Buying an apartment in a building under construction before July 2020 was a kind of lottery: people paid developers directly, and there was practically no guarantee that the house would be completed and delivered on time. Since July 2020, everything has changed: according to the law, equity holders now transfer money to escrow accounts, and construction companies receive it only after the houses are put into operation.
The rights of shareholders are now more reliably protected, but many still have not figured out what escrow accounts are, whether equity participation agreements (hereinafter referred to as DPAs) are valid, how calculations occur, what the purchase scheme looks like and what pitfalls can await the buyer. Let's look at it in more detail.
Legislation
- Contents and sample agreement
- Contents and sample agreement
- Documentation
Before you buy an apartment in a new building, you need to study the features of such a purchase. They are regulated by several laws:
- Federal Law of December 30, 2004 No. 214 “On participation in shared construction...”. The procedure for settlements, conclusion and termination of the contract, and the deadline for transferring the property to the shareholders by the developer are indicated here.
- Federal Law No. 177-FZ dated December 23, 2003 “On insurance of deposits in Russian banks.” The amount of the insured amount transferred to the escrow account under the DDU is 10,000,000 rubles. If the bank goes bankrupt, the funds will be returned in full.
- Art. 860.7 of the Civil Code of the Russian Federation “Escrow account agreement”. Determines the procedure for opening an escrow account and obligations under it.
Important! DDUs are now concluded in the same way as before. But the calculation procedure has changed. If until mid-2020, during the transitional stage, developers could take money from shareholders through escrow or directly, but now payments are made only through special accounts. They open for each kindergarten. The bank acts as a third party, and its participation minimizes risks for shareholders. They can be sure that their money will not go anywhere, and even if the developer goes bankrupt or freezes construction, they will be returned the entire amount.
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Description and types of agreements between the developer and the buyer
Where to start buying an apartment in a new building? Initially, it is necessary to carefully study the contract proposed by the developer. This document is fundamental; it must strictly define all the obligations and responsibilities of the parties for their failure to comply. The contract must contain comprehensive information about the property, the terms of its construction and delivery, as well as the amount of all funds necessary for payment.
You can buy a new building by concluding one of the following types of contracts:
- According to the agreement of participation in shared construction (DDU, this is the safest option).
- Purchase and sale agreement at the preliminary stage.
What is an escrow account?
Escrow is a special account opened in a bank for settlements under DDU when purchasing housing in a building under construction. The investor transfers money there, but the developer receives it only after the house is put into operation. For construction, he finds money from his own budget or attracts funds from outside: for example, takes out a loan.
When paying through escrow, the risks for the shareholder are reduced to a minimum. If the construction company does not comply with the terms of the agreement and delays the deadlines, it can terminate the contract and then get the money back from the bank.
Is it possible to buy an apartment without an escrow account?
The main purpose of introducing escrow accounts for settlements on real estate transactions was the safety of equity holders. But reliable construction companies can still accept money from them directly; they just need to meet a few requirements:
- The first contractual agreement was concluded until July 1, 2019.
- The house is at least 30% complete, more than 10% of the apartments have been sold.
- The company can confirm the degree of readiness with a conclusion.
- The shares sold by the company will be checked in Rosreestr along with the project declaration and registered agreements.
- If the developer has received the right to work without an escrow account, he is obliged to transfer money to the fund for the protection of shareholders. In the future, compensation is paid from there if the company does not fulfill its obligations under the DDU. The contribution is 1.2% of the cost of housing.
Important! In some cases, the requirements for the minimum degree of readiness are reduced. For example, 6% is enough if the company is systemically important, builds more than 4,000,000 apartments, and there are social facilities on the site. 15% is enough if entire microdistricts are being built up according to territory development programs, schools, clinics and kindergartens are being built.
Ways to buy an apartment in a new building
As a standard, all transactions with new buildings are carried out according to the DDU. But some developers offer people to buy apartments in installments.
In general, there are several ways to buy an apartment in a new building:
- According to DDU. It is concluded at any stage of construction before the house is put into operation.
- Under an agreement of assignment of rights of claim, when one shareholder sells the right to claim an apartment that has not yet been built from a construction company. Shareholders are being replaced.
- Preliminary installment purchase agreement. The riskiest option for the buyer, which is often used by developers to avoid concluding a DDU and paying through escrow accounts. An initial payment is required, the remaining amount is paid by the buyer in several payments. After full payment, the main DCT is drawn up and registered with Rosreestr.
