Increase in requests I have been receiving recently for legal support of apartment purchase-and-sale deals got me to think about writing this guideline.
Real estate sale-and-purchase deals are subject to notarization. Before notarizing such a deal a notary has to make sure that an object of the deal (house, premises, apartment, etc.) is clear from any type of encumbrance, mortgage, arrest, seizure, etc. So no worries in this matter unless you got into a real scam. To protect yourself, always insist on a notary you know and trust.
Next step is to make sure the seller is a due and faithful owner. Even when a person owns the title and assigns it to you in presence of a notary, this deal might be dissolved in the future by court in a number of cases to name a few of them:
(i) the seller was mentally ill at the time of sale. For example, there are fraud cases when an old lady or man sells his apartment. After some time the new owner finds out that a child, nephew or whoever else files a lawsuit to recognize the deal null and void because the seller was not understanding what he was doing when selling the apartment due to a mental illness, intoxication or something similar. In order to avoid such a scenario, ask you seller to bring an official statement from a certified psychiatrist proving the seller’s mind is clear;
(ii) the seller is a legitimate title holder but previously the apartment was acquired with a legal defect. For example, the seller did not provide his spouse’s consent for the sale, or an officer of a legal entity-the seller did not have due powers to sign the sale-and-purchase agreement. There might be other cases. Such risks are hidden and this is where a lawyer will become handy.
It also often happens that owners make alterations in the apartment by relocating walls and communications without obtaining a permit from relevant state authorities. It does not affect sale-and-purchase deals but when state officials find out about such alterations, you may be fined. Moreover, if the previous owner changed, lets say, pipes in the apartment and this caused water inrush flooding your neighbor below, you also will be countable for that. To make sure no illegal alteration was made, you should ask the seller to invite a technician from the ZHEK so that he prove that everything is OK.
It is not advised to buy a dwelling with people registered at the place. To make sure there is no one such a person ask your seller to provide a special statement called “Form 3”.
In Ukraine buyers and sellers usually tend to minimize the official sale-and-purchase prices of apartments because doing this allows the parties to safe on taxes. But doing this may harm a buyer if the deal recognized null and void later. Imagine, the real price of apartment in USD 50 000, the parties specify in the sale-and-purchase agreement that the price is USD 40 000 and pay the rest USD 10 000 under the table. If a deal is recognized null and void later, the buyer has to return the apartment to the seller and the seller has to return the money paid for the apartment. But officially the seller received USD 40 000 and so that he returns only this sum. The rest (USD 10 000) is lost for the buyer.
As you can see from written above, a buyer bears more risks than a seller and that is why a buyer should better retain a lawyer before the deal. Often people ask a lawyer to come to the notary office and to read the sale-and-purchase agreement just minutes before signing it, however, this is a bad practice. My advice is to provide your lawyer with all necessary documents and information at least one day prior to the deal. Note that not all pitfalls are written above because it is just not possible to foresee everything.