What we encountered when providing legal support for a DDU transaction, and is this service really needed?

It didn’t take me long to find a lawyer. Friends from management structures recommended a couple of smart specialists, and I met with each of them. I chose the one who seemed most concerned about my interests when buying a home (or simply the one who was more “to my liking”; here I also listened to the voice of intuition, which in the end did not disappoint).

As for the cost, I note that I received the first consultation for free (lawyers offer it in order to attract a client so that he can evaluate his knowledge and experience), thanks to which I could easily figure out in what direction and in what sequence we would act. In general, prices for legal support of real estate transactions range from 35,000 to 150,000 rubles and even higher - it all depends on what is included in the package of services. In the end, I chose full transaction support, which cost 75,000 rubles. And this, taking into account the experience, level of qualifications of the specialist and all the hassles that were avoided, turned out inexpensively (I myself could have lost much more). In addition, my participation, time and emotional costs were minimal.

What the lawyer did and checked

The specialist did a serious job:

• checked information about the apartment in closed sources (including for legal purity);
• made a risk analysis and assessment;
• carefully checked the share participation agreement;
• reviewed additional documents;
• provided a conclusion describing the risks and recommendations;
• participated in negotiations with the developer to agree on a deal when I found clauses in the contract that confused me;
• accompanied settlements at the bank (through a safe deposit box, since the letter of credit did not suit me);
• helped collect the necessary documents and organized the registration of the transfer of ownership;
• prepared the acceptance certificate;
• supervised the transfer of receipts and keys.

Plus, the lawyer gave me a guarantee certificate for the transaction and his services (for a period of 5 years). This reassured me and gave me even more confidence that the decision made to cooperate with him was the right one.

Pitfalls in an agreement with a developer

And now I’ll tell you in more detail what we encountered – what points in the DDU we were confused by, and how the issue was resolved. In general, I was initially prepared for difficulties, therefore, when the lawyer (for convenience, I will call him Yuri) found unfavorable or suspicious clauses in the document and showed them to me, while simultaneously describing the alternative and ways to solve the problem, I immediately called the developer’s office, to make an appointment. We were not satisfied with the points relating mainly to the financial side: the price was tied to the dollar exchange rate and the inflated penalty for the investor was a penalty for termination. That is, if I decide to terminate the contract, I will have to pay 10% of the cost of the apartment.

Rice. 1. Penalty for termination of a pre-employment agreement at the initiative of the shareholder

The third point, the most harmless at first glance, was the connection to a specific management organization, which in the future may lead to an increase in tariffs for home maintenance. A similar point was that from the day the house was put into operation until the apartment was transferred to me, I would be required to pay for the maintenance of the house.

Rice. 2. Payment of utilities

I honestly admit that I myself (without a lawyer) would not have even noticed this point, although I am used to working with documents and carefully read all the papers before signing.

Our cases

• Recovered: RUB 14,500,000.
  As a developer, Mayak paid 14.5 million rubles. for the war he started Read more
• Inclusion in the register of transfer of housing

  How we overcame the bankruptcy trustee and joined the register Read more

• Recovered: RUB 2,260,000.

  How we squeezed 2,260,000 rubles out of crooked window profiles from the developer LSR Object-M Read more

• Recovered: RUB 1,634,800.

  We collected 1.6 million rubles (206%) for deficiencies in the decoration of the apartment according to the DDU from FSK Leader More details

• Investment is not recommended

  How we saved the client RUB 14,665,500. investment Read more

• Recovered: RUB 898,735.

  The developer "Lotan" paid the shareholder 274% of the market cost of eliminating the defects Read more

• Recovered: RUB 2,415,243.

  How a shareholder received 2.4 million rubles. from “StartSK” on the agreement to terminate the DDU Read more

• Recovered: RUB 1,180,500.

  The court recovered 537% of the cost of eliminating deficiencies from PIK-Region More details

• Recovered: RUB 21,394,502.

  How to get 21 million rubles. upon termination of a contract for an object worth 9 million. Read more

• Recovered: RUB 2,200,000.
  Read also:  How to rent out housing on Booking: registering an apartment, receiving guests and paying taxes in 2022

  Collection of 2,200,000 rubles from BM-Stroy for poor quality repairs in an apartment Read more

• Investment is not recommended

  How an analysis of a counterparty helped save RUB 3,385,679. More details

• Recovered: RUB 641,094.

