Buying real estate is a serious step that involves not only financial costs, but also a competent legal process. The protection of the rights of the buyer and the seller depends on a correctly drawn up contract, because any mistake or legal inaccuracy can cause legal disputes, loss of property or financial losses. Some people think that a typical sales contract is a simple formality, but in reality there can be pitfalls that can change the terms of the deal in favor of one of the parties.
There are widely known cases when people lost not only money, but also the real estate itself due to an incorrectly drawn up contract. In order to avoid this, the lawyers of the “Repeshko and Partners” law association explained what risks most often arise during the execution of a sales contract, how to avoid them, and what you should pay special attention to so that it is safe and meets the requirements of the law.
Almost every average citizen dreams of having his own home. For someone, an apartment is enough for complete happiness, while someone dreams of their own two-story house with a luxurious garden. The ways of realizing a dream are also different for everyone – someone accumulates money until the final amount is reached, someone buys enough baskets from the beginning, and someone builds with their own hands. One thing is indisputable – real estate deals are quite complex from the point of view of taking into account all the nuances and quite expensive both in terms of the amount of the contract and taking into account all the risks. That is why it is necessary to approach the purchase of real estate carefully, calculating in advance all the components of the agreement.
The first thing you should ask the seller about is the availability of a title document for real estate. Let’s emphasize that the technical passport is not a title document for the property! It confirms only the technical description of the object and informs about the presence of spontaneous reconstructions and redevelopments. In order to confirm the right of ownership, you must provide: a contract of sale, a gift, a lease, a certificate of the right to inheritance under the law or a will, a court decision on recognition of the right of ownership, and others.
The fact is that now there are rare cases when a seller starts selling real estate without having documents for it. This does not mean that he is necessarily a fraud. This is often done by heirs, hoping for a quick registration of the inheritance and sale of the received property. But in many cases, everything does not go according to plan – it turns out that some documents are not available and the notary cannot quickly issue a certificate of the right to inheritance and sends the documents to the court to be processed. But here it cannot be fast, because the case can be considered by the court for up to a year (in the best version), and it is not a fact that the decision will be in favor of the heir (it is relevant, for example, in those cases when it is necessary to confirm the family connection). Therefore, in such cases, we advise you not to consider the real estate object as a potential purchase until the documents for it are properly drawn up.
There is a general rule – the older the real estate title document, the better. Real estate that was purchased yesterday and sold today raises many questions. Of course, you can find a thousand and one explanations for why this happens, but if there is a problem, no one will ever tell you the truth. Even an heir who quickly formalized the inheritance and sells it may in fact not be the only heir, and others who have been bypassed in their right can add a lot of headaches. A recent renovation (unless it is a new building) should also prompt certain reflections – they may mask the shortcomings of the house or apartment. This is especially relevant for those cities where the arrival of enemy drones and missiles took place. The main thing is to inspect the property in good light and very carefully.
Oddly enough, neighbors are a valuable source of information about real estate. After all, they can tell everything about the real estate they are selling: who was born, baptized, married, gave birth and died there when. The history of the family for the last ten years will be told to you, and nothing more is needed. It is possible to get a lot of different information, there will be something to analyze.
It would be very good to receive information about who exactly has been registered in the house or apartment for at least the last three years. From this information will depend whether someone can want something from the owner of real estate in the future.
If, at first glance, everything is satisfactory and there is a persistent desire to purchase this particular property, the next step, where funds and agreements are already involved, is a deposit. To justify the cost of his services, the realtor usually offers to draw up a deposit agreement and even keep the money as a guarantee of fulfilling the terms of the contract. To put it mildly, it is a “watershed”.
It should be understood that a deposit is a sum of money or movable property given to the creditor by the debtor against the payments due from him under the contract, to confirm the obligation and to ensure its fulfillment (h 1 Art. 570 of the Civil Code of Ukraine). The effective factor in such a case and why the deposit is made is the following rule: if the failure to fulfill the obligation occurred due to the fault of the debtor (the party that issued the deposit), the deposit remains with the creditor. If the creditor (the party that received the deposit) is responsible for the breach of the contract, he is obliged to return the deposit to the debtor and additionally pay an amount equal to the amount of the deposit or its value (Art. 571 of the Central Committee of Ukraine). It is the loss of the deposit by one or its return to the other in a double amount that constitutes the essence of the security function of the deposit and leverages and disciplines the parties.
