Buying Apartments Under Construction
Buying Apartments Under Construction in Serbia
In recent years, we have witnessed an expansion of apartment construction in Belgrade, accompanied by increased demand for the purchase of newly built apartments.
Buying a new apartment for many is one of the life’s biggest decisions, the happiest, but also the most stressful, life situations. One of the main questions is how to buy quality real estate, and at the same time at a “good” price, a price that is within the available budget. Often, the logical choice is to buy real estate under construction.
Buying an apartment under construction is certainly a more favorable option because apartments under construction are many times cheaper than already built and registered apartments. However, you are buying an apartment that has not yet been built, and therefore, it is not registered, so the purchase is fraught with many legal risks. Still, many citizens are making this move and they fully consciously accept the risk.
Apart from the fact that, as already mentioned, under construction apartments are cheaper than apartments that are already built, many people find it convenient the fact that they are able to adapt the apartment base on their needs. For example, They can arrange in advance what material will be used in the construction of the building (joinery, ceramics), what will be the layout of the toilets, electrical outlets, etc. Likewise, payment can be arranged in installments, e.g. it is possible to pay one part of the total amount of the purchase price when concluding the contract, the other part at the completion of a certain part of the work, or some phase of construction, and the final amount only after real estate registration.
A big advantage when buying an apartment under construction is the right to a VAT refund of 10% of the amount of the purchase price. This practically means that on the purchase price of EUR 40,000.00, you have a VAT refund of EUR 4,000.00. This amount is of great importance to buyers when furnishing a new apartment. According to article 56a paragraph 4 of the Law on Value Added Tax, the right to a VAT refund can be exercised for an apartment whose area for the buyer of the first apartment is up to 40 m2 and for members of his family household up to 15 m2. It is important to note that this right can be exercised only by one who did not own an apartment on the territory of the Republic in the period from 1 July 2006 to the date of notarization of the contract. However, this type of real estate purchase also carries some considerable risks, so before concluding the Contract, it is necessary to analyze all legal aspects of the type of Contractual Relationship, check the details about investor, the existence of the necessary construction documentation, as well as negotiate the best possible means of security that would eliminate the risk of disorderly fulfillment of the Contract.
In addition to the Contract for the purchase of a apartment under construction, many people also decide to conclude the Agreement on joint construction or the Agreement on co-financing of real estate construction. In that case, the person interested in buying the apartment, participates in the construction of the whole building either with a certain amount of money or with ownership of the land on which the building will be built, and the investor undertakes to transfer ownership of a particular apartment of the particular area to be built. However, this may also be less favorable for the buyer of the apartment/co-financier, because the buyer bears the risk for the apartment that belongs to him under the Contract, but also corresponds to third parties who have concluded Purchase agreement for an apartment under construction.
In order to avoid or at least reduce the risks of being cheated by investors and to prevent the building, for which you have already given the money, never be built, t is possible to arrange a Bank Guarantee of good performance, which provides security at least up to the amount specified in the guarantee. It is possible to negotiate a contractual penalty, which the investor would be obliged to pay to the buyer in the case that the investor abandons the construction of the facility, in addition to the refund of the amount paid, however, it is doubtful whether these amounts could also be paid by the investor. It is recommended that for the proper execution of the contract by the investor, that is, for the purpose of construction of the facility within the stipulated deadlines and in the agreed manner, make a pledge by which the investor or third party, would guarantee to fulfill the Contract and in case of non fulfillment, the buyer could settle through a mortgage.
It is advisable to “check” the investor when buying an apartment under construction or concluding the Agreement on joint construction. You can do this through the Business Registers Agency website, where you can see information about his company, check investor’s accounts on the website of the National Bank of Serbia, talk to the tenants of the building that the investor has previously built, etc. It is necessary to check whether the investor is registered as the holder of the right of ownership or use on the land, whether a building permit has been issued, to inspect the preliminary design, as well as to check whether the investor has paid all the bills for electricity, water supply, etc.
It is advisable that the Contract contains a provision on the obligation of the investor to obtain, at his own expense, a occupancy permit, which is a condition for the object to be registered, as well as a provision that the investor is not entitled to the full amount of the agreed price of the apartment until obtaining the occupancy permit.
The seller of the apartments under construction must have documentation such as location information, proof of ownership of the building land, building permit according to the technical documentation for the construction of the building, the main project in accordance with the building permit, etc., so that the buyer can buy the apartment under construction, so it is necessary to check all construction documentation before making a purchase decision.
Unfortunately, it often happens that real estate buyers are tricked, left with no money and no housing, and forced to exercise their right in court, and even after obtaining a final and enforceable judgment, sometimes in enforcement proceedings it is impossible and charge. For this reason, it is necessary to consider all the benefits and risks of such a purchase before making the decision to buy an apartment under construction in order to make the best possible and informed decision.
Buying an apartment, and especially an apartment under construction, is a complex legal issue that needs to be addressed with the utmost care and with the help of those who specialize in the area. An increasing number of apartments are being sold already under construction due to high demand and at a slightly lower price than usual. The real estate market is expanding, opening up space for more and more potential abuses. Therefore, be fully informed before making a decision to buy a apartment under construction or conclude a Joint Building Agreement.