Refunds from a Developer After Contract Termination: How Courts Determine the Refund Amount When the Price Was Pegged to the US Dollar

What Is a Developer Agreement?

A developer agreement is a legal document that defines the rights and obligations of both the developer and the buyer (investor) who intends to purchase a future residential property (apartment) or commercial premises (office). Such agreements may take several forms:

• a preliminary sale and purchase agreement, which records the parties’ intentions and serves as the basis for signing the final purchase agreement;
• an agreement with a housing cooperative that acts as the developer or is controlled by the developer (investment agreement);
• an agreement for the sale and purchase of property rights.

If the construction project received a building permit after 10 October 2022, the parties must conclude a future real estate sale and purchase agreement in accordance with the Law of Ukraine “On Guaranteeing Property Rights to Future Real Estate Objects.” The terms of this agreement are established by law, and other types of agreements may no longer be used in such cases.

When Can a Buyer Terminate a Developer Agreement?

In theory, an agreement may include a clause allowing either party to terminate it at their own discretion. In practice, however, such provisions are rare. More commonly, termination occurs because the developer breaches the agreement. Typical violations include delays in commissioning the building into operation (a particularly common issue during martial law, when construction activity has significantly slowed) or failure to fulfill other contractual obligations properly. In some cases, the developer may also demand additional payments that were not предусмотрены by the agreement. These circumstances may provide legal grounds for the buyer or investor to file a claim in court seeking termination of the agreement with the developer.

Why Do Disputes Arise Over the Refund Amount?

In agreements with buyers (investors), developers usually peg the price of an apartment to the US dollar. When payment is made in installments, this allows the developer to offset inflation-related losses, since construction materials and components are often purchased abroad. If the buyer later decides to terminate the agreement, they typically expect to receive a refund based on the current US dollar exchange rate, while the developer generally seeks to return only the amount originally received in Ukrainian hryvnias.

What Does It Mean When the Apartment Price Is Pegged to the US Dollar?

A price pegged to the US dollar means that the value of the property is determined in a foreign currency. Although the buyer pays in Ukrainian hryvnias, each payment is calculated according to the current exchange rate of the US dollar. As a result, the price in hryvnias may increase if the exchange rate rises. In some agreements, the parties may also specify a fixed exchange rate that applies for a certain period.

Is It Legal to Peg the Property Price to the US Dollar?

Under Ukrainian law, all payments for residential property purchased from a developer must be made in Ukrainian hryvnias. This requirement is reflected in sale and purchase agreements. However, developers are permitted to include contractual provisions that adjust the price according to specified conditions. Pegging the purchase price to the US dollar is a common market practice, and Ukrainian courts generally recognize such provisions as lawful.

How Do Courts Determine the Refund Amount After a Contract Is Terminated?

When bringing a claim against a developer, the buyer must provide evidence of all payments made, such as bank statements, cash payment receipts, or other documents confirming the transferred amounts. The buyer should also demonstrate that although the payments were made in hryvnias, they were calculated based on the US dollar exchange rate applicable at the time.

For example, if several years ago the buyer paid UAH 25,000, which at that time was equivalent to USD 1,000, the same amount in hryvnias is worth considerably less today. Therefore, the buyer (investor) may request reimbursement of the equivalent of USD 1,000 at the current exchange rate. If the court upholds the claim, the amount to be refunded is recalculated using the exchange rate in effect on the date of repayment. As a result, the buyer receives the hryvnia equivalent of the original value of the investment.

Can You Demand a Refund at the Current US Dollar Exchange Rate?

Current judicial practice shows that Ukrainian courts increasingly rule in favor of buyers in disputes with developers. If the apartment purchase agreement linked the purchase price to the US dollar, courts generally recognize that the refund should also be calculated using the US dollar equivalent, provided that the contract contains the relevant provisions.

Which Contract Terms Are Usually Decisive in a Dispute?

For the court, the most important issue is whether the buyer’s rights have actually been violated. Delays in completing construction or other breaches relied upon by the claimant are not always clearly documented in the agreement. Therefore, the court carefully examines the wording of the contract and determines whether its provisions comply with applicable law.

As a result, the court may refuse to terminate the agreement and, consequently, deny the buyer’s claim for a refund, regardless of whether the purchase price was linked to a foreign currency equivalent. In practice, the key issue is usually the legal grounds for terminating the agreement rather than the method of calculating the refund.

What Evidence Is Required to Recover Money from a Developer?

To seek a refund from a developer, the buyer should first provide the agreement to a lawyer so that they can assess whether the developer has violated the buyer’s rights or otherwise acted unlawfully. Proof of payment is also essential. This typically includes bank statements, payment receipts, cash payment orders, or any other documents confirming the amounts transferred to the developer.

What Mistakes Do Buyers Most Commonly Make?

Before filing a lawsuit to recover money from a developer, buyers should carefully evaluate the potential risks. If the investor has also breached the agreement, they may face legal consequences. For example, if the apartment is being paid for in installments and construction has been suspended, the agreement may still require the buyer to continue making payments. If the buyer instead files a lawsuit seeking a refund of the amounts already paid, the developer may respond with a counterclaim demanding contractual penalties for late or missed payments. In such cases, it is important to calculate the amount of potential penalties, as litigation may ultimately be less beneficial than waiting for the project to be completed, even if there is a delay.

