You can buy an apartment in a new building in different ways. When a developer sells an apartment, he chooses the most optimal sale option for himself, and the buyer is forced to agree with this option.
However, the scheme of selling an apartment in a new building depends on how risky the purchase will be. Which methods are safer, and which apartment is better not to buy?
Article 4 of the Law of Ukraine "On Investment Activities" provides that raising funds from individuals for the construction of residential buildings can be carried out only through construction financing funds, real estate funds, mutual investment institutions, by issuing targeted bonds of enterprises. These methods are the safest for buyers.
However, raising funds for construction in such ways are more problematic and costly for the developer. Therefore, when you buy an apartment in a new building, you often have to sign other contracts. This can be: a contract of sale of property rights, a contract of participation in a housing cooperative, a preliminary contract of sale of an apartment or a contract of sale of a derivative. All these methods have both advantages and disadvantages.
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Agreement on participation in the construction financing fund
The funds raised for the construction are transferred to the fund manager, who uses the funds according to the fund's rules and agreements with investors.
Pros: The scheme is expressly provided by law. Construction control by the manager. The developer must have permits. In the event of bankruptcy of the developer, buyers will potentially be able to return the investment.
Cons: The scheme is difficult for the average buyer to understand (a significant number of parties, many legal concepts). The developer can control the fund manager. The developer can delay the delivery of the house (as in any of the schemes).
Purchase and sale agreement of target bonds
The developer sells to the buyer securities - target bonds. After the maturity (redemption) of bonds, and delivery of the house, buyers can exchange bonds for an apartment.
Pros: The scheme is expressly provided by law. The developer must have permits. Borrowed funds can be spent only on construction
Cons: The scheme is difficult for the average buyer to understand. The developer may delay the delivery of the house.
Preliminary contract of sale of the apartment
The developer signs a preliminary contract with the seller, in which he undertakes to conclude a contract of sale of the apartment in the future.
Pros: The scheme is simple enough for ordinary people to understand.
Cons: The developer can raise funds without permits. Possibility of misuse of funds. Possibility of double sale. The developer may delay the delivery of the house.
Contract of sale of property rights.
The developer signs a preliminary contract with the seller, in which he undertakes to conclude a contract of sale of the apartment in the future.
Pros: The scheme is simple enough for ordinary people to understand.
Cons: The developer can raise funds without permits. Possibility of misuse of funds. Possibility of double sale. The developer may delay the delivery of the house.
Agreement on participation in a housing cooperative.
Funds for the construction of the facility are raised by concluding agreements with buyers on the payment of share contributions in a housing cooperative.
Pros: The scheme is simple enough for ordinary people to understand. Buyers as members of the cooperative have the right to participate in the management of the cooperative.
Cons: The developer can raise funds without permits. Possibility of misuse of funds. Possibility of double sale. The developer may delay the delivery of the house. Prior to the sale of the apartment to the buyer, the owner of the apartment is a cooperative.
Forward contract. Derivative purchase and sale agreement.
The buyer enters into an agreement to purchase a security - a derivative. The purchase of a derivative gives the right to enter into a contract of sale of property rights, on the basis of which the buyer receives ownership of the apartment after putting the house into operation and paying the value of property rights.
Pros: The buyer does not incur additional costs (for example, for a notary). The risk of double sales of the apartment is minimized.
Cons: A certain difficulty in understanding the scheme for the buyer. The developer can raise funds without permits. Possibility of misuse of funds. The developer may delay the delivery of the house.
As you can see, you can buy an apartment in a new building in different ways. Each of them has both advantages and disadvantages. When you decide to buy an apartment, you should analyze not only the scheme of sale, but also the contract itself, the permit documents of the developer and his reputation in the market. Professionals will help you with this real estate lawyers.
To find out how you can check the developer yourself, you can read our article.
Let's help to get real estate safely
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