What are the conditions for participation in shared construction?

Basic Concepts

Shared construction is a method of investing in the construction of residential or non-residential real estate, in which the developer attracts the finances of citizens, and after putting the facility into operation, transfers finished housing or non-residential premises to them.

In Russia, it is regulated by Federal Law No. 214-FZ, which came into force on January 1, 2005. It was from this period that they began to conclude a DDU, rather than an investment agreement, with shareholders.

This law regulates the relationship between the developer and shareholders. A construction company can conclude a contractual agreement only after meeting several requirements:

acquisition or lease of land;
obtaining a construction permit;
publication of the project declaration in the media or on the Internet.

The object of shared-equity construction is recognized as residential or non-residential premises, as well as parking spaces that are part of an apartment building created with the funds of shareholders.

Developer is a construction company that has experience in the construction of apartment buildings and has a land plot for development on the right of ownership or lease.

Stages of completing a transaction

Shared housing construction includes a number of successive stages. In short, the process looks like this:

The developer receives permission to construct the facility.
Publishes information and design documents for construction on its website.
Attracts private investors to its project.
Concludes agreements with shareholders and registers them in Rosreestr.
Builds an apartment building in accordance with the deadlines established in the documents.
Puts it into operation and hands it over to participants.

Advantages of shared construction

The undeniable benefit of purchasing an apartment under the DDU is the low cost of real estate, which increases in direct proportion to the stages of readiness of the apartment building.

Insurance companies offer favorable conditions to attract investor funds:

interest-free installments;
discounts;
parking space or decoration as a gift.

Thus, with the help of DDU you can not only buy housing at an affordable price, but also save on bank interest.

Interesting: In 2021, the number of shared construction contracts in Moscow from developers increased by 39% compared to 2021.

Quality guarantees

In accordance with Article 7 of Law No. 214-FZ, the construction company is obliged to transfer to the shareholder a shared construction project, the quality and technical characteristics of which correspond to the terms of the contract.

If deficiencies were identified at the time of acceptance of the property, the developer is obliged to:

eliminate the comments free of charge;
reduce the contract amount;
reimburse the costs of correcting the defects.

The warranty period for the object cannot be less than five years. The developer is released from the obligation to eliminate damage during the warranty period if he proves that it was caused by the fault of the property owner or third parties.

Key terms

Concluding a shared construction agreement requires compliance with a number of nuances. And in order not to fall for scammers, you need to know about every stage of the transaction. One of the key points is payment. It should be understood that the cost of living space and the terms of payments directly depend on what the down payment will be. For example, if the full amount is paid within three working days, the developer most often provides his client with a discount that applies to each square meter of property purchased.

REFERENCE! The advantages of paying in installments are that even with a relatively small amount, the shareholder is able to get housing. In this case, the client is able to choose both the number of square meters and the period for receiving the property and registering ownership. However, if you take a long-term installment plan, you should understand that the initially prescribed cost cannot be changed even under the pressure of inflation.

The procedure for transferring an apartment, registration and deadlines

So where to start? In accordance with the DDU, the property is transferred to the ownership of the shareholder in accordance with the following procedure:

Upon completion of construction, the shareholder receives permission to put the building into operation.
Next, the developer sends a notification by mail to all participants regarding the readiness of the house.
Each of the shareholders inspects the property allocated to him, identifying shortcomings. If there are any, the client must point out the shortcomings to the developer, who is given a certain time to eliminate them. After this, a re-inspection is carried out.
After the act of acceptance of the transfer by the developer to the private owner is signed, the shareholder is given the keys.

After the property is finally transferred to the participant in shared construction, he should carry out state registration of the specific property. However, the developer’s obligations to the client will be considered fulfilled even before receiving documents from Rosreestr confirming his ownership of the apartment.

Each stage of real estate transfer involves the following nuances:

An apartment building can be put into operation only after receiving the appropriate permit. To do this, the developer applies to the authorized body that issues a permit to build a house. As soon as this document is issued, the developer is obliged to transfer the object to the disposal of shareholders no later than the period specified in the DDU.
Having received permission to put the building into operation, the developer must notify shareholders about the completion of construction at least a month before the deadline specified in the DDU.
Having received the notification, each participant in shared construction must accept the object within the period established by the contract. If this nuance is not reflected in the contract, then the transfer occurs within seven working days after notification. If within two months the shareholder has not accepted the apartment, then in accordance with paragraph 6 of Article 8 of the Federal Law, the transfer of real estate can be carried out unilaterally.

According to the law, the determination of the period for transfer of the object is carried out by the developer and is indicated in the share participation agreement. Civil legislation provides for the following options:

A specific date is assigned in the format “day, month, year”.
A certain period of time is indicated, the starting point for which is the moment of conclusion of the DDU.
The delivery of the object occurs upon the occurrence of an inevitable event that does not depend on the will of the parties.