  We collected more than 215% of the cost of eliminating defects from the Lotan developer More details

All cases

Developer Tricks

At the first meeting, the developer’s representative tried to dissuade me from making changes, hinting that “so many people were already interested in this apartment.” However, I did not give in, because I had already heard from friends about such manipulations, the only purpose of which is to dissuade a potential client from “wasting time on useless conversations about making changes to the DDU.” The reasoning can be completely different:

• the last apartment, it can be taken away tomorrow;
• price increases are planned;
• limited period for receiving a discount or promotion;
• There is no such advantageous offer anymore and there never will be.

In such situations, you need to evaluate the risky clauses in the contract and compare them with the possibility of purchasing real estate on more suitable terms (in another residential complex, from another developer).

I made a counter move, using my arsenal of “pressure” methods on the developer’s representative. To be more precise, I showed that I am a profitable and desirable client for him. Almost wholesale. Of course, I didn’t buy all the remaining apartments. I just found “allies” who were also considering the possibility of buying a home in this new building. Keep this in mind when you interact with the developer. He will more quickly agree to adjustments in the DDU during negotiations with a representative of the “united front” who is ready to buy all the apartments on the floor than when communicating with a single client. Although exceptions are possible here too. But a hint that you will give recommendations to your friends to buy real estate in this house will not be superfluous.

What is the difference between joint and common shared ownership

Both property regimes are of the same nature and imply the presence of several owners of the same material assets and property.
But there are also differences between them. With joint ownership, all things, property and real estate are in the possession of both family members. Husband and wife have equal rights to everything and can jointly manage and dispose of all their property. An apartment that is owned by both cannot be sold by one of them without the permission of the other. If one of them makes a transaction without the knowledge of the other, then within a year it can be challenged by the party that did not take part in it. Such transactions are declared illegal by the court. Shared ownership of an apartment by spouses means that each of them has their own allocated part in this apartment, which they can manage and dispose of as they wish. The shares may or may not be equal. The size of each share is determined by mutual agreement between them. If you want to sell or donate your part, you do not need to obtain permission from another family member. However, before selling your part, you must first offer it to the other spouse, since he has the first right of redemption. Having received a refusal, you can sell it to anyone.

A brief educational program on how to properly negotiate with a developer

Each developer has his own standard share participation agreement, which he invites all apartment buyers to sign. And the conditions prescribed there (often unfavorable for the investor) are not particularly keen to change. However, we found arguments (about wholesale purchases) that prompted the developer to make changes to the standard DDU that would meet the interests of the buyer – mine in this case.

I’ll tell you from my own experience - in order for everything to work out in the most favorable way, it is important to follow simple rules:

1. Limit yourself to a minimum number of people at negotiations - the more there are, the more difficult it is to find a compromise.
2. Try to have the same number of people present at the negotiations on both sides. This is an important psychological move - superior numbers have a negative effect on the enemy.
3. It is better to make an appointment in the first half of the day - when fatigue and nervousness are minimal.
4. It is useful to introduce the technique of “inflated demands”, then your real requirements will seem like flowers (for example, to maximize the level of responsibility of the developer or to minimize the time it takes to fulfill his obligations).
5. Save the most important adjustments to the DDU until last. The more times the opposite side refuses your edits, the higher the likelihood that they will be forced to concede at least something (which is what the last point will be).
6. Adhere to the rules of etiquette - speak in a calm and low tone, react to everything with restraint.

Strategy and tactics of negotiations with the developer

I would like to note right away that the process of negotiations with a developer differs significantly from the format of usual business negotiations. It is these features (I was personally convinced) that usually lead buyers to failure - even those, like me, who, by profession, often conduct successful negotiations with partners. I will list the main reasons why equity holders do not seek concessions at the developer’s office (I realized them after analyzing the situation I had to face):

1. In most cases, negotiations with the shareholder are not conducted by the person who makes decisions on the issues raised in the DDU (most often the manager listens to the investor).
2. The equity holder is much more interested in buying the chosen apartment than the developer is in receiving money from one “small” client (especially if he buys a studio or one-room apartment).
3. And what emerges from the previous point is that the developer will sooner agree to change some provisions of the contract and make concessions to an investor buying several apartments, rather than listen to the shareholder who chose the same tiny studio.
4. High demand for the property. When a developer has a waiting list in the sales department, the likelihood that he will make concessions to you is extremely low.
5. Rumors are spreading that changes have been made to the agreement. There is a possibility of word of mouth, as a result of which other buyers will begin to actively put pressure on the developer and demand amendments or changes in each contract. In order to prevent such “problems”, the developer is ready to defend his position to the last, refusing even the most promising investors.

