Buying an apartment from a developer: what to check before signing the contract

What are the main risks when buying an apartment in a new development?

Investing in property that is still under construction always involves risks. The primary risk is that if the building is not completed, it will be difficult to recover the money invested. To prevent this, you need to check the initial legal and factual status of the project, namely:

• whether it can actually be built in the form declared by the developer;
• whether the developer has the right to use the land plot;
• whether there is a building permit;
• whether all approvals are in place and there are no ongoing lawsuits or disputes.

It is important that the contract specifies the procedure for refunding payments and the consequences if the project is not completed.

A significant risk when buying an apartment in a new building is the lack of clearly defined deadlines. If the exact construction or handover date is not specified, there may be little basis for going to court, and it becomes much harder to protect your rights. For example, a developer may indicate an “approximate construction period — 2 years.” Under certain conditions, that period can be unilaterally extended by the developer by six months or a year, and some circumstances (weather conditions, etc.) may be excluded from the term. In practice, the construction period can end up being not 2 years but 4 or more.

The contract should also set deadlines for handing over the apartment to the buyer, notifying the buyer of completion, and signing the handover-acceptance certificate. Deadlines for providing statements or confirmations that the buyer has fully paid contributions are also important.

What documents should be checked before making the first payment?

Even before signing the contract, it is necessary to verify whether the developer has lawful grounds to carry out the project. First of all, you should find out whether the land plot is properly documented, whether its designated use corresponds to construction, whether a permit for construction works has been obtained, whether the design documentation has been approved, and whether there are no court disputes concerning the project.

Special attention should be paid to the contract offered by the developer. It is important to analyze its terms, check the construction and handover deadlines, the refund procedure, the parties’ liability, and whether the developer can unilaterally change the contract terms.

If the contract is concluded not directly with the construction client (developer) but, for example, with a housing cooperative or another legal entity, it is necessary to check the documents that confirm that entity’s right to sell apartments. For this you should review the agreement between that entity and the construction client, since that agreement determines whether the entity has the necessary authority.

Also, it is worth making sure that the actual construction corresponds to the project documentation. For example, a buyer may be offered an apartment on the 12th floor even though the project provides for only 10 floors. The developer promises to add two more floors after the building is commissioned. But there is a risk that they will not do so. Failing to read the contract carefully can seriously harm the investor, particularly if the project is not completed.

What is more important: the building permit, the land, or the contract with the developer?

All components are important, but they should be evaluated in the correct order. The priority for verification looks like this:

1. Assessment of the land plot’s designated use. It is necessary to check its designated purpose and also to confirm that it is owned by or at least under the lawful use of the construction client (developer). If a lease agreement is used, it must specifically allow for development (construction), not merely for maintenance of the land plot.
2. Checking the permitting documentation. The next step is to check the urban-planning conditions that determine the parameters of the future construction, and then the permit to carry out construction works, which is the final stage of the permitting process.
3. Analysis of the contract with the developer. Although the contract is also very important, in some cases — even if it contains certain unfair terms — the investor’s rights may still be protected by statutory provisions and case law.

Verification of all three components is mandatory.

What sales schemes for apartments are currently encountered?

The sales scheme for an apartment in a new development depends on the method used to implement the construction project. Today the market uses several investment models, each with its own features and each requiring separate legal due diligence. The main purchase-sale schemes include:

• investing through a housing cooperative by making a membership/share contribution. This model has long been used in the market and is provided for by law;
• a sale agreement for property rights, which is currently used only for projects whose building permit was obtained before October 2022;
• registration of rights to future real estate objects by executing notarized agreements. This is a relatively new mechanism that is already in practical use.

These are the three forms of real estate acquisition provided for by law and actively applied in practice.

A risky acquisition scheme is concluding a preliminary agreement without notarial certification with a third party who is not the construction developer.

What makes contracts dangerous when the developer can unilaterally change the deadlines, area, price, or characteristics of the apartment?

If the developer is granted the right to unilaterally change material terms of the contract — construction deadlines, the apartment’s area, the design, or other characteristics — the investor is effectively left in uncertainty. They cannot be sure exactly which asset they will receive and on what terms.

For example, a buyer invested in a 30-square-meter apartment, but after construction is completed, due to changes in the design, the apartment’s area increased to 70 square meters. The buyer was asked to pay extra for the additional square meters, and, if they refuse, to pay a penalty and have the contract terminated, because the developer had a contractually stipulated right to change the area.

That is why, before signing the contract, it is essential to ensure that all key terms are clearly defined: which precisely the object being purchased is, what its area and characteristics will be, and the deadlines for completion of construction.

Why is it important for the buyer to check not only the company with which the contract is concluded, but also the landowner — the construction client?

In many projects, the contract with the buyer is concluded not by the landowner or the construction client, but by another legal entity — for example, a developer company or a cooperative. This is a lawful practice, but it requires additional verification.

One company may own the land plot and act as the construction client, while another attracts investors and sells apartments. There is a separate agreement between them that defines the powers regarding the project’s implementation.

Therefore, it is not enough for the buyer to verify only the company that signs the contract. It is also necessary to ensure the legality of the construction itself: check the land rights, the building permit, the design documentation, the required approvals, and the legal entity that is actually carrying out the construction.

It is important to find out whether the construction client has any litigation or other legal problems. If difficulties arise with the company that is building the project, this will directly affect buyers, even if the contract was signed with a different legal entity.

Which “red flags” in a contract should stop a buyer?

One of the main danger signals in a real estate sale contract is the existence of litigation concerning the land plot or the risk of the building permit being revoked. If such disputes exist, it is advisable to wait for their final resolution and the entry into force of the relevant court decisions, because the permit may be revoked and construction halted at any time.

Another important “red flag” is the absence of clearly defined terms in the contract. Particular attention should be paid to construction deadlines, the handover of the apartment, the specific obligations of the parties, the area, and other characteristics of the property.

It is better for the contract to contain as much detailed information about the apartment as possible. In addition to the area, it is advisable to specify the apartment’s layout, the floor, the location on the floor, the total number of floors in the building, and other characteristics that allow the investment object to be clearly identified. Such specification significantly facilitates the protection of the buyer’s rights in the future.

Can the risks of buying a newly built property be completely eliminated?

It is impossible to completely eliminate the risks of investing in a newly built property. Investing in construction inherently carries risks until the asset is commissioned. Even after a full legal review, circumstances may remain that cannot be fully foreseen.

The lawyer’s task is not to remove all risks, but to identify them, explain them to the buyer, and assess the possibilities for protecting rights if problems arise. What matters is not the mere existence of risks, but the buyer’s understanding of them. Sometimes investors consciously accept risks because they consider the transaction profitable.

At what stage should a lawyer be involved?

In practice, people tend to turn to lawyers when problems with the developer arise. However, it is advisable to consult a lawyer before signing the sale and purchase agreement.

After the buyer has chosen a developer and selected a specific apartment, they should order a legal review of the contract. It is advisable to contact a lawyer three to five days before the planned signing, since the lawyer needs time to analyze the documents. After receiving the legal opinion, the buyer can consciously assess all risks and decide whether to sign the contract, request amendments to its terms, or refuse to invest if the risks are too high.