All this is true, but there is a significant nuance! Usually, the deposit agreement is concluded in the usual written form. Realtors are happy to offer their deposit contracts, which they have developed over the years. But for real estate, unfortunately, all this does not work. When buying real estate, in order for the deposit agreement to be considered as such and the sanctions expected by the parties to apply, it is necessary to sign what is called a preliminary agreement. According to the requirements of Article 635 of the Civil Code of Ukraine, a preliminary contract is a contract in which the parties undertake to enter into a future contract (main contract) within a certain period of time (at a certain time) on the terms established by the previous contract.
The main rule that applies to the preliminary contract is that it must be concluded in the same form as the main contract. In accordance with Article 657 of the same Civil Code of Ukraine, a contract for the sale of a plot of land, a single property complex, a residential building (apartment) or other immovable property is concluded in writing and is subject to notarization, except for contracts for the sale of property subject to a tax lien.
Thus, in accordance with the requirements of Articles 635, 657 of the Civil Code of Ukraine, the preliminary contract for the purchase and sale of an apartment must be concluded exclusively in writing with a mandatory notarization, since the main contract is concluded in the form with a mandatory notarization, the preliminary contract is concluded in the form established for the main contract. It is in the preliminary contract that the term during which the main purchase and sale agreement must be signed, the seller’s obligation to write off the residents, remove them from the register at the military commissariat, obtain certificates of absence of debts, etc., the date of transfer of the apartment/house and keys, the amount of the main agreement and the procedure for calculation, the amount of the deposit (the amount of the preliminary contract) are indicated in the preliminary contract.
The legal norm of Article 220 of the Civil Code of Ukraine warns that if the parties do not comply with the requirements of the law on notarization of the contract, such a contract is null and void. What does this mean? This means that the same sanctions for which we are talking about the deposit in this case will not apply. Therefore, if the non-fulfillment of the obligation occurred due to the fault of the debtor (the party that issued the deposit – the buyer), the deposit will be considered only as an advance payment (advance payment under the contract), and in case of non-conclusion of the contract, it is subject to return by the seller. If the creditor (the party that received the deposit – the seller) is responsible for the breach of contract, he is not obliged to return anything in double amount, it is enough to simply return the funds received from the buyer. And no court will award anything else!
When you enter into a deposit agreement or a preliminary agreement with the help of a realtor (whatever they call this piece of paper), you only enter into an advance agreement. An advance is recognized as a sum of money or other property value, which is transferred by one party to the contract to the other in consideration of future payments. Accordingly, the advance does not perform a security function. The party that issued the advance has the right to demand its return in case of termination of the obligation before the beginning of its performance, as well as in all cases of non-fulfillment of the contract.
Certification of a preliminary contract is the responsibility of notaries and consular offices. Officials of local self-government bodies do not have the right to certify a preliminary contract. Yes, this agreement is also paid – the cost of its certification is 1% of the agreement amount (the amount of the deposit), but it is a really effective mechanism and only on it as a sanction it is possible to charge a double amount. Such nuances are especially relevant now, taking into account the instability of the real estate market, which quickly reacts to the latest news, and the seller can both withdraw the object from sale altogether and increase its value.
It is worth knowing that the preliminary contract can be certified by any notary throughout the territory of Ukraine without restrictions, even if the certification of the main contract is limited by the territorial jurisdiction defined by Article 55 of the Law “On Notaries”. When certifying a preliminary contract, the notary is obliged to establish the valid intentions of the parties regarding the creation of legal consequences that are determined by this transaction. The consent of the other spouse of the parties to the conclusion of a preliminary sales contract is also required.
According to with Part 4 of Article 55 of the Law of Ukraine “On Notaries” The place of registration of the contract of sale of real estate is determined as follows:
- according to the location of such property;
- by the location of the legal entity;
- at the registered place of residence of an individual – one of the parties to the relevant contract.
