How to control the developer during the construction of housing. Advice from the experts

We tried to figure out whether a shareholder can control the builder during construction and really influence events if he sees that there are some problems. The experts we approached shared their vision of the problem and ways to protect themselves, which may seem interesting to our readers.

Despite the efforts of lawmakers, who go out of their way to protect shareholders from fraudulent developers (or the latter's failure to perform their obligations without malice), news of such cases appear in the media with enviable regularity.

Each edition of Federal Law-214 looks very impressive - each time we think that now the shareholder can safely pay the money, and firmly believe that he will get the keys to the new apartment exactly in time. But in fact it turns out that some or other provisions for some reason are simply not complied with, inspection agencies look at the violations of the law through their fingers. Which, in fact, leads to the fact that the story with the sharecroppers is repeated almost every year.

A frightening example: the bankruptcy of a major developer.

It is not only about relatively small local companies which go bankrupt as a result of not very competent management and insufficient material and technical base. Even giants of federal scale go bankrupt as evidenced by the collapse of Urban Group. During last several months before the company went bankrupt its management actively transferred money from shareholders to accounts of affiliated companies.

The violations were detected after it became known that the company was unable to fulfill its obligations, bankruptcy proceedings were initiated and a provisional administrator was appointed.

They also revealed the methods by which the money was withdrawn from the accounts, which, by the way, is a complicated business, since there have long been procedures to verify the intended use of funds as well as the bodies responsible for such verifications. In particular, money was sent to subcontractors who performed certain work, and the developer signed contracts and signed estimate documents with very inflated prices.

In some cases, the overcharge was as high as 70-80% of the average market rate.

«Of course, after the judicial review of these violations initiated by the interim manager, the Arbitration Court (MO) declared all these transactions invalid, but should there be any doubt that it will not be possible to return the money? Most likely, these companies have ceased to exist, and the state will solve the problems, the objects will be completed according to a "road map" developed specifically for such cases. Although it seems more logical for authorities not to develop a road map, but to introduce appropriate laws and control their implementation.»

...Old rake again: shareholders will lose in any case

In fact, nothing really new happened with the Urban Group in this incident - a standard (albeit very large) developer, a standard scheme for raising funds, standard methods for monitoring its activities. And the most important thing - they used standardized methods of withdrawal of the money.

It would seem, nothing special can happen for shareholders, one way or another, the houses should be completed and people will receive their apartments. But only about concrete terms of additional waiting in statements of responsible officials and in press it is not accepted to speak, as well as about compensatory payments.

The truth of life is that shareholders can continue to two or three years (or even more, depending on the degree of readiness of the house at the time of bankruptcy of the developer) to pay rent housing and timely payments on the mortgage.

In other words, because of the long wait (payments for rent), the final cost of real estate may well increase by half, especially when it comes to Moscow. If, of course, the hapless shareholder copes with the financial burden on the appearance of which he had not counted on, making a mortgage (and this is often the "last resort", almost at the limit of financial possibilities). If he fails, he will lose money, because the rights of claim on the property will go to the bank, part of it will go to repay the mortgage, part will return to the mortgagor, but a larger amount will go to the bank's assets in the form of net profit after the sale of the property.

Who pays and for what: "at whose expense is this banquet"?

Besides, where will the government get the money to complete the construction, given that the bankrupt company is "on the take"?

The fact is that one of the main sources of replenishing the state budget is taxes collected from citizens (personal income tax).

Thus, when a developer goes bankrupt, not only shareholders, but all citizens of the Russian Federation suddenly become solidarity investors in construction.

However, if the shareholders do get housing, although the deal closes less favorably for them than they bargained for, the taxpayers instead of receiving real social benefits, for which the tax deductions should have gone, will pay the bills of a negligent developer without compensation.

Can a shareholder "get out of the deal" and get his money back before the deadline?

Do shareholders have mechanisms to timely identify problems of the builder and somehow influence the situation? Thinking back to the problems of the Urban Group, one could say that this collapse (rather a big scam) was not an instantaneous occurrence, the money was being withdrawn over many months. And if the signs had been noticed in time, who knows, maybe it would have been possible to save some of the money intended to continue the work.

Actually, this is what the law says: the shareholder can count on compensation if the deadline for commissioning is delayed, but he can not demand something from the developer, if the agreed period has not yet arrived, but the work is delayed for some reason. Does it mean that investors in construction can only wait for the delay (two months), and only then seek something? But if so, then the developer has plenty of time to disappear with the money.

