Actual problems of the real estate market and their solutions

12.02.2011 20:06
Among the most pressing issues of the real estate market, the decision has been delayed by investment activity, I would be classified as follows:

1. Lack of safeguards and mechanisms for protecting investors when investing in the construction phase

Current legislation does not define the conditions under which an interested developer has the right to raise funds from investors. Certain restrictions on acceptable mechanisms for financing the construction of the legislation set for housing projects. At the same time, the existing rules and introduced a system of control does not help prevent the risks of repeat sales, leaching of funds from the project due to their misuse. In order to optimize the tax consequences, the developers have to resort to complex financial instruments (bonds of trust, mortgages, options, etc.) and financial intermediaries, which sometimes leads to technical problems (eg, issuer default), which cause irreparable harm to project an image. Year after year, the legislator provides audit of building legislation, in particular by limiting the permissible funding mechanisms housing projects and changing the law of Ukraine "On investment activity", but the effect is not achieved. But to protect the investor and as a consequence of improving the investment climate in Ukraine was to so few - enter the state registration of transactions carried out with the object under construction, property rights, securities, if they are used to purchase the rights to the apartment, to introduce compulsory insurance financial (rather than proprietary) risk; eliminate intermediaries from the relationship, "the developer-investor." But we do not wait ...

2. Legislative conflict regarding compensation to the customer the cost of construction of the offsite engineering infrastructure, created to fulfill technical conditions

Existing law requires building owners to carry out construction of engineering infrastructure, if required by the specifications, which are issued to private specialized companies (natural monopoly), and transfer the ownership to the aforementioned organizations ... for compensation. The law № 800 determines that the amount of compensation to be determined in the manner prescribed by the Cabinet of Ministers of Ukraine. At the same time for two years, the order of Cabinet of Ministers has not been approved, and developers continue to fill up specialized monopoly power, presenting their construction of the facility offsite engineering infrastructure.

Moreover, in matters of compensation to the customer the cost of construction of engineering infrastructure, the legislation contains provisions that are inconsistent with each other, namely: (a) Part 8 of article. 27 of the Law of Ukraine "On the Planning and Development" № 1699-III of 20.04.2000, concerning the possibility of deducting the cost of construction of utilities, which are outside the area with equity, and (b) Part 3. 18 of the Law of Ukraine "On Electricity" № 575 / 97-BP on 10/16/1997, concerning compensation for the cost of construction engineering in the amount and manner prescribed by the Cabinet of Ministers of Ukraine. As a result, none of the rules are not implemented in practice, without the ability to determine which rule takes precedence and what rule should apply in either case.

Not invited to address these problems and the bill "On regulation of urban development", adopted a total of 13 January 2011. Under the bill, the compensation cost of construction of engineering infrastructure to the customer is done by reducing the equity (contribution) of the customer in the creation and development of engineering infrastructure of the settlement. In this case, conflicting regulations of the Law of Ukraine "On Electricity" with respect to compensation for the construction of engineering infrastructure owner of the relevant elements of the engineering infrastructure is not excluded. In such circumstances, it follows that these expenses will be reimbursed to the customer double the amount or, because of inconsistency of legislative provisions, there will be disputes and preconditions for abuse relevant bodies and agencies.

Nevertheless, the decision problem lies in direct, clear and unambiguous definition of the order, timing, and the formula for calculating compensation (compensation), the builder, as well as the consequences in case of violation of the specialized organizations of the conditions of compensation. Moreover, it would be possible to offset compensation expense in connection fees to the networks of a specific project.

3. The absence of mechanisms to counter inaction of local authorities - a collegiate body

Virtually every other developer is facing avoidable problem - inaction of local authorities when deciding on the lease of land, changes in their purpose, land privatization, etc. In accordance with the Act on Local Government in Ukraine ", local councils, powers that the disposal of land, is a collegiate body. Characteristic sign of collegiality of the body is making decisions through sessions that may not be a quorum, etc. Accordingly, an interested person may for years without result to expect when his matter will be considered, or when still gather a quorum for the solution of his question. But he may refuse, in this case a collective body is not obliged to justify the reasons for its refusal. Version of judicial protection of rights of the person concerned, alas, but bezperspektiven as induce session to take a particular decision or to gather a quorum is not possible, and contrary to the Constitution of Ukraine. As a consequence, many years can not extend, renew terminate the contract of lease of land plots located within settlements. There was a period when, in order to overcome the legal stalemate, many in the court recognized the lease agreements concluded or rights to land obtained, but in a subsequent similar actions have been recognized by Vasu illegal, and many court decisions reviewed at the request of prosecutors.

A certain way out of inaction collegial bodies gave the principle of "tacit consent". At the same time, the principle of "tacit consent" that is embedded in the law of Ukraine "On licensing system in the sphere of economic activity, lost its practical value to the cancellation mechanism for its implementation in accordance with the Law of Ukraine on February 11, 2010 1869 N-VI. I think, extremely relevant not only for the real estate market, but also to other spheres of life, which involve local authorities, legal regulation mechanism of the principle of tacit consent.

Natalia Dotsenko-Belous, Vasil Kisil and Partners

Content tags: Investments Property
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