It should be understood that the DDU will not be considered concluded if it contains approximate or approximate terms of transfer.

Documents from the developer

To ensure the transparency of the procedure, the future shareholder needs to carefully study the documentation provided by the developer. The latter is required to provide the following documents:

Permission to conduct construction on a specific land area.
Project declaration.
Guarantee or insurance agreement.
Full information about the construction organization, including address, list of authorized persons, name. These data must completely coincide with those indicated in the permitting documents.
If the registration of documents is carried out by a representative of the developer, he must provide documentation authorizing the delegation of these rights.

What should you pay attention to when drawing up a contract?

Experts advise highlighting the following nuances:

A warranty period is required. For residential premises it is five years.
The contract must reflect information regarding the area of the apartment.
The document contains a detailed description of the object, indicating the exact deadline for delivery and the procedure for transferring rights.
The presence of clauses regarding the conclusion of contracts with third parties or organizations is unacceptable.
The procedure for terminating the contract and the grounds for this are described. The amount of penalties is also determined.
The degree of responsibility of the parties is indicated. From the moment the funds are deposited, all obligations of the shareholder must be considered fulfilled. In turn, the developer has the right to use the received money only for its intended purpose (that is, for construction purposes).

Contract pitfalls: risks and alternatives

Any specialist will tell you that equity participation involves significant risk. And this is due not only to the facts of fraud, but also to the peculiarities of the preschool education system itself. The main risks are as follows:

Construction work may be frozen . The reason for this is often the bankruptcy of the developer. What to do to avoid such situations? A thorough check of the company, which should have not a single successfully implemented project, will help.
Encumbrances. In most cases, developers' money is not enough to build an apartment building. Third-party expenses such as logistics, communications, etc. also require financing, which often involves issuing bank loans to the company. And as soon as the money stops flowing into the mortgagor’s bank account, the property is under arrest.
Double sale. Despite the existence of state registration of contracts, this happens not so rarely. This usually happens due to the fault of the employees of the development company when the contract has not yet been registered. How to resolve the situation? According to the law, the agreement that was registered first is considered valid. The company must return the money in full to the remaining shareholders applying for this housing.
Making changes to project documentation . Shareholders are not informed about this, and as a result, at best, you can get single-glazed windows on the windows, and at worst, a reduction in the agreed housing area by 8-10%. Therefore, the shareholder should carefully inspect during the acceptance process. After the official transfer of real estate, it will no longer be possible to force the developer to eliminate the identified deficiencies.

What alternatives could there be to preschool education? Here are the following options:

Housing cooperative. We are talking about an organization that includes citizens who have decided to jointly buy an apartment building with its further operation. At the time of establishment, the residential complex must include at least 5 people. Difficulties in this case arise due to the strong influence of the human factor and problems in the distribution of finances.
Social housing. This is a way to provide citizens with housing while retaining ownership rights to the municipality or state. That is, residents are not owners of the property, but can subsequently buy and privatize it.
Individual low-rise construction . Usually we are talking about buildings with one to three floors. Their difference from high-rise buildings lies not only in height, but also in the absence of elevators, a central garbage chute, etc. These buildings have a lightweight engineering infrastructure. For example, townhouses are popular in the USA and Europe, when several families live in one small house.

Possible risks

Unfortunately, shared-equity construction in Moscow is associated with certain risks:

delay in delivery of the house;
additional payment not provided for in the agreement;
impossibility of terminating the contract;
problems in registering property rights;
double sales.

In addition, there is a possibility of bankruptcy of the developer. In this case, shareholders will have to prove their rights to real estate in court.

Reference: Federal Law No. 214-FZ is designed to minimize the risks of participants in shared construction and strengthen the protection of their rights.

How to check a developer under Federal Law 214?

When purchasing an apartment in a new building, the inspection should begin by studying the formal documents: an extract from the register, which can be ordered via the Internet.

The extract will contain the following information: who is the general director and for how long, who are the owners of the company, the authorized capital, the period of registration - the existence of the company, whether the legal address is the address of mass registration of the company, whether the company is at the stage of termination - liquidation. It is also recommended to check the website of the arbitration court in the region of registration of the company, whether there are any legal proceedings against the company, incl. bankruptcy claims. On the issue of violation of construction deadlines and quality of construction, you can view information on the website of the district court at the place of registration of the company. In addition to official sources, a lot of information can be found on forums and social networking groups for your home. As a rule, they discuss issues of violation of construction deadlines, delivery of apartments to owners, quality of construction and the work of the management company. If your developer has been on the market for a long time and has completed projects, this information will also be useful. Pay attention to which company insures the construction project; if it is a large, well-known insurance company, then your risks are significantly reduced. The same applies to banks offering mortgage programs for this home. If this bank is in the top 50, even if the developer goes bankrupt, construction will most likely be completed. Based on these and other signs, you can determine whether the developer is reliable or whether there are risks when buying an apartment.

