Buying an apartment in a new building

How do you check the developer and the construction permit?

In a new building it is better to start your choice not with the apartment but with the company. Look at the developer's earlier projects. Did it hand over buildings on time? What do residents complain about? Has it changed its name? Read what the press and social media say. If you can, ask residents of its earlier projects what condition the building was in after handover.

Then check the building itself. The State Register of Buildings is the state register of construction projects that are being built, in use or being demolished. See whether the building has an entry there and compare it with what the seller says. If the building cannot be found or the data does not match, ask the seller about it. Finding the building does not prove it is safe either; a lawyer should look at the documents.

Also ask the company for the documents in the list below. There is a question that is easy to miss: is the company that received the permit the same one that actually builds and sells the building?

• A document confirming the right to the land plot
• The approved design and the construction permit
• Information on the company's state registration as a legal entity
• A document confirming the authority of the person handling the sale

Buying from an LLC or from a housing cooperative: what is the difference?

An apartment in a new building can be sold by an LLC (limited liability company) or by a housing construction cooperative (MTK). When you buy from an LLC, the apartment is sold under a purchase and sale agreement, then registered in your name, and a title deed is issued. In a cooperative you become a member, pay a share, and the apartment is allocated to you by a decision of the general meeting of members. Behind the same word "for sale" in a listing there can legally be two different routes.

The difference is clearest on the way to the title deed (kupcha). According to an official explanation from the State Property Service, for an apartment bought from an LLC, the LLC's ownership of the building must be registered in the state register, and a notarized purchase and sale agreement must be concluded between the parties.

In a cooperative the conditions are different. The building must be commissioned. There must be a decision of the general meeting allocating the apartment to you. You must also present a financial certificate that the share has been paid in full and there is no debt. Check the current list of documents in advance. If the building is not yet finished, how to protect your right is covered in the next section.

Ask the seller directly: is the apartment sold by an LLC or by a cooperative, and which documents must be collected for the title deed? No one can say outright which scheme is more reliable. In both, the result is determined by the documents and obligations of the particular company.

Can you buy an apartment in a building that has not been commissioned?

You can, but it is risky, and you need to follow the rules that protect your right. When construction ends, the building receives a permit for operation, which people call the "commissioning act." Without this permit a title deed is usually not issued for the apartment. If the seller says "the building is handed over," ask to see the document and check the State Register of Buildings.

For the scheme in which you buy a share in the land plot of an unfinished building, the Civil Code has a separate requirement. The contract must be concluded before a notary, and a "security entry" in favor of the buyer must be made in the state real estate register. This entry serves to protect the buyer's right.

Under this scheme the buyer cannot be obliged to pay the whole price before construction is finished. Payment can be demanded only after the contract has been notarized and the security entry has been made. Check the current wording of the rule, and which scheme a particular project is sold under, with a lawyer or notary.

If a project is sold under this scheme, demand a notarized contract and a security entry from the company. If the company refuses, treat it as a warning sign: a document concluded without these two steps may not protect your right properly. And check any offer to pay the full price before construction ends, before signing, with a lawyer.

Booking payment, preliminary agreement and payment: what should the contract say?

Before the main contract, a booking payment agreement or a preliminary agreement may be signed. Conclude a booking payment agreement in writing; for the sale of real estate the law also requires it to be notarized. State exactly in the document that the money handed over is a "booking payment" and not an "advance": in a dispute this difference can be decisive. Whether the money is returned if the agreement is breached depends on the terms of the document and the law, so find out from a lawyer before signing. If the building has not been commissioned, before any payment, including a booking payment, ask the company in writing how the rules described above will be observed.

If a preliminary agreement is signed, it must state the date of the main contract, the price and the parties' obligations. The legal force of such a document depends on its form and content. Show it to a lawyer before handing over any money.

Instead of cash, transfer the money to the company's bank account, or, for a cooperative, to the cooperative's account. Check that the account belongs to the company named in the contract; the transfer document will serve as proof of payment. If you will pay in installments, write into the contract the schedule and the stage of construction each installment depends on. The schedule is an obligation directly to the company, so the checks above matter especially here. Also clarify in advance who pays the notary and registration costs. The contract should contain at least the following:

• The date the apartment is handed over and the company's liability for delay
• The condition in which the apartment is handed over: doors, windows, plumbing, utilities
• How the area is calculated and how the settlement works if the actual area turns out different
• The warranty period and who is responsible for defects
• Who will obtain the title deed, with which documents and when

How do you accept the apartment and obtain the title deed?

Accept the apartment by act, but check it before signing the act. Measure the area, inspect the doors and windows, check that electricity, water and gas are connected. Write any defects you notice into the act. What is included in the area, for example whether the balcony is counted, read in the contract and compare with your own measurement.

If a defect is found later, record it with photos and a written notice. Ask a lawyer how the warranty period is determined by law.

The title deed is usually issued after the building is commissioned and state registration is done. Ask the registering body, the State Property Service, where and how to submit the application for first registration of ownership of the apartment. This also requires documents that the company or cooperative will issue, so write into the contract who will submit the application and with which documents. If you can agree on it, make the last part of the payment depend on the title deed being issued.

Mortgage on a new building and the final check before signing the contract

When issuing a mortgage, the bank takes the apartment as collateral and for this usually requires a registered apartment with a title deed. Whether a loan is given in a building under construction depends on the particular bank and project.

In the terms on the official website of the Mortgage and Credit Guarantee Fund, buying a share in the land plot of an unfinished building, if a security entry has been made, is also listed among the cases where a mortgage loan may be issued. The Civil Code also allows the buyer to conclude a mortgage agreement if such an agreement provides for the possibility of using a mortgage loan. But this does not mean any bank will give such a loan. If you are thinking of buying this way, write into the contract with the company the possibility of using a mortgage loan, and before choosing an apartment and paying a booking payment, get a written answer from a particular bank. A bank's preliminary answer is not a guarantee of a loan.

Terms on the rate and the down payment differ from bank to bank. Work out the monthly payment on a calculator, and get the official terms from the bank. Before signing, go through the list below; if any item is left without an answer, do not rush.

• The company's earlier projects, the land document, the design and the construction permit have been checked
• The building has been checked in the State Register of Buildings; if there is an operation permit, it is confirmed by a document
• It is clear who the seller is, an LLC or a cooperative, and what the route to the title deed is
• If the building is not commissioned, you know under which scheme the project is sold; if it is the land-plot-share scheme, a notarized contract and a security entry have been demanded
• Payment will go to a bank account on a schedule; the handover date, area, warranty and the obligation on the title deed are written into the contract
• A lawyer or notary has read the contract before signing