- Purchase of a new building with the inclusion of secondary housing. An unfavorable option for the buyer: the resale property will be valued at the minimum cost, and it will be offset against the price of the new building. Usually, two DCTs are drawn up: one by one the company buys a secondary home, and the second one is used to sell a new apartment. But there may be a different scheme of the deal.
Legal advice: it is better not to experiment and buy an apartment using a regular DDU with payment through escrow. The developer may offer discounts on installment plans, but in this case the seller’s money will not be insured. If problems arise, it will be difficult to get them back.
Elena Plokhuta
Lawyer, website author (Civil law, 6 years of experience)
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Risks when buying in a new building
The biggest risks are the developer’s failure to fulfill its obligations, but provided that all documents are in order, it is quite possible to receive compensation. But there are other risks, they are associated with legal illiteracy and lack of knowledge of your rights. In this case, there is a high chance of being deceived. The most common tricks that buyers fall for:
- Not all essential terms are included in the contract. Often the developer’s responsibilities are not specified, as a result, if the delivery of the property is late or it goes bankrupt, he has nothing to show.
- Selling one apartment several times. This practically never happens with DDU, since the scope for fraud is too limited.
- Suspension of construction for an indefinite period, bankruptcy.
- Low quality of housing delivered due to savings in materials.
- The difference in the area of the apartment according to the contract and actually.
- Lack of development of the local area - no parking, pedestrian paths, playgrounds for children.
- The developer's bill systems make it almost impossible to return the invested funds.
- Preliminary purchase and sale. This is a trick that the developer resorts to when problems arise with permitting documentation.
- Conclusion of preliminary DDUs, which require payment of certain amounts before the conclusion of the main agreement.
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Buying an apartment from a developer: procedure
The scheme for buying an apartment in a new building for cash looks like this:
- Developer check. This is the most important stage.
- Conclusion of the DDU.
- Opening an escrow account. The bank is chosen by the developer. Typically, an account is opened with the bank that issued the construction loan to the company.
- Registration of preschool education in Rosreestr. An application from the developer and shareholder will be required. Everything is filled on the spot. You can contact the registrar directly or submit documents through the MFC.
- Payment according to DDU.
After this, you need to wait until construction is completed and accept the apartment, then register ownership.
Contents and sample agreement
When purchasing a new apartment, developers provide the DDU themselves; they already have developed samples.
What information should be reflected in the contract:
- Name and address of the organization, position of the person authorized to make the conclusion, details of the power of attorney, TIN, OGRN,
- Full name, passport details, date of birth of the shareholder.
- Construction permit details.
- The deadline for transferring the object to the shareholder.
- Conditional apartment number for the duration of construction.
- Information about the apartment: area, number of rooms, floor, house address.
- Rights and obligations of the developer.
- Rights and obligations of the shareholder.
- The developer is responsible for violating construction deadlines, and the shareholder is responsible for failing to meet payment deadlines.
- Payment order.
- Dispute resolution.
The developer will need the signature of an authorized person and a seal, while the shareholder will only need a signature. The agreement is drawn up in three copies: one remains with the parties to the transaction, the third is transferred to Rosreestr.
Agreement on shared participation in housing construction (ddu)
Documentation
To conclude a DDU and register with Rosreestr you will need:
- Shareholder's passport.
- Power of attorney from the developer's representative, passport.
- Constituent documents.
- Extract from the Unified State Register of Legal Entities.
- A document confirming the ownership or lease of the land participant by the developer.
- Project declaration with all changes.
- Construction permit.
- DDU.
- Plan of an apartment building under construction.
- Developer liability insurance contract.
- Certificate from the bank about opening an escrow account.
Expenses
The fee for opening and servicing the escrow is paid by the developer according to the tariff. On average this is 0.5-0.7% per year.
The state duty is 350 rubles. The parties independently determine who will pay for it.
Important! You can issue a power of attorney to a company employee, and he himself will submit all documents for registration. This is paid additionally, on average 20,000-30,000 rubles.
Participation agreement
Buying an apartment under the DDU is considered a fairly safe type of transaction, since this agreement is protected by Federal Law No. 214. The legislation of the Russian Federation protects the consumer from fraudulent actions on the part of an unscrupulous developer. In this case, you can purchase housing in a new building at any stage of its construction, even at the foundation pit stage.
The document concluded between the two parties is a guarantee that the constructed housing will be transferred to its owner, according to the date specified in the contract, immediately after the construction and commissioning of the facility.