But that's not all the law says about it. The buyer can break the contract with the developer and insist on an immediate and full refund (and compensation) if circumstances arise where the house cannot be built and commissioned within the stipulated time. Or if the work is stopped or suspended. Of course, the contract can be broken only by a court decision, which should have a good reason for that. Can the developer provide the court with some facts? How to prove that the construction is suspended?

Mechanisms of influence: initiative group and control bodies.

In order to protect their interests, the shareholders should monitor the work even when the construction began. It is desirable to form an initiative group to represent the interests of all co-investors, control the construction process, send requests to the developer, engage in constructive dialogue, and in case of problems, take part in court proceedings.

It is worth knowing that since 2017, the law requires that the developer must accompany the project declaration with a construction schedule, which indicates the stages of work. This schedule is necessary for the inspection of the developer's activities by the regulatory authorities (in Moscow this is done by Moscomstroyinvest, and in the MOE - the structure of the Ministry of Construction). In the case of violations of the timeline regulatory agency sends a statement to the court, which decides on fines or other penalties, up to the initiation of bankruptcy proceedings.

In fact, it is the regulatory authorities are the main tool of influence on the developer, a tool that can protect the money.

There are signs which allow an investor to understand that some problems may soon appear with the builder. The main one is the suspension of work at the construction site, which can be diagnosed by regular site visits (the builder cannot refuse to do it, because the possibility to monitor the progress of work is prescribed by law), installation of video cameras. That is, if the representatives of the initiative group of shareholders see that the stages of construction, declared by the developer, are not complied with, or that the work has been suspended, they can send the developer appropriate questions (of course, the document must be registered accordingly).

After that, the company's management should provide an answer, on the basis of which the shareholders plan further actions. Namely: if the explanations about the reasons for the construction suspension are not satisfactory to the shareholders or if the management refrains from communicating with the shareholders, it is necessary to apply to the control body. The basis for inspection is the response to the request (or lack thereof), if the inspection reveals violations - an application for sanctions will go to court, to which will be added applications of other shareholders to terminate the contract.

Life after the court decision: what next?

Thus, the builder will have several ways out of the situation. He can initiate bankruptcy proceedings or return the money to the shareholders who filed lawsuits (if there are not too many of them and the funds are left to continue construction).

It is possible that after the courts the developer will have no money for the continuation of construction. However, in any case, the company will not be able to withdraw money from their accounts, because at the time of the Ministry of Construction check, the latter will be blocked. In this situation, developers will have to prepare for the wait - construction will be resumed after the bankruptcy procedure will be initiated and conducted, and a company will be determined to finish the construction.

Advice from the participants of the equity construction market: a word to the experts

In short, there are mechanisms of control of the developer and the rapid identification of problems. The direct participants of the equity construction market will tell us how effective they are and whether there are any nuances of their use. So the word belongs to the experts:

ALEXEY PERLIN Director General of "SMU-6 Investments

In most cases one can follow the progress of project construction online, through round-the-clock video surveillance cameras and regularly updated photo reports formed on the project website. If the client sees that the camera hasn't picked up workers for a long time, or that the last photo report was created a few months ago, it's worth paying attention to it. To understand the situation, send a request to Mosgosstroinadzor, which, in turn, on a regular basis monitors the construction of the object and ensures timely consideration of citizens' applications. Also, every quarter the developer provides Moscomstroyinvest interim financial statements and at the same time makes changes in the project declaration on the amount of accounts payable and receivable on the last reporting date. In addition, the timing and quality of construction of the residential complex can be checked by indirect indicators. Pay attention to whether the advertising of the facility is being maintained, whether the documentation on the official website is being updated, whether the news feed is being maintained.

ANDREY KOLOCHINSKY Managing Partner of VectorStroyFinance

If you have already purchased an apartment in a new building at the stage of construction, having paid enough attention to the choice of the developer and the real estate object itself (visited the construction site and checked the documents) you need only to watch the process. And if the situation with the stages of construction of the floors is easy enough to control, then at the end of this stage the dynamics will not be so noticeable, since most of the work now takes place inside - mounted inter apartment walls, finishing of the common areas, installing elevator equipment, etc. Therefore, some buyers are concerned about the lack of obvious changes on the construction site, in this case, we advise to come to the construction site and see for yourself. On our construction site there is no blank fence and even in the evening and at night you can see how the work is done.

MARIA MOGILEVTSEVA-GOLOVINA Product Director of City XXI Century

Conscientious builders have an open information policy during construction, they inform shareholders through all available channels: photo reports on websites, groups on social networks, webcams at the site, etc. Sales departments are constantly in touch with clients and answer all their questions. There are also guided tours for everyone.

