Ten common mistakes when buying real estate in Ukraine

Often, before purchasing real estate, buyers check only the technical passport and an extract from the State Property Register, without looking at other sources. As a result, when concluding a deal, litigation, enforcement proceedings or obligations related to the object may “emerge”. Buying real estate in Ukraine is a complex process with numerous risks: from “gray” payments to unaccounted for rights of co-owners or children. Lawyers at DE-JURE specialize in minimizing these risks and ensuring safe execution of transactions. Let’s analyze 10 typical mistakes when buying real estate.

The housing and commercial real estate market is too dynamic. It is quite difficult to track all the changes – new investment models, registers, taxes, etc. appear. It is not surprising that ordinary citizens can make mistakes when buying real estate. Let’s analyze 10 typical mistakes when buying real estate, and also tell you how to avoid them.

Mistake 1. Lack of legal opinion of a lawyer (so-called due diligence)

Often, before purchasing real estate, buyers check only the technical passport and an extract from the Real Estate Registry, without looking at other sources. As a result, when concluding a deal, litigation, enforcement proceedings or obligations related to the property may “emerge”. If you buy housing on the secondary market, then a notary checks some of the risks, but he does not analyze the full chain: how the owners changed, whether the property is in the court registers.

To avoid such a mistake, we recommend contacting a professional lawyer who will conduct a full due diligence check. The lawyer checks the following sources:

• Real Estate Registry (rights/mortgages/encumbrances);
• Unified Register of Debtors;
• Register of Enforcement Proceedings;
• Register of Court Decisions;

In addition, the lawyer analyzes all previous transactions related to the property, such as changing the purpose, redevelopment without obtaining permits, etc.

Mistake 2. Payment in cash or “gray” price

A low value in the contract may look advantageous for the seller, as it reduces taxes for him. But for the buyer, this is a significant risk: in the event of termination of the contract or restitution, only the officially indicated amount is returned. “Hand-to-hand” payments create an additional problem: in court it is often impossible to prove the fact of the transfer of funds.

To be on the safe side, you should indicate the real price in the contract, make payments non-cash and prescribe a payment schedule. If the agreement nevertheless provides for a different actual amount, the buyer needs to receive a detailed receipt from the seller indicating all the circumstances of the case and the amount. It is recommended that the receipt be signed by two witnesses.

Mistake 3. Not taking into account the marital status and powers of the seller

When drawing up a real estate purchase agreement, the notary always checks whether the parties are married and requires the consent of the other spouse if there is no evidence that the property or funds are their personal property. The powers of the representative acting under a power of attorney are also carefully assessed. However, in contracts with developers at the construction stage, such requirements are often ignored: agreements are concluded without the notarized consent of the husband or wife or under a power of attorney with limited powers. As a result, the transaction may be challenged in court.

To avoid risks, you should request documents on marital status, a notarized consent or a marriage contract, and also check the validity period and scope of the representative’s powers specified in the power of attorney.

Mistake 4. Formal prepayments and contracts without legal force

Transferring large sums of money against a simple receipt or signing a preliminary contract without notarization creates serious risks for the buyer. By law (Articles 635 and 657 of the Civil Code of Ukraine), a preliminary contract for real estate must be notarized, otherwise it is null and void and does not create any legal consequences. A similar situation arises with an incorrectly drawn up deposit: instead of an instrument guaranteeing obligations, it turns into an ordinary advance payment that does not ensure the fulfillment of the agreements.

It should be remembered: if the purchase and sale contract is ultimately not concluded, the consequences directly depend on who violated the agreement. They may be as follows:

• if the buyer is at fault, the deposit remains with the seller;
• if the deal is broken off due to the seller’s fault, he is obliged to return double the deposit to the buyer.

However, it is only necessary to make a mistake in the form or content of the contract, and the deposit automatically loses its status – it is equated with an advance payment. In this case, the buyer can only count on the return of the funds paid, without any additional liability of the seller.

To avoid problems, the registration of pre-contractual payments must be legally competent. For real estate, a preliminary contract should be concluded exclusively in notarial form, with clear terms, conditions and sanctions. The deposit must be recorded in accordance with current judicial practice and the requirements of Art. 570 of the Civil Code of Ukraine, so that it really fulfills its guarantee function.

Mistake 5. Hidden redevelopment and unaccounted changes in the structure

Illegally transferred wet areas, unauthorized openings in load-bearing walls or on the facade, glazed loggias without permits – all this creates significant risks for the future owner. The authorized body may require the elimination of violations, return the premises to their original condition, or undergo a complex reconstruction procedure with the receipt of approval documents.

Such work is often hidden under cosmetic repairs, but the legal consequences remain serious. After all, the presence of illegal redevelopment can lead to the fact that the purchase and sale agreement will indicate incorrect characteristics of the object. By signing it without comments, the buyer actually confirms the absence of claims, which will make it difficult to prove the guilt of the previous owner during an inspection by the competent authorities.

To avoid problems, it is necessary to order an up-to-date technical passport and compare it with the actual condition of the object. Additionally, it is worth obtaining an opinion from a lawyer or designer on whether the identified works belong to the category of those that require building permits. If discrepancies are found, you should demand either a price reduction taking into account the costs of legalization, or bringing the documentation into line with the real state before signing the agreement.

Mistake 6. Choosing the wrong investment model for a new building

One of the most common mistakes buyers make in new buildings is a poor understanding of the exact scheme by which investments are attracted and construction is financed. Buyers often confuse purchase and sale agreements for a future object with derivatives, construction financing funds, share contributions or cooperative schemes. Each model has its own legal consequences, level of investor protection and risks. An incorrectly chosen form of interaction with a developer can lead to significant financial losses.