Important! The agreement on shared participation in construction is subject to mandatory registration with the Rosreestr authorities. Only after this procedure is the document endowed with all rights and powers.
What should you pay attention to when buying an apartment in a new building under DDU? The document contains the following list of main points:
- Floor plan of the housing, its location and exact information about the footage, construction axes and serial number.
- The full value of the real estate must be indicated.
- The deadline for delivery of housing after its acceptance by the State Commission is indicated.
- The final date for the transfer of his apartment to the DDU participant.
How to buy an apartment in a building under construction with a mortgage?
The algorithm for buying an apartment in a new building with a mortgage is slightly different:
- The buyer finds the developer, checks the documents and clarifies the terms of the transaction with him.
- A bank is selected and a mortgage application is submitted.
- After the application is approved by the bank, the DDU is concluded and registered with Rosreestr.
- A mortgage agreement is concluded with the bank, then the money is transferred to the escrow account.
Legal advice: to increase your chance of getting your mortgage approved, you should take a closer look at the bank’s partner developers. Before executing a mortgage agreement, the lender carefully checks the construction companies, and he will have more confidence in the partner.
Elena Plokhuta
Lawyer, website author (Civil law, 6 years of experience)
Contents and sample agreement
A DDU with a mortgage contains almost the same information as without it. But it must indicate the procedure for settlement with the developer and the details of the lender.
Documentation
To apply for a mortgage for a new building you will need:
- Borrower's passport.
- Help 2-NDFL.
- A certified copy of the work record.
- DDU.
Note! If maternity capital is used, a certificate and a certificate of the balance of funds on it from the Pension Fund are submitted to the bank. To confirm the down payment, you will need a payment order and a bank account statement.
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The head of the agency department, Yulia Kravchuk, answers:
You need to start buying an apartment in a new building by studying advertising (outdoor, in the media, on the Internet, etc.). It must contain the name of the developer company and the address of the site on which the project declaration of the complex and the construction permit should be posted. The Internet (site of the object, forums) will help you get a first idea about the project and its initiators: their founders and work experience. It is useful to pay attention to the presence of large banks lending to the property and its mortgage accreditation (this provides additional guarantees that your future home will be built on time).
Study the apartment layouts on the website to see if any of them have what you are looking for. If yes, then start studying the project: number of floors, number of apartments per floor, construction technologies, engineering, availability of internal infrastructure, etc. Pay attention to the immediate surroundings of the complex: are there parks, kindergartens, schools, clinics, shopping centers, etc. around? . Some sites allow you to track the construction process in real time. Be sure to take advantage of this opportunity to see how the construction is progressing.
If at this point you have a favorable impression, call the sales office and check if there is an apartment for sale with the area you are interested in, number of rooms, cost, availability of finishing, etc.). If there are few of them left or they are subject to a promotion, it is better to reserve the selected lot by phone and agree on the time of the visit. Also check the terms of the promotion, whether you correctly understood the information contained in the advertisement.
Results of 2020 on the Moscow new buildings market
Results of 2020 on the market of new buildings in St. Petersburg and the Leningrad region
Next, contact specialists who will help you study the documents that are the basis for legal construction. In particular, look at the land lease agreement and the investment contract, which clarify the developer’s obligations to the city. Also important is documentation confirming the competence of the seller’s actions: an agreement for the sale of the object, a protocol for apartment distribution. The next stage is studying the housing purchase agreement. The most reliable legal scheme at the construction stage is the purchase of an apartment in accordance with Federal Law-214.
Try to find out more about the complex: what wall material is used, the level of sound insulation, the window manufacturer, the transport situation in the area, the cost of future utilities, where the windows face and what kind of view they have. Specify the timing of the project in stages: when it is built, when it is put into operation, when the property is registered, when the keys are issued.
How to register property rights?
Registration of ownership is possible only upon completion of construction, when the developer already has permission to commission and a technical passport.
How it all looks step by step:
- The company receives all the documents, and a protocol for the distribution of space is drawn up.
- The shareholder accepts the apartment and signs the transfer deed.
- Documents for registration are submitted through Rosreestr or to the MFC.
- As a result, the owner receives an extract from the Unified State Register.
Documentation
To register property rights you will need:
- Application (filled out on site).
- DDU.
- Transfer deed.
- Mortgage agreement and mortgage, if the apartment was purchased with a mortgage.
- Technical passport.