How can you estimate the construction pace yourself? It is enough to monitor the number of builders and other workers on the site, analyze the rate of construction (if one floor is being built for more than a week, that is a reason to ask the builder what caused the slowdown). To do this, you can visit the site once a quarter, or do it more often as needed.

ALEKSEY LUKHTAN Head of Marketing and Sales at Lexion Development

The state is doing everything possible so that the term "defrauded shareholder" would not appear in the country. While the new rules of the game, when the developer works through escrow accounts, and the shareholder quietly awaits the completion of construction, do not work to the full extent (only from July 1, 2019 all builders must switch to escrow accounts), some methods of control over his activities still exist.

First of all, there is a state information portal, where you can observe all the processes of construction of a particular real estate project. The website - our.dom.rf - publishes the dynamics of the project's construction, so that each shareholder is aware of what is happening to his or her object with a certain regularity.

Secondly, you can independently monitor the construction and check the data with the project declaration published on the official website of the developer or the project.

And third, it is much easier to check the builder, if he does not build with his own money, but with a loan, because you can not check the availability of your own money, and when there is a credit line issued, officially confirmed by a large reliable bank - it is an additional guarantee that the construction will be completed, and therefore less risky situation.

Julia Zubarik Founder of urban planning bureau "Master `s Plan"

The participant of equity construction has a number of opportunities to control the developer's work. On the control of construction mentioned above. As for controlling the parameters of the house, such as finishing facades and entrances, or, for example, the manufacturer of elevator equipment, everything is more complicated. If a participant thinks that the developer does not build in the way he promised, first of all he should address to the developer and demand to see the documents, according to which he works. All the technical parameters are specified in the declaration, including the materials from which the house is built. But they are specified rather vaguely. For example, the decoration of halls with porcelain stoneware may mean that the developer can supply tiles for 500 rubles per square meter, or 5000 for each part of the house there are documents, which can be changed after the approval of the relevant authorities. If a developer is not satisfied with the quality of construction, they have only one option - to go to court.

PHILIPP LITVINENKO Director of transactional business and raising funds at Moscow Credit Bank

According to amendments to Federal Law 214 "On Participating in Shared Construction..." developers will have to obtain obligatory banking support for transactions. The bank will control all operations in special accounts with the right to refuse them - for example, if there is suspicion of misuse of funds. We are talking about every transaction, whether it is prepayment for design documentation, engineering survey or advertising costs. Accounts in one bank will be opened not only for the builder, but also for the technical customer (the company providing engineering services) and the general contractor.

To meet the requirements of the legislation the banks formed competent teams, increased the number of departments of banking support and project finance, strengthened the expertise of financial and documentary control. Our bank created all the necessary infrastructure to work with specialized accounts of developers.

ANDREI COPYTIN First Deputy General Director of KTB ZhB JSC

Today's rules of share construction of housing provide for quite a few tools to control the quality of housing for the average consumer, of which at the same time not many people are aware. At the same time, the vast majority of the necessary information for this is publicly available and published on the website of the Developer, or on the websites of city authorities, in one way or another related to the process of implementing the investment object (Moscow Government Portal, Moscomstroyinvest, Moscomarchitecture, Mosgosstroynadzor). On August 31, 2018, Order No. 996/pr of the Ministry of Construction approved a new form of project declaration, which all developers are required to publish in the public domain.
What to pay attention to when choosing the object of co-financing in the construction process: 1 First of all, this is Section 6 - the financial results of the developer in the current year. The presence of losses in the financial statements, as well as significant accounts payable, is a bad sign for the shareholder. 2 You should also pay attention to Section 10.3, namely the company that developed the project documentation. As a rule, there are from 3 to 5 organizations, the first of which indicates the general designer, and the subsequent - the subcontractors who carried out some parts of the project documentation. If the first ones are little-known young companies, or in their portfolio you could not find a significant number of completed residential projects, along with the general contractor you risk to experience all the charms of lack of experience designer. This can be both irrational and low-quality design solutions, and simply disrupted construction schedule. Choose objects designed by large experienced companies who have proven themselves in the market.

ALEXANDER SERGEEVICH KRASAVIN First Deputy Chairman of the Board of "Barkli"

In projects from comfort class to elite segment shareholders can watch the dynamics of construction works in social networks, cameras are installed directly on the site, and you can watch broadcasts on YouTube about the progress of construction which are filmed by journalists on location. These days, shareholders can keep up-to-date with everything that is going on at the construction site without having to go to the site in person.