Unfinished objects: drowning - drowning care?

23.03.2012 09:45
Articles about real estate | Unfinished objects: drowning - drowning care? The financial crisis and as a consequence, the difficulties of developers to complete the implementation of construction projects, as well as the adoption of the Law of Ukraine "On prevention of the global crisis on the development of the construction industry and housing» № 800-VI of December 25, 2008, which protects the interests of developers , caused investors to cooperate to protect their rights.

This law № 800-VI actually recognized the crisis in the housing circumstances of force majeure to January 1, 2013 That is, until early next year, property developers, armed with the appropriate pre-notification of the occurrence of force majeure, it can avoid the legal liability of any for breach of obligations in respect of the transfer of the housing, and for the return of funds invested. In addition, the investors who have carried out a partial payment for the facility, may require the cancellation of the contract with the developer only if the subsequent disposition of such an object to another investor. However, given the problematic status of construction, the prospect of the emergence of a new investor - to predict mild. In addition to this, the Act developers to January 1, 2013 are exempted from payment of charges and penalties for failure to comply with their obligations to return the invested funds.

Related article: Since the new year it will be easier to register property

The problem of unfinished projects, discussed the city government and Minregionstroem, there is not the first year, and ideas for its solution, in particular with regard to the transfer facility under construction to investors or local governments / local city administrations in order to complete the construction, are not innovative.

However, to date, investors still do not have at their disposal effective enforcement mechanisms builders to complete construction in the absence of recent financial resources or a substantial limitation. Also, as investors do not have a real opportunity to return the money invested in the construction, because no claim or litigation regarding the recognition of the contract with the builder of the contract null and void or cancellation of, the financial plan does not promise the affected investor, developer if there are no financial resources.

Suggested ways to resolve problems associated with the suspension of construction projects, builders, or even default rates of the latter, consisting in the transfer of self-organized investors unfinished object, in fact, have already been tested practice. One of the most common mechanisms of such self-organization was the establishment of housing co-operatives (HCC), which allow investors to independently resolve issues of further development. In particular, the HBC, issued the ownership of the object under construction is entitled to enter into all necessary agreements, including with contractors, and owner of the land, for the completion of the facility and subsequent transfer of apartments invested its members (investors). However, the nature of mass, this trend is not acquired because of low investment activity, in principle, unwillingness to cooperate, an insignificant level of investor confidence in some institutions, but also because it is based organizational and financial concerns and risks. After the creation of HBC should involve not only the availability of effective investment managers, but also the willingness of members of HBC was created to carry out additional financial contributions to enable the completion of the construction project.

Also, an important factor affecting the desirability and feasibility of co-operate, is the readiness of the project: the higher the degree of preparedness - the more chances to complete the project by investors themselves. Last but not least, and sometimes decisive, role in the possibility of investors to complete the construction project is the developer's position and the extent of his cooperation, in particular the voluntary transfer their facility under construction in the property created by investors HBC. As part of the developer support is also important to take into account the structure of leveraged bank loans, attracted by the developer for the construction project, and to analyze the amount of the bank's property rights to the object under construction. Indeed, in the case of a registered mortgage of the property or property rights to it in favor of the bank, the latter may object to foreclose on the developer in case of default at any stage of construction of the facility, including after its completion and acceptance into service, regardless of the transfer of ownership for such a facility from the developer to investors, or created their HBC.

In addition to the mechanism of HCC for each individual investor the possibility to conclude an agreement with the developer of sale of the facility under construction (which corresponds invested apartment) while signing the contract agreement with the developer to complete construction. Such a mechanism is, of course, creates a great guarantee for investors who have acquired ownership of the facility under construction, but does not solve the problem globally, as part of the object under construction can not be isolated and function by itself without the completion of the facility as a whole. Therefore, this option should be viewed in conjunction with the creation of HBC.

It should also be noted that bank loans to developers, in the event of default may be the last to foreclose on the object under construction prior to the establishment of HBC investors. In this case, the bank may sell such an object to local authorities or bodies of executive power, which thus effectively "replace" developer experiencing financial difficulties or is in default, that is: continue to build, but at the expense of budget funds. In this case, is really important to have a balanced, transparent and clear government policy regarding the participation of local authorities / bodies of executive power in the "problem" projects, because at present obligation to support such projects do not have these bodies, as well as the criteria that define priority of such support.

It is clear that the existing mechanisms for improvement, and balancing the interests of all participants in the construction process: investors, financial institutions, the builder and his possible successor, municipal authorities and public authorities, in particular, to coordinate activities and minimize associated with the process of exit from the project developer, risks.

Unfortunately, maintaining the trend of self-organization of investors, and expressing the fundamental understanding of the necessity of participation of state and local governments to complete these "problem" projects, neither local authorities nor Minregionstroy not offer specific mechanisms to resolve unfinished issues that the public could join their discussion to develop the best solution.

Anna Sisetskaya lawyer, Vasil Kisil and Partners
Did you like the material?Subscribe to our newsletter
Your comments:
Your opinion will be the first. Thank you for reading this article. I wish you happiness! Please share your opinion in the comment below.