In Ukraine, there are quite frequent cases when the construction of a new building is completed later than the stated deadline.
If the completion time of a facility is delayed by more than one year, it is considered a long-term construction project.
Experts predicted an increase in the number of long-term construction projects due to the coronavirus pandemic. Some construction projects were suspended for the duration of the quarantine, some were temporarily frozen. In order not to become a victim of long-term construction, it is necessary to be aware of the main signs, and in the event of a delay in construction deadlines, know what to do.
Signs of long-term construction
Lack of activity in construction
Not all developers have the necessary amount of money to build an entire house, so at the initial stage, funds from private investors are attracted, the lack of investors suspends construction. The pandemic has left its mark on this factor, but this does not mean that it can be ignored.
On real estate websites, websites of complexes and construction companies, you can find information about the progress of construction. Some companies install surveillance systems so that investors can see that construction is underway.
You can trust the developers, or you can go to the construction site yourself and see for yourself whether construction is underway.
Housing prices are below market prices
Everyone has felt the consequences of the pandemic and quarantine, some developers have started having problems. As a result, many companies have started offering discounts. Yes, prices have decreased globally, but there is a limit to discounts.
It is worth being wary if a new building has a 15-20% discount for several months. Quite often, developers have financial problems and, in order to solve them, lower housing prices, this does not mean that you will buy an apartment at a low price, it means that the developer will solve his problems, and construction will never take place.
Change of contractor
As a rule, when building residential complexes, general contracting organizations are involved. Sometimes the general contractor is replaced during the construction process, there is nothing supernatural in this. Perhaps he did not fulfill his duties well, so the developer took care of the shareholders and hired a new one.
But if the general contracting organizations are changing one after another, you should start worrying: most likely, they themselves refuse to work with this developer (most likely, due to debts and non-fulfillment of financial obligations by the developer) and withdraw from the project.
Ignoring the investor
A clear sign that there are problems with the construction: the developer tries in every way to isolate himself from communicating with investors. This happens when there are obvious problems with the construction and the developer does not have a clear answer to inquiries from buyers.
The deadlines are specified in the construction passport
If the construction passport indicates the planned date for putting the building into operation, for example, the fourth quarter of 2018, and today it is already 2020, then it is worth avoiding such construction, since it is unlikely that during an economic crisis the developer will be able to solve his problems and make up for the delay in putting the building into operation.
What happens to unfinished long-term construction projects?
An unfinished building may not only be a foundation pit, but a finished building, people may even live in it, but the building has not been put into operation and/or is partially not connected to the networks. The fate of an unfinished building depends on its legal purity and economic attractiveness.
In general, there are three scenarios according to which the situation with problematic housing construction objects develops.
The project is being completed by another developer. For example, the construction of the Lisovyi residential complex at 12, 16 General Matykin Street began in 2000. Construction stopped at the stage of constructing the 5th floor, and in the second quarter of 2013 the new building was put into operation by another company. The first attempt to build a house at 3 Teremkovskaya Street was in 2004, and in 2012 the site was transferred to the Special Housing Fund, which completed the construction of the facility in 2014, but the building was put into operation only in December 2019.
It is worth being wary if a new building has a 15-20% discount for several months.
Investors are completing the building with their own efforts. For example, a house on Bohdana Khmelnytskyi Street, 58-A in the capital. The construction company “Konsol” took up the construction in 2003, and in 2008 it quit without completing the construction. Investors united to obtain a court decision to remove the building from the mortgage, because all the apartments were sold in advance, and the house was built on credit. Then they carried out communications and put it into operation in 2016.
The unfinished building is standing empty, investors are losing money. There are more than a hundred such cases in Ukraine. The Ministry of Regional Development and the Cabinet of Ministers have been thinking about how to solve this problem for more than a year, but construction projects are still frozen.
Construction has stopped, what to do and how to behave in such a situation?
There are not many options. You can wait until construction resumes, sell an apartment in an unfinished complex, or terminate the contract with the developer.
If there is no question of moving, you can wait for the completion of construction, because there is a high probability that the construction will be completed someday, perhaps by another developer. There are many similar examples in the capital, when new buildings were put into operation after 5-7 years.
In addition, any investor has the opportunity to transfer the contract, that is, sell an apartment in a building under construction and transfer all obligations under the contract to a third party. If the apartment was purchased with a mortgage, you may need the bank’s permission.
In addition, finding buyers for an apartment in a long-term building is not so easy, most likely you will have to sell everything at a significantly reduced price.
You can also terminate the contract. If the developer has not handed over the apartment to the investor after the deadline, the termination occurs unilaterally (if the guarantees for the investor are specified in the contract).
The scheme is as follows: the developer receives a written notice of termination of the contract, after which he is obliged to return to the investor the full cost of the apartment specified in the contract. However, the reason for terminating the contract may be the cessation of construction, in which case the contract is terminated through the court.
So how to buy housing in new buildings correctly, so as not to get into a long-term construction, you ask? Check the developer’s documents before concluding the contract and carefully read this text again.
Volodymyr Kopot CEO and co-founder of the Monitor. Estate project