Changes in legislation

From July 1, 2021, changes were made to Law No. 214-FZ. The final transition to new contract standards is scheduled for June 30, 2021. During this period, the previous DDU scheme will be applied.

Changes in the law have greatly tightened the requirements for developers:

The insurance company must have an equity capital of at least 10% of the project value of the property;
the company must have at least three years of experience in the field of construction and at least 10 thousand square meters of housing put into operation;
operating expenses should not be more than 10% of the estimated cost;
For each permitted construction, a separate legal entity must be created. face.

What comes next

Experts predict that due to tightening legislation, prices for shared participation in construction will rise by at least 10%. The transition to a new system for purchasing housing from developers will take about five years.

Today, construction companies have three sources of investment:

own funds;
bank loans;
shareholders' finances.

It is the latter source of funds that is most attractive to the developer. This is due to the absence of the need to pay interest for using money, unlike bank loans.

Today, in the primary housing market in Moscow, up to 85% of apartments are sold through DDU, and only the remaining 15% under purchase and sale agreements after the facility is put into operation.

Due to the need to obtain a loan from a bank for the construction of an apartment building, the costs of developers will increase, and, following this, the cost of finished housing will increase.

Also, due to tightened requirements for construction, players will not be able to stand it and will leave the market. And this in turn will lead to an increase in the number of abandoned unfinished objects.

Only large companies with a stable financial position will remain in the construction market.

What do you need to know when buying an apartment in a new building?

Apartments in apartment buildings under construction or in new buildings that have just been commissioned form the primary housing market. As the name of this segment of the real estate market suggests, it consists of objects for which ownership is registered

first.

The apartment you are purchasing in a new building may well turn out to be secondary real estate if the ownership of it has already been previously registered in the Unified State Register of Real Estate. At the same time, the apartment may not have been used for living.

Our specialists will help you determine exactly whether you are purchasing property on the primary real estate market or whether the apartment you have chosen is a “secondary” one. an “OBJECT PASSPORT” on our website.

1.1. Participation in shared construction of an apartment building

The sale and purchase of apartments on the primary market can be carried out at the construction stage by concluding an agreement for participation in shared construction (DDU) of an apartment building ( MKD

The conclusion of the DDU assumes that you are investing in housing construction, and the developer

at the expense of your funds and the funds of other participants in shared construction, within a certain period of time, builds an apartment building (MKD). The developer transfers ownership of a specific apartment to you only after the apartment building has been put into operation and you have paid the full price of the contract.

Relations between the developer and participants in shared construction of apartment buildings are regulated (Law No. 214-FZ) (Clause 1, Article 1 of Law No. 214-FZ).

All recent changes to the legislation regulating the relationship between the developer and the shareholder are aimed at strengthening the protection of the rights and legitimate interests of persons who have invested their savings in future housing through the conclusion of a DDU.

However, despite the efforts made by the state in this direction, real estate

in the primary market still have a high share of risk. Therefore, before deciding to purchase a home from a developer, carefully analyze all the details that will be discussed below.

1.2. Pros and cons of buying an apartment on the primary market

Buying an apartment under the DDU has many undeniable advantages.

Among them, first of all, it is necessary to note the following:

lower price per 1 sq.m than on the secondary market;
“clean history” due to the absence of old owners and, accordingly, the absence of the risk of the transaction being contested;
the ability to choose a layout;
new engineering communications;
the opportunity to make repairs to your liking from scratch, etc.

However, when purchasing housing on the primary market, there is also a certain amount of risk, which can be minimized by taking into account the main negative aspects of purchasing an apartment under the DDU. This:

non-compliance with construction deadlines (long-term construction);
unlawful demands from developers to make additional payments not provided for by the DDU;
termination of construction (bankruptcy of the developer).

Accordingly, everyone must decide for themselves what level of risk is acceptable to them.

More details

An apartment in a new building, regardless of the method of acquisition, may have additional “cons”:

slow occupancy of the house and a prolonged period of repair and finishing work, which is fraught with increased noise levels;
poorly developed infrastructure and insufficient amenities in new microdistricts, etc.