All these points must be taken into account and their neutralization must be thought through in advance. It is equally important to get a meeting with the developer’s lawyers, and not with the manager, who is not able to influence the contract. The actions of the shareholder should be as follows:

1. Carefully read the proposed contract - a lawyer did this for me.
2. Highlight provisions that are fundamentally unacceptable to you or carry serious risks. I had the following points:
   too large a penalty (material liability of the shareholder for failure to comply with the terms of the contract);
3. pegged to the dollar exchange rate (implies a possible increase in the cost of the apartment);
4. the developer's own operating/management company specified in the contract.
5. Formulate these provisions in other editions so that the identified risks for the investor (you) are minimized. And provide them to lawyers.

Developers usually do not want to agree to the following changes to the contract:

• increasing their financial liability in case of failure to fulfill obligations;
• changing the order of calculations (like mine - it was necessary to decouple the cost of the apartment from the rate of the rapidly growing American dollar);
• granting the shareholder the right to freedom of choice of management organization (I was still ready to come to terms with this);
• establishing specific deadlines for the transfer of real estate into the ownership of the buyer (I was lucky that they were clearly stated in my contract, otherwise I would have been indignant at this point);
• reduction of the shareholder’s financial liability in the event of improper fulfillment of the terms of the contract (excessive penalties are also a point “from my opera”).

Although changes to the agreement were made extremely reluctantly, Yuri and I achieved our goals. The developer fixed my price in rubles until the end of the year (regardless of the changing exchange rate of the US dollar) and almost halved the percentage of financial liability (the developer flatly refused to remove this clause). As a token of gratitude, I made “counter concessions” - I agreed to the services of the developer’s management organization. I also agreed to pay for utilities in the hope that there would be no serious delay in handing over the keys.

Advice: try to achieve concessions on points that are more important to you by making concessions on less significant points (as I did).

And remember: if a representative of the developer tells you that it is impossible to make changes to the contract, do not be upset and do not give up. Talk to the people who are authorized to make such decisions, or even better, at least consult with a specialist. This way you will increase your chances of winning and will be able to change at least some points in the DDU.

The nuances of registering an apartment as shared ownership

Situations often arise that do not fit into the general rules. For example, what should shareholders do if the shared ownership agreement is registered in the name of one person, but the spouses want to buy an apartment as shared ownership, indicating the share of each of them? There are several possible solutions for this situation:

• re-register a child-care facility for two. To do this, you need to contact a construction company and make changes to the already concluded contract.
• sign an agreement among themselves in which to determine the shares of each;
• conclude a marriage contract.

Situations are quite common when the agreement already defines the shares of both family members, but upon registration of housing they are not retained by them, and the property becomes joint ownership. Separation is especially important for families who are going to divorce and divide living space among themselves.

Judicial practice on this issue is ambiguous. One court may recognize the wording in the DDU and retain their shares for the spouses, justifying its decision by the fact that the DDU is, in essence, an agreement on the division of newly created property. Another judicial authority may leave the legal property regime, regardless of the shares of the spouses established in the agreement. Often, the court’s decision depends on how well the shareholder’s position is presented in court. Therefore, in such cases, it is best to rely on the professionalism of a lawyer and entrust him to represent the interests of the shareholder in court.

If the shareholders are common-law spouses and their relationship is not documented, they can only buy housing in shared ownership. At the same time, they must indicate in the contract the share of each of them, the size of which will be proportional to the monetary contribution made.

Another question that worries many shareholders: how is a spouse registered as a shared owner of an apartment purchased under a DDU? According to the law, the owner can register a member of his family on the living space in which he owns a certain part, if its other owners give permission.

The most common situations that married couples purchasing housing under the DDU may encounter are given in the article “The DDU was concluded before marriage, what will happen to the property after the divorce.”

Written promises and reaching compromise

It is very important to record all promises and guarantees of the developer’s lawyers or representatives of the sales department immediately in the contract. No verbal assurances! Otherwise, this time can be considered wasted. Know: what is not described in the contract is usually not fulfilled.

After successful (in your opinion) negotiations, you need to carefully read everything again and study the agreement in the new edition. Check:

• whether all the changes you discussed have been made;
• Is the wording accurate (without subtext or additional nuances);
• Are there any other items added to the DDU without your knowledge that will neutralize the changes agreed upon with you?

If you find violations that contradict the law on the protection of consumer rights, you can safely challenge them.

conclusions

Finally, I note that the services of a lawyer were not cheap. But I was absolutely confident in my own safety (in terms of finances). And those who cannot afford legal support for the transaction under the DDU when purchasing an apartment in a new building need to be especially vigilant and take into account a number of points so as not to get into trouble.