Before signing any document, it is necessary to analyze the contract in detail: do the conditions announced by the developer’s representatives coincide with those enshrined in the documents; does the scheme comply with the legislation and established judicial practice; what obligations and guarantees do the parties have; what are the conditions for exiting the project, if such a need arises.

The best option is to involve an experienced real estate lawyer. If this is not possible, it is worth carefully studying the contract yourself and using specialized platforms that analyze developers and their projects. It is also necessary to check whether the construction customer has the right to use the land plot for the appropriate purpose, the existing urban planning conditions and restrictions, as well as a valid permit for construction work.

Mistake 7. Ignoring the rights of tenants, children and registered persons with special status

When buying a home, buyers often underestimate the importance of checking the rights of children, tenants and persons registered in the premises. If minors own a share or have the right to use the home, the alienation of real estate may require the permission of the guardianship authorities. Moreover, the notary must make sure that there are no registered minors in the apartment, so the buyer should request the relevant certificate from the seller in advance.

A separate risky situation is the presence of a valid lease agreement. A common mistake is to think that the new owner will be able to simply evict the tenant without legal consequences. In fact, tenants continue to use the premises on the basis of the contract, and a change of owner does not automatically terminate their rights.

To avoid problems, you should obtain a certificate of registered persons and, if necessary, a decision of the guardianship authority on consent to the conclusion of the agreement. If tenants live in the apartment, it is necessary to familiarize yourself with the current lease agreement, assess the consequences of the change of owner and obtain from the tenant a waiver of the preemptive right to purchase the object (Part 2 of Article 777 of the Civil Code of Ukraine). After that, the new owner can either extend the lease or initiate its termination in accordance with the terms of the agreement.

Mistake 8. Errors when working with shares and common property

Problems arise when the seller and buyer underestimate the features of joint joint or partial ownership. Selling a share without observing the preemptive right of the co-owners (Article 362 of the Civil Code of Ukraine) or without their proper consent may become a basis for legal claims and subsequent recognition of the transaction as invalid. Although the notary checks the registers, the risks remain. It happens that the buyer has already paid the full price in the form of an advance under the previous agreement, and then it turns out that it is impossible to obtain the consent of the co-owners. The share is not allocated, the procedures last indefinitely, and the buyer actually becomes a hostage to agreements that he does not control.

In such situations, the buyer can sign a preliminary agreement with unfavorable conditions: an obligation to wait for the share to be registered, agree to additional requirements of the co-owners, or risk penalties for refusing the deal.

To avoid these mistakes, it is necessary to clearly define the ownership regime: whether it is joint, joint, or partial. Next, notify the co-owners in a timely manner about the intention to sell, properly record their consent, refusal, or ignoring. All documents should be notarized, and only after that proceed to the registration of ownership.

Mistake 9. Neglecting the final formalities during the transfer of the object

It is not enough to simply sign the agreement – it is important to correctly complete the deal. This is especially true for new buildings, where after the house is put into operation, the object is registered in the name of the investor. However, even in the secondary market, underestimating the final procedures can create many problems. An incorrectly drawn up acceptance and transfer certificate, the lack of data on the completeness of the housing, the condition of the object or meter readings, as well as untimely submission of comments to the developer actually deprive the buyer of the opportunity to demand the elimination of defects. As a result, the new owner may be left without equipment that should have been in the apartment, or be forced to eliminate defects at his own expense that arose through the fault of the developer.

To avoid such situations, before signing the certificate, it is necessary to carefully inspect the housing and record all the identified defects. If necessary, photographic materials are attached to the document. It is important to obtain certificates of the absence of debts, as well as to notify the condominium association, the management company and service providers about the change of owner – this will protect against possible claims in the future.

Mistake 10. Tax liabilities and transaction costs: who is responsible for what

When buying or selling real estate, it is important to determine in advance who pays what payments. By law, the seller is responsible for personal income tax and military duty, which are reflected by the notary in the tax reporting after providing proof of payment. The buyer, in turn, pays a contribution to the Pension Fund and an administrative fee for state registration of ownership. In addition, both parties cover the costs of notary services and state duty.

Although established practice provides for such a distribution, the law does not directly determine who bears all transaction costs, so the agreement between the parties must be recorded in the contract. Often, it is the lack of a prior agreement that causes conflicts directly at the signing or even the breakdown of the transaction.

In order to avoid making a mistake, you should calculate all potential costs in advance, clearly agree on their distribution between the parties, and reflect them in the contract. It is advisable to provide for the method and procedure for making payments to avoid downtime at the notary’s office and to ensure timely payment of taxes and fees by all parties to the transaction. This allows the transaction to be completed quickly and without the risk of disputes.

How lawyers of “DE-JURE” help to avoid mistakes when buying real estate

Buying real estate in Ukraine is a complex process with numerous risks: from “gray” payments to unaccounted rights of co-owners or children. Lawyers of “DE-JURE” company specialize in minimizing these risks and ensuring safe execution of transactions. We provide the following services:

• verification of the legal status of the object and its owners;
• analysis of the presence of encumbrances, litigation and claims of third parties;
• consultations on the legality of redevelopments and unauthorized works;
• verification of preliminary and main purchase and sale agreements, advance and deposit, ensuring their notarial force;
• analysis of investment models in new buildings and risks for the investor;
• preparation and coordination of conditions regarding the rights of children, tenants and registered persons;
• consultations on the regime of joint and partial ownership;
• correct execution of the acceptance and transfer act, recording of defects of the object;
• consultations and preparation of documents on taxes and transaction costs.

Thanks to the comprehensive support of “DE-JURE”, the client can avoid most typical errors, ensure the legality and transparency of the transaction, as well as protect his financial and property interests.