1.3. Choosing an apartment in a new building

Some criteria for choosing an apartment, which are universal, are determined only by your personal preferences and do not depend on what market the property is purchased on - primary or secondary

So, as general recommendations, when choosing an apartment, we advise you to pay attention to such factors as:

transport accessibility (availability of a sufficient number of types, routes and flights of public transport; capacity and quality of roads; availability of parking spaces in the local parking lot or proximity of paid parking lots);
proximity of housing to the main objects important to you (place of work, place of residence of relatives, school, kindergarten, clinics, hospitals, markets and shops, etc.);
parameters and characteristics of future housing (wall material, floor and location of the apartment in the house; apartment layout
, location of load-bearing and non-load-bearing walls in case of necessary redevelopment; number of rooms, total and living area; presence of loggias, balconies, storage rooms, dressing rooms);
ecology of the area (presence of natural objects, including forests and park areas; presence/absence of harmful and dangerous industrial facilities; proximity to major highways, railways, etc.)

More details

To select suitable options on the primary housing market, use all available methods:

real estate websites;
advertising materials (banners, booklets, commercials, etc.), newspaper advertisements;
recommendations from people you trust;
regional printed specialized media, etc.

You can also be provided with advice from the sales departments of development companies, realtors and real estate agents.

However, it should be taken into account that in addition to the universal criteria listed above, choosing an apartment in a new building also has its own specific ones. For example, when assessing future housing based on such a parameter as wall material, in the case of a new building, it is necessary to take into account not only the different noise and heat insulation of various materials, but also the average construction time. So, if a panel house is built on average in 3-12 months, and a monolithic one in 9-12, then the construction of a brick house, all other things being equal, will take 1.5-2 years. This is an important point if you have to bear additional costs for rented housing

. In this case, such a parameter of future housing as the construction stage will have the same significance. By the way, it will also affect the price of the purchased housing: the higher the degree of completion of the house, the higher the price of apartments in it.

But one of the main criteria for choosing an apartment on the primary market is the reliability of the developer. After all, it depends on the reliability of the developer whether you will receive your apartment on time, whether its technical condition will comply with the terms of the contract and regulatory requirements, whether your apartment will have another owner, etc.

The universal criteria for choosing a developer include:

time of presence in the housing construction market and work experience;
the ratio of the volumes of constructed and delivered housing;
quality of completed projects;
availability of design documentation and licenses;
cooperation with leading banks.

So, if you have previously decided on the area of your intended residence and the basic requirements for the apartment, it’s time to start checking the developer to make sure of his reliability.

Why tough measures were needed

Despite the fact that 214-FZ has been in effect since 2005, the number of defrauded shareholders is growing every year.

Attention: According to the Ministry of Construction in Russia, more than 80 thousand people who bought apartments in problem properties were recognized as defrauded by shareholders.

And this is only according to official data. According to unofficial estimates, there are about 200 thousand. This huge figure is due to several factors:

fraudulent actions of developers;
misuse of shareholders' funds;
bankruptcy of construction companies.

In addition, insurance companies do not fulfill their liability insurance obligations. If they did this, then if it was impossible to fulfill obligations in a timely manner, insurance companies would pay compensation to citizens.

A special Committee was created in Moscow - Moskomstroyinvest, which is designed to solve the problems of defrauded shareholders. But not all citizens can qualify for help from the city.

What are the pros and cons of escrow accounts?

The buyer retains his funds in the event of bankruptcy or other problems of the developer, if all obligations under the contract are fulfilled.
The parties entering into an escrow account agreement can choose the documents themselves that will serve as a guarantor of the transaction.
Investments up to 10 million rubles are insured by the Deposit Insurance Agency.
Escrow accounts are not subject to seizure (clause 4 of Article 860.8 of the Civil Code of the Russian Federation. Restrictions on the disposal of funds and the use of an escrow account).
The shareholder opens an escrow account for free.
The scheme for purchasing real estate through escrow accounts makes it possible to get rid of the asymmetry of the transaction, where on one side is the shareholder (or his authorized representative), and on the other is the developer. An individual does not have such competence to check the developer, but the bank can already examine his reliability.

Increase in insurance prices

Today, insurance companies contribute 1.2% of each concluded DDU to a specialized fund for the protection of shareholders. Starting next year, this percentage will increase by almost five points and amount to 6%, which will lead to an increase in apartment prices.

The main task of the Fund is to provide financing for the completion of a facility in the event of bankruptcy of a construction company. Today in Russia more than a thousand apartment buildings remain unfinished.

The fund will accept contributions until July 1, 2021, after which it is planned to conclude a DDU through escrow accounts.

Changes in the law are designed to protect the rights and finances of citizens. But at the same time, the housing market will undergo significant changes, which will undoubtedly affect the cost of apartments. Until the amendments come into full force, investing in real estate will have good results. Therefore, citizens who were planning to purchase living space in the near future should not put the purchase on hold.