State duty
For registration, the buyer pays a fee of 2,000 rubles.
What to look for when buying a new building?
Most often, people are interested in what questions to ask the developer when buying an apartment. First of all, you need to ask if he has a construction permit and design documentation, then read the documents.
It is also recommended to clarify:
- How developed is the infrastructure, how are things going with transport links?
- Are there any plans to build new facilities nearby?
- Are there agreements with energy companies and other companies providing services?
- Does the developer work with mortgage investors if a mortgage is planned?
- What materials is the house built from?
Legal advice: the developer can answer anything. It is better to check all the information yourself by requesting documents and familiarizing yourself with the infrastructure of the area.
Elena Plokhuta
Lawyer, website author (Civil law, 6 years of experience)
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How to check the developer?
First you need to check the documents of the construction company:
- Charter
- Extract from the Unified State Register of Legal Entities.
- Certificate of registration with the Federal Tax Service.
- Construction permit.
- Project declaration.
- New building insurance contract.
It would be a good idea to check information about the developer using several services.
For example, on the website of the Russian Ministry of Construction you can find out the number of houses sold by a company, its registration data, information about the manager, email address and telephone number of the reception desk. If the developer is not registered anywhere, information about him will not be there. This should alert you, it is better to refuse the deal. There is a possibility that this is a scammer.
Another verification option is the FSSP database of enforcement proceedings. If a construction company has debts, they will be reflected there. The presence of debt negatively affects the reputation; such a transaction must be treated with caution: there is a possibility that the developer will soon go bankrupt.
Note: you can check the construction company by reviews. It is better to ask them from those who have already bought apartments there. Ideally, these will be relatives or acquaintances. On the Internet there is a chance to run into custom reviews.
A lawyer's answers to questions about buying a home in a building under construction
Is it possible to buy an apartment in a building under construction and then sell it after the price increases?
Yes, this is often practiced. But it is not the apartment that is being sold, but the right to claim it under the assignment agreement.
Is my husband's consent required to purchase an apartment in a building under construction?
Yes, consent is provided in simple written form, because General money is used for purchases. It is usually required by the bank.
Is it possible to register a private trust for two shareholders?
Yes, this is not prohibited by law. The contract specifies their details, as well as the procedure for distributing financial obligations to the developer.
I am in one city, I want to buy housing in a new building in another. How to do it?
You can issue a notarized power of attorney for another person. He will deal with the procedure and negotiate with the developer independently, but on behalf of the principal.
The father was a shareholder and died before the house was put into operation. I am the heir. Can I become a member of the DDU instead of him?
Yes. Within 6 months from the date of death, you need to enter into an inheritance, obtain a certificate from a notary, and then come to the developer and conclude an additional agreement to the DDU.
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Procedure
Purchasing housing located in a new building with a mortgage is as follows:
- Preliminary approval of a mortgage loan for the purchase of housing in a specific house. Most often, an application for a mortgage loan is sent to the partner bank of a particular developer. In this case, the possibility of quick preliminary approval of a mortgage loan increases, since the bank does not need to additionally check the developer for the quality of his fulfillment of his obligations.
- Signing a preliminary purchase and sale agreement with the developer, acting as the owner of the property, or with a development company that is engaged in the sale of housing in a specific built house. Such an agreement must indicate the basic data about the apartment being purchased, as well as the mechanism for mutual settlements between the parties to the transaction. Since the option under consideration involves the purchase of housing with a mortgage, the preliminary purchase and sale agreement must indicate what part of the funds is considered as a down payment on such a loan and is transferred either through the bank to the seller of the property, or independently by transferring funds from the buyer to the seller .
- Signing a loan agreement to receive funds that will be transferred by the bank to the home seller to repay the funds that the buyer must pay for the purchased square meters. The loan agreement is signed on the basis of the provided preliminary purchase and sale agreement. But the bank may refuse to sign it, despite the fact that there was preliminary approval, if for some reason the buyer is recognized as not meeting the bank’s requirements or the purchased housing raises questions for the bank.
- Signing the main purchase and sale agreement, on the basis of which the ownership of the purchased housing is registered. With a signed purchase and sale agreement, the buyer applies to Rosreestr to register ownership of the housing, and also registers the establishment of an encumbrance on such housing until the debt is fully repaid.
In order for the transaction to be as successful and quick as possible, the parties to the transaction should prepare a certain package of documents, which are sent to the bank to consider the possibility of concluding a mortgage agreement.
