Pitfalls in real estate transactions

04.07.2011 09:15
Articles about real estate | Pitfalls in real estate transactions The real estate market more and more come to life and number of transactions grows. I would like to draw attention to some aspects of domestic legislation concerning the field of real estate transactions.

1) Cost of property sales and the cost of renting are very dependent on the location and condition of the property. However, the estimated difference between the purchase price and the amount of monthly rent is that the purchase of property for rent will pay off in the best case, no earlier than two years. It should be borne risks such as lack of demand risk, the risk of fluctuations in market prices and risk losing the tenant (for objective or subjective reasons). In this period we can speak about the possible disadvantages of investing in real estate - both residential and commercial.

Related article: Exclusive agency agreement: to conclude or not?

2) When purchasing natural persons of the property for profit, an agreement to acquire part of the Property shall contain the terms of the absence of third party rights, and the agreement on trust management should include a commitment to ensure the profitability of the manager and agreed with the owner of the property rental.

3) The best option out of the scheme co-invest in real estate for an individual will either sell part of the joint property of the other co-owners and the assignment of its rights under a contract of trust management or the sale in favor of the agency (with the termination of the management in terms of selling shares in the joint property). In any case, a person must consider the tax consequences in the form of a five per cent income tax on the sale, as well as the costs of notarization of the contract (1%).

4) The Tax Code of Ukraine does not provide the features of taxation of real estate transactions, transferred in trust. According to the norms p.170.1 st.170 Tax Code, a tax agent for the lessor is the lessee and the lessee is a natural person - that he landlord.

5) Jurisdiction of relationships with asset management of real estate is difficult to define, but according to part 2 st.1031 Civil Code, a contract of trust management of property subject to compulsory state registration, and, according to p.170.1.6 st.170 Tax Code, to disclose information about the lease relevant tax authorities required a real estate agency, which is a mediator.

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