How to protect yourself if the investor is late in construction?
The purchase of apartments under construction is widespread today. An increasing number of buyers are deciding to buy an apartment in one of the new buildings. There are many advantages to purchasing this type of real estate, but you must pay attention to the potential risks.
Define a deadline for completion of works
The specificity when buying a new apartment is that it does not have to be finished and ready to move in at the time of purchase and payment of the agreed price. Therefore, it is essential for the buyer that the contract by which he buys the apartment under construction defines the deadline for the completion of works.
Investors are often inclined to exceed the deadlines for the completion of construction. Sometimes this can not be attributed to the exclusive fault of the seller because there are situations where administrative work slows down or hinders construction work, and sometimes it is even about unforeseen circumstances in the form of weather problems and the like. (so-called force majeure).
Negotiate a contractual penalty
How customers can protect themselves is by negotiating a contractual penalty. It is a legal institute regulated by the provisions of the Law on Obligations and which implies the obligation of the debtor to pay a certain amount of money (or some other material benefit) if he is late in fulfilling his non-monetary obligation. An important feature is that a contractual penalty cannot be contracted for monetary obligations (interest is used for such situations). Therefore, buyers have the opportunity to negotiate a contractual liability with the seller in case of delay in construction. The practice is that the amount of the contractual penalty corresponds to the market price of renting the apartment whose structure is pending.
We emphasize that it is necessary to negotiate a contractual penalty because it is not an institute that is applied by force of law. Without the agreed provisions on the contractual liability, the buyer will not be able to demand it from the investor.
Due to construction delays, buyers found themselves in a situation to start repaying loan installments and, at the same time, continue to pay rent for the apartment they rented because the apartment they bought was not finished. However, they planned to redirect the money they set aside for rent on the loan installment. In practice, there have been cases where a contractual penalty has been agreed upon so that the seller pays the buyer an amount equal to the monthly installment for the loan.
Negotiate to protect yourself from double the cost of rent and credit
When buying an apartment under construction, keep in mind the possibility of applying to this important institute, which will allow you to "overwhelm" the wait in the event of a delay in completing work. And the amount of the contractual penalty depends on your negotiating skills and the investor's willingness to pay it.