What you have to know when you buy an apartment

11-10-2016

What documents and norms should be checked in a construction company to not willingly become a victim of a quite expensive prank?

SHulyakThe Better Regulation Delivery Office (BRDO) Construction Sector Head Olena Shuliak shared with Hromadske Radio with legislative subtleties of the construction sphere.

Vasyl Shandro: How did the construction terms change in Ukraine at the level of legislation, standards and requirements?

Olena Shuliak: A lot of documents in this field must be reviewed. Some of them had been adopted in the Soviet Union. The construction starts with the land allocation and finishes with the registration of the ownership right to the property.

The Law “On regulation of urban development” adopted in 2011 is the one of the main laws.  But its provisions started to work only from January 1, 2015. It says that now it is impossible to allot the land or change its designated purpose if there is no developed detailed plan for the territory where the land plot is located.

Just about 15% of the territory is covered with the urban planning documentation in Kyiv, and in Ukraine – about 45-50%. Neither the local nor the framework budget provided costs for the development of detailed territory plans.

To allot the land, investors can negotiate a triple contract, and they will refund the plan development. In this case, they will demand the land they are planning to build to be minimally encumbered, i.e. there will be no social facilities there.

That is why some investors cannot allot the lands, so they build without permits with the expectation that when the apartments are sold, no one will be able to demolish them.

People often confuse with two concepts – a buyer of apartment and an investor who shares the risks of a developer and can easily lose the invested money.

Tetyana Troschynska: Does the developer have to bear responsibility for making active development but not providing the social infrastructure for the residents,  and schools, kindergartens, clinics located nearby just cannot cope with great amount of people?

Olena Shuliak: There is a so-called investment tax, which the developers call the “legalized bribe”. This is a share contribution for the development of the engineering and transport and social infrastructure.

In addition to building utility facilities at his own expense, every developer must pay 4% of the construction estimate for the residential and 10% for the commercial property to the city.

This tax is one of the most corruptive payments in the construction sector. At the website of the Kyiv City Council we can see that as of October 1, 2016, 381 billion UAH have been already paid. All these funds must be spent on the social services, but I looked through analytical data – only one kindergarten had been put in the service for the last 3-5 years.

It means that the developers pay but the city does nothing with these funds. From the other side, this system is very unattractive for investors because such neighboring European countries don’t have this tax at all.

Vasyl Shandro: What should a potential buyer ask to escape unpleasant surprises post factum?

Olena Shuliak: There are basic rules: if you want to invest in housing, it is important to check the developer’s documents. First, this is a document that testifies the property right or the land use. You also need to verify the way the project documentation was approved, whether it was examined by experts, and whether the developer got a construction permit. Unfortunately, it is very difficult to check the quality of materials the residential buildings are made from.

If we look at facilities, which are being built now, we will came back twenty years. Developers have to correct the price at the cost of quality. It is really offensive to look at this because our children and grandchildren will live in the panel buildings, the great amount of which was built in every district.

Premium and comfort-class residential properties are practically stopped to be built. When people choose the housing, they do not interest in the ceiling height and materials the panels made from – first they look at the price.

Tetyana Troschynska: Why do not foreign investors come?

Olena Shuliak: I think that people buying apartments are our main domestic investors, and they must be protected primarily. The Lawyers calculated that every fifth contract has all the signs of double or triple apartment sale.

Also, it often happens that a person buys an apartment, for example, on the 10th floor, and the project provides 7 floors.

To protect the domestic investors, we propose a mechanism of creating the register, which would be made up based on developers’ data, to the government. When the developer gets all permits and provides legal construction – the sale is allowed only after he formed the register for the apartment sale.  It would eliminate the double and triple resale and would not allow the developer to change technical specifications.

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