special attention to the reputation of all participants in the construction (developer, customer, contractor, construction designer). To do this, it is worth examining them for decency. There are a number of indicators that you should pay attention to: reviews of the previous properties of the developer, the number of completed and commissioned facilities, the presence of negative information, litigations, the presence of companies in criminal cases, the presence of obligations to third parties, and so on.
One of the indicators of a developer’s ability to complete construction is the absence of open enforcement proceedings and attaches. This information can be obtained upon the request in the Unified State Register of Property Rights to Real Estate, the Automated System of Enforcement Proceedings and the Unified State Register of Court Decisions.
Saying in general, the availability of information about the termination of activities, a “newly-made company” with a minimum authorized capital, the presence of arrests and debts casts doubt on the possibility of completion of construction on time. It is worth being skeptical about any developer and carefully checking the documents with which they begin construction and sell apartments to their clients.
Before investing in a project, the buyer should request the main list of documents from the developer and check the legality of the construction. Such documents should include documents confirming the right to develop a land plot (ownership, lease, superficies) with a corresponding purpose; town planning conditions and restrictions; construction project and a positive expert opinion on the result of its study; documents giving the right to perform construction work.
From the point of view of legislation, the correct documents for the land plot can be considered as the basis for the start of building. In practice, a developer takes a land plot for lease, gets the right to superficies for construction, or buys it out. Through the Internet resource “Public Cadastral Map”, the buyer can see based on which documents the developer uses the land plot, and whether it is intended for the construction of a residential building. You can search the information through the cadastral number or the address of the object. The map displays information about the type of property and the purpose of the object, as well as for the specified land plot, you can order an extract from the State Land Cadastre, which contains information about the owners, superficies or tenants of the land plot. If the building customer is not mentioned in any section of the certificate and other faces are stated there, this may indicate problems with the right to a land plot and that the customer does not have building rights. In addition, the Unified State Register of Property Rights to Real Estate will show whether there are prohibitions, rights of claim from third parties to a plot (mortgage, mortgage, arrest) on a particular land plot.
You should not ignore the verification of urban planning conditions and restrictions, as well as documents giving the right to perform construction work for relevance. The start of construction work is preceded by the design of the facility. In accordance with the construction, standards and the location for the future housing complex, are established some requirements, that are reflected in the urban planning conditions and restrictions that the developer receives on his construction site and which he must adhere to when carrying out construction. These are design requirements, the key ones of which are the number of stories of the building, architectural requirements, building density, and retreats of houses and structures from the red lines. You can check the issued town planning conditions and restrictions through the resource “Town planning cadastre (layer of design documentation), where you can find a brief description of the document and its main details, which can later be compared with the document provided by the developer. If the issued document indicates the height under 9 floors, and the developer plans to build 16, this is a clear example of how construction becomes illegal and problematic.
Yet, you need to understand that the presence of all permits from the developer does not indicate a guarantee of the commissioning of the construction object and its legality. There is often a risk of cancellation of permits; therefore, the buyer needs to monitor the developer, their compliance with the requirements during the construction process, analysis of information from state registers.