If the building has already been completed but the developer refuses to transfer ownership rights, it may be more advantageous to seek recognition of the buyer’s rights to the property rather than terminate the agreement and request a refund. Although the buyer may recover the purchase price, they could lose the benefit of the property’s increased market value. For these reasons, it is advisable to consult a lawyer before taking legal action. A legal professional can assess the specific circumstances of the case and explain both the advantages and the risks of litigation. It is also important to remember that obtaining a favorable court judgment is only part of the process. The judgment must still be enforced, and the awarded funds must actually be recovered from the developer.

For example, the land development rights may belong to one legal entity, while another entity—such as a separately established housing cooperative—may have collected the buyers’ funds and signed the investment agreements. If that entity has no assets, recovering the money may prove impossible despite a successful court decision. In such situations, a broader legal strategy may be necessary, particularly where there are signs of a fraudulent scheme designed to misappropriate investors’ funds. Alongside civil court proceedings, it may also be appropriate to report the matter to the relevant law enforcement authorities. 

Every case is unique and requires comprehensive legal analysis, careful examination of the available evidence, and a thorough assessment of the contractual terms before deciding whether to initiate court proceedings.

How Does a Court Dispute with a Developer Proceed?

To obtain a court judgment ordering the refund of money paid under an investment agreement, it is advisable to seek legal assistance from the attorneys at “DE-JURE”. Buyers (investors) often face difficulties obtaining accounting records and other internal documentation from the developer, even though such information may be crucial both for proving the claim and for recovering the funds paid.

There are also specific legal considerations when housing cooperatives are involved. If several investors have pooled their funds through a cooperative, they may be able to replace the cooperative’s chairperson by convening a general meeting. Instead of terminating the agreement, this approach allows the investors to take control of the cooperative, which may either be the developer itself or an entity working closely with the developer. However, this is a complex process that requires coordination and cooperation among the investors.

What Additional Amounts Can Be Recovered from a Developer?

In addition to recovering the purchase price of the apartment, a buyer may also be able to claim contractual penalties, late payment charges, or other statutory compensation from the developer. Although such payments are not always expressly provided for in the agreement, they may arise under the provisions of the Civil Code of Ukraine. Whether these additional claims are available depends on the specific facts and legal circumstances of each case.

What Are the Risks of a Developer’s Installment Payment Plan?

An installment plan offered by a developer is, in essence, a form of financing provided without involving a bank, allowing the investor to pay for the property over time. In itself, this financing method does not create additional legal risks. However, if payments continue after the construction has been completed, important legal questions may arise, including whether the apartment is transferred to the buyer for use after the building is commissioned and what the legal status of the property will be during the remaining payment period.

Buyers should carefully review the installment terms, paying particular attention to:

• any additional payments that may become due;
• how such payments are calculated;
• penalties for late or missed payments; and
• the consequences of failing to comply with the payment schedule.

Strict compliance with the installment agreement is essential to avoid financial penalties.

How Can You Check a Developer Before Buying an Apartment?

Conducting legal due diligence before purchasing an apartment from a developer is always a prudent decision. A comprehensive review performed by “DE JURE” lawyers typically includes:

• verification of the construction project and the land plot, including whether the land is being used for its designated purpose, whether the developer has obtained all required permits, who legally holds the land rights, and whether there are any pending court proceedings or asset seizures;
• assessment of the developer’s reputation and track record;
• review of the investment structure, including whether funds are being raised through a housing cooperative, the sale of rights to future real estate, or another legal mechanism;
• legal analysis of the agreement, including the parties’ rights and obligations, potential risks, penalties, and the legal consequences of breaching the contract.

If the due diligence confirms that the project documentation is complete, all approvals and permits have been properly obtained, and the legal framework is in order, the investment is generally considered significantly safer and the buyer’s legal risks are substantially reduced.

When Should You Consult a Lawyer in a Dispute with a Developer?

It is not always possible to effectively protect your rights if you have signed an agreement that does not fairly balance the rights and obligations of both parties. For this reason, the best time to consult a lawyer is before signing any agreement with a developer.

In some cases, after breaching the agreement, a developer may attempt to negotiate with the buyer (investor) and ask them to sign additional documents, such as statements, acknowledgements, or extensions of deadlines. These documents may adversely affect the buyer’s legal position. Before signing any such paperwork, it is advisable to seek legal advice to avoid making the situation more difficult.

Frequently Asked Questions

Can You Recover Your Money If the Building Was Never Completed?

The decisive issue is not whether the building was completed on time, but whether the developer fulfilled the contractual obligations and whether the developer has sufficient assets to satisfy a court judgment. Even if the buyer obtains a favorable court decision, recovering the money may be impossible if the developer has become insolvent or entered bankruptcy proceedings.

What Should You Do If the Developer Refuses to Terminate the Agreement?

If the developer refuses to terminate the agreement voluntarily, the buyer may file a claim in court. However, termination is not always the most beneficial solution. If the property’s current market value exceeds the amount already paid under the agreement, it may be more advantageous to wait until the building is completed, obtain ownership rights, and sell the apartment at a higher price.

Can You Get Your Money Back Without Going to Court?

In most cases, recovering money paid to a developer without court proceedings is not possible. Exceptions are rare and usually occur only when the buyer agrees to accept repayment without insisting on reimbursement based on the US dollar equivalent provided for in the agreement.

How Long Does a Court Dispute Take?

Proceedings before the court of first instance typically take between six months and one year. An appeal usually requires a similar amount of time. As a result, a developer dispute generally lasts between one and one and a half years, or even longer if the developer abuses procedural rights or requests additional expert examinations. The actual duration should also be assessed in light of the realities of wartime in Ukraine, including court workloads, power outages, and interruptions caused by air raid alerts.