How to terminate or invalidate an investment contract in a residential apartment to get your money back?

After investing in a new building and starting construction work, there are often cases of delays in implementation or other violations of agreements. This is especially true in cases where the investor does not check the developer and the contract itself beforehand. And then the question arises of how to prove the illegality of the developer's actions, declare the investment contract invalid and return the funds actually paid for the unfinished apartment, respectively. We will talk about this and other aspects below.

Residential real estate investment contract: what do you need to know and check?

Currently, investing in residential real estate in Ukraine requires the preparation of an appropriate type of contract. An investment contract (real estate investment contract) is a bilateral (and sometimes tripartite) agreement between a developer and an investor on the terms of their interaction and payment. Depending on the different methods of investing in new buildings, these contracts can also be concluded with the participation of an intermediary for enhanced control of implementation, namely:

• construction financing fund;
• joint investment institutions;
• securities traders.

Today, there is no single unified form of an investment contract, since each case is essentially unique. And such a situation can create favorable conditions for violations by developers. However, the specified agreement should still contain key information regarding:

• the investment object (characteristics of the future apartment, important parameters);
• financial conditions (amount and payment procedure, terms of refund, confirmation of payments);
• guarantees for both parties (in the section on rights and obligations);
• the deadline for completing the order (including the presence of penalties or fines for delay);
• the procedure for transferring the object into operation and registering ownership of the apartment;
• early (unilateral) termination of the contract.

Preliminary contract with the developer and investment contract in a new building: what are the main risks?

It is worth emphasizing that in most cases, a preliminary contract is concluded with the developer first (less often - a contract of intent), and only later - the main one. Both the first and second carry significant risks if their content is not checked before starting cooperation. The main ones concern the financial stability of the developer and the legality of the construction of the apartment.

Among the risks that a preliminary contract has, the following should be highlighted:

• first, the lack of guarantees regarding the transfer of rights to the future real estate object;
• secondly, the possibility of a “double sale” (since there are no guarantees yet, the developer can conclude several contracts of intent or preliminary agreements, respectively);
• thirdly, the use of the advance payment not for further construction.

Although a real estate investment contract provides greater protection for the rights of the investor, it is not perfect. But at the same time, if during the cooperation it turns out that there are reasons to really consider it invalid, then it is possible to achieve its termination and, accordingly, the return of the funds actually paid. But the main thing is that the corresponding clause must be indicated in the contract.

When can a contract with a developer be declared invalid in order to return the funds?

The contract can be declared invalid in cases where it was concluded in violation of the law. Among the main reasons, it is worth highlighting the lack of the developer's proper legal status and construction permits or the inappropriateness of the content and form of the agreements themselves. Most often, there are cases when the contract is declared invalid precisely on the basis of the illegality of construction due to the lack of:

• a license to perform construction work;
• documents for a land plot under future housing;
• a valid certificate of registration of a construction company.

How to properly terminate an investment contract in a residential apartment?

Submitting an offer with an additional agreement

The least conflict-prone option for resolving a dispute and terminating the agreement (if the case does not involve holding a problematic developer accountable) is submitting an offer. By adding an additional agreement to it, you will be able to initiate a negotiation process with the developer and quickly resolve the issue. In the claim, you need to indicate:

• the reasons for early termination of the agreements;
• the amount to be refunded and the terms of its payment;
• the date for termination of the arrangements.

Applying to the court to declare the contract invalid

If the developer refuses to negotiate or does not respond to your proposals, the only effective way is to apply to the court. However, it is worth emphasizing that you can file a claim to declare the investment contract invalid if it contradicts the provisions of the Civil Code of Ukraine or the Law of Ukraine “On Investment Activities”, was concluded under the influence of fraud, or the legal status of the developer is not true. For more detailed information, we also recommend consulting one of our real estate lawyers.

Do you have any questions? Don't waste time: get a consultation and find out the cost of a lawyer's services in the case of returning your funds to the developer by filling out the form below.