At the same time, the parties choose a notary by agreement. But the extent to which the contract will be concluded in compliance with all legal subtleties and cannot be challenged in the future depends on his qualifications, because the main person in the agreement who checks everything is the notary. It is mainly the same realtors who rely on him when they say that they will check the real estate. It is the notary who checks:
- the identity of the seller and checks whether the identity documents are legally valid;
- the right to establish documents for real estate (whether they are correctly drawn up, whether they are drawn up for the real estate seller);
- are there nuances when concluding a contract (for example, when selling a share in real estate, the seller must first offer in writing to purchase his share for the same amount, not to the other co-owners of the movable property, and only then, if the latter did not want to exercise their right, the real estate can be sold to a third party);
- presence or absence of real estate encumbrances according to state registers (arrest, mortgage, etc.);
- other aspects of the agreement (respect for children’s rights – availability of a decision of the authority for children’s affairs, registration of persons at the real estate address, permission of the second spouse to sell shared property, etc.).
However, even a notary does not need to be relied on one hundred percent. On the website of the judicial authorities, it is possible to check by the last name, first name and patronymic of the real estate owner in recent years whether there have been legal cases related to this real estate and, if so, what kind of cases they were (one case is the collection of debts for communal services, another is the invalidation of the title documents of the real estate owner). It is necessary to carefully study, if such court cases took place, then in connection with what, when and to make a decision for yourself – whether this real estate is worth such risks or not.
Another important nuance – it is necessary to obtain certificates from the owner of the property stating that there are no debts for utilities on the property. If you do not do this, you will pay all the debts yourself.
We are often asked the following question: should we buy real estate if the seller is absent and the person with a power of attorney is present? Legally, yes, it is possible and should be. But practical advice is not needed, especially in this time of war. The power of attorney is canceled with the death of the person, but it does not happen at the same time – minute by minute. Today you can sell real estate on behalf of the owner who died abroad yesterday. You will find out about it already when the heirs file a lawsuit against you.
When purchasing residential buildings, be sure to pay attention to the land plot. Sometimes it happens that the document for a residential building belongs to one person, and the ownership right to the land under it belongs to a completely different person. This is rather exotic, but it also happens. If the plot of land is owned, then it is necessary to have: a certificate of ownership, a deed of privatization, a contract of sale and other documents. The cadastral number is a mandatory attribute of a land plot when making transactions with it. The presence of a cadastral number does not mean the presence of ownership! It must be provided to areas that are in permanent use, and not only in ownership. Currently, no agreement with a residential building will be notarized until the land plot under the building is assigned a cadastral number.
Regarding financial costs. The cost of signing the real estate purchase agreement itself is:
- personal income tax (abbreviated as “PIT”) – 5%. It may or may not be – it depends on many factors;
- military levy – 5% (previously it was 1.5%);
- state duty – 1%;
- contribution to the Pension Fund – 1%;
- notary services are by agreement, and the cost of the service is determined by the notary. At a public notary, the registration fee will be lower;
- payment for certificates and extracts from relevant state registers;
The specified costs are distributed as follows:
- VAT, military duty, state duty are usually paid by the seller,
- buyer – collection to the Pension Fund, notary services.
At the same time, the value of residential real estate is not subject to tax, if during the year a person makes only one purchase and sale agreement of residential real estate, which he has owned for more than three years. Then the seller and the buyer pay only the state duty (1%) and the fee to the Pension Fund (1%).
If a person inherited a real estate object, the condition regarding the possession of the property for more than three years does not apply in this case, and the property can be safely sold immediately. However, the distribution of costs in this way is not mandatory, the parties can agree on another variant of the distribution of costs.
Therefore, legal literacy when concluding a contract of sale of real estate is a guarantee of a safe agreement. Attention to detail, verification of documents and consultation with professionals will help you avoid financial risks and legal problems. Investing in real estate is not only a big purchase, but also a responsibility, so you should approach this issue with maximum caution.
