A number of challenges and risks exist when buying property in Ukraine. If you are interested in buying Ukrainian real-estate, you have to be informed about challenges and risks existing in this sphere.

In this article we would like to discuss each one of these issues in detail.

There are two most common types of property:

(it`s mostly about residential apartments. Would you interested in commercial property or houses, each item has its individual features)

Old-resale property

Pro:

  • Deals with such buildings/apartments are much clearer as require single sell-purchase agreement.

Still you will need to investigate the title to the property, restriction, history of the real estate and the seller him(her)self.

  • You are free to use/repair your property once you paid for it.
  • Some of the old buildings, especially in centers of cities are pieces of architecture art itself.

Cons:

  • Higher price of such items or a quite poor conditions of both apartments and buildings.
  • Some neighbors can be bothering.
  • If really old buildings have its own charm, most of residential houses built between 1970-2000 are both ugly and uncomfortable. Moreover, bad materials had been used for some of such buildings.

 

Newly built or property that is yet to be built

Pro:

  • Significantly lower price for not completed items.
  • Modern planning and materials.
  • Easier designing of such apartments.
  • New neighbors will be mostly young “middle” class families and individuals who usually   are more easygoing and pleasant.
  • Utility bills will be significantly lower due to new equipment and construction technologies.

Cons:

  • Unfortunately, Ukraine has not yet created any legislative or market instruments that would fully insure the investor in residential real estate. It is not uncommon for even large developers to suddenly go bankrupt.

However, this does not mean that you should not buy new buildings, you just need to do it consciously, weighing all the risks, conducting a full inspection of several objects that you like, and choose the one where the risks will be minimal.

  • Usually you will be able to start repairing in 12-24 months after the deal. In addition, most developers delay planned terms of commissioning.
  • Sometimes developers violate land use or building requirements. Such buildings stay not commissioned properly for a long time. Investors, at best, live in their apartments, but without proper access to communications.

 

The most common risks related to the purchase of property in Ukraine are:

  • Work of real-estate agencies

Neither the real-estate agencies nor the real-estate agents do not require any special license to operate. Thus, there is not much at stake for them.  Real-estate agency’s fee includes also services for due diligence of property. However, as the fee will be paid only upon a deal, so agents is always interested to make it happen. For these reasons, we do not recommend to rely on legal opinions, made by real-estate agency’s “experts”.

  • Terms of payment

Undervalued sale price resulting in the sanction of tax authorities and challenging the agreement as fictitious.

Cash payments, which are often imposed by the seller, can challenge the very fact of payment.

  • Terms of the preliminary contract resulting in the non-return of the advance prepayment for the proposed purchase
  • Restriction of the seller's rights to sell, encumbrances/ mortgages
  • Former deals

All the transactions made with the building in question should be investigated. Just one past bad deal can lead to significant legal trouble in future transaction.

  • Third parties interests

Example: minor children officially residing in the residence who can not be evicted without official permission

  • Unbalanced terms of agreements with developers resulting in week position of the investor in even the minor conflicts
  • Complications with land, permits and building requirements  during the construction   
  • Tax issues

 

Conclusions

In Ukraine, legal due diligence of the real estate and assistance in the deal is in particularly high demand.

This is a direct result of the state’s invalid legislation and even more, its dysfunctional court system, which can cause enormous risks for investors.

 

But no pain, no gain, right?

Investing in Ukraine’s commercial real estate can be very profitable. Market experts report about up to 12-percent yields.

Most risks can be detected and eliminated with the proper legal due diligence.

Our English-speaking lawyers will  provide you with comprehensive assist of your investment.

Also, we can recommend you reliable technical experts and broker who will calculate costs of repairing/decorating and profitability of your prospective property.

 

Please find our sercises related to property here.