What to check and what to look for when concluding an equity participation agreement with a developer:

• Developer reputation. You need to study how large the company is, how long it has been on the market, what it has built, what customer reviews are, and whether there are any complaints from counterparties. Much can be found on the Internet or through other media (including from open sources from executive authorities and judicial structures - portals of arbitration/district courts and others).
• A package of documents confirming the rights of the developer: to conduct construction and sell real estate; act of a local government authority (for example, administration) on land; project declaration; an investment contract with a company sharing the responsibility for building a house; additional agreements and protocols.
• If an agreement is not concluded with the main developer, it is important to check the entire chain - how the person assigning his rights to housing to you acquired these rights; his powers; documents confirming payment for the transfer of rights to him; how these rights will be transferred to you. If payment has not been made, there is a high risk that the contract will be declared invalid and it will be terminated.
• Is a DPA (share participation agreement) really being concluded, and not some analogue of it - for example, a preliminary agreement, to which Federal Law-214 does not apply. It does not protect against double sales, is not subject to state registration and can mask fraudulent schemes (and therefore is a very dangerous way to buy real estate).
• Obligations of the developer to transfer ownership of housing after completion of construction of the facility. Some unscrupulous companies use instead amended wording that removes the transaction from the scope of the Federal Law No. 214. For example: financing joint activities within the framework of construction, participation in investment activities, etc. Try to find other “loopholes” in the contract: indicating an “approximate” and not a specific deadline for the completion of a new building, an attempt to sell an apartment after the start of bankruptcy proceedings...
• If everything is in order and there are no complaints, it is also important to check whether the contract contains mandatory conditions and clauses: definition and location of the apartment, its characteristics, cost and terms of payment, registration of the DDU, deadlines for completing the construction of the house and transferring the apartment, penalties for non-compliance by the developer obligations.

Only after the contract has been drawn up (or better yet, registered) can you make payments under it. Usually a payment is made by bank transfer to the construction company's account - a payment order with a check is your main safety net. There is no need to deposit cash, since there are cases where, even after receiving a check from an accountant or a receipt from the developer, the payment turned out to be invalid, and by a court decision the buyer lost not only the apartment, but also the money.

How to get a mortgage from a bank based on the assignment of rights?

To purchase an apartment in a building under construction, you can take out a mortgage loan from a bank. To do this, it is necessary to draw up an agreement on the assignment of rights under the DDU, and then a loan agreement.

The bank will check the developer, make sure that it is possible to deal with him and issue a loan. To do this, of course, the borrower must fully meet the bank's requirements and be ready to pay monthly payments.

To obtain a mortgage you will need:

1. present a certificate of employment indicating your salary;
2. conclude an agreement for the assignment of rights under the DDU;
3. show a copy of the main DDU;
4. make a down payment (from 15-30% of the cost of housing);
5. draw up a loan agreement.

An assignment under an agreement is allowed only after settlement under the agreement or simultaneously with the transfer of the debt to a new person. Another requirement: the DDU agreement must already be registered in order for it to be possible to assign claims.

Average mortgage loan rates in Russia at the beginning of 2021 were at the level of 10-11% per annum in rubles. If the income is not enough, the bank may ask you to provide property as collateral : another apartment, a car or a dacha.

How to purchase an apartment by transfer of rights is described in a separate article.

Assignment of DDU. What is an assignment agreement? RISKS / ERRORS / INNOVATIONS 2021

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When can you do without legal support for a DDU transaction?

You can probably do without a lawyer only in two cases:

• when an apartment is taken out on a mortgage (the transaction is verified and controlled by the bank);
• when the developer is large and well-known.

However, attentiveness and caution will never hurt - after all, both the bank and the developer can go bankrupt at any time.

Article on this topicMarch 6, 2020

Finally! We received an invitation from the developer to inspect our apartment in a new building. We've been waiting for this for over a year. Commissioning was initially scheduled for the 2nd quarter of last year, but the developer missed the deadline. In the end, we had to wait. Therefore, we agreed on a meeting and eagerly went to the reception the very next day.

Personal experience: how we accepted an apartment in a new building

When does shared ownership arise?

By default, a joint property regime is established between spouses. However, if they wish, they can change this regime to a contractual one. It's possible:

1. When signing a marriage contract, which applies to all things and property belonging to the couple. It can be concluded both before the wedding and during married life. The agreement is valid both in relation to material assets already present in the family, and in relation to things that are expected to be acquired in the future.
2. When signing separate agreements for acquired or newly created property. Most often, contracts are drawn up in relation to real estate. Based on such an agreement, the apartment is registered as the shared ownership of the spouses.