Risks when buying luxury real estate

Description of risks that the parties to the transaction may encounter when buying or selling luxury real estate

Elite real estate is special layouts, good materials, convenient location and other pluses, depending on whether this is an apartment or a house. This is an expensive investment based on the desire for comfort, emphasizing the status or other wishes of the buyer. A seller can have several elite real estate objects and sell one of them, or he can sell a single elite real estate object for a variety of reasons - moving, business debts and more.

Consider the main risks of the buyer and seller of luxury residential real estate.

Buyer Risks:

Risk of declaring a contract null and void

If the contract does not indicate the price of elite real estate, the object of elite real estate (cadastral number, address, number of storeys, etc.) is not indicated, such an agreement will be declared non-concluded. Unclaimed due to the fact that the parties did not agree on the basic conditions for the sale of an elite property.

Reaching agreement between the seller and the buyer on two important issues of the contract of sale of an elite residential building or an elite apartment is a guarantee that the agreement is concluded and, therefore, the parties are obliged to fulfill the terms of such an agreement.

In the event of a situation in which agreement is not reached, the parties return to each other what they received earlier (the buyer is a house or apartment, the seller is money).

The risk of invalidation of the contract

The contract of sale of elite real estate can be invalidated for many reasons, the most common of which is the sale without the consent of the spouse (or spouse). Of course, if there is no prenuptial agreement determining the order of possession, use and disposal of spouses' property.

In the absence of a prenuptial agreement and the notarized consent of the spouse (or spouse), the contract of sale of elite real estate may be invalidated.

If the seller is a company, the most common reasons for the invalidity of the contract are the lack of authority to sell such an object or the lack of consent of the owners of the company to sell.

Just as with the recognition of the contract null and void, the parties return to each other what they took and take what they gave.

Risk of returning an apartment or house to previous owners (earlier owners)

If in the chain of owners of the elite object there was a sale based on forged documents or with other violations of the law and the rules for the sale of real estate, at any time the elite object may become the subject of litigation. In this case, it is possible that the new buyer will be obliged to return it to one of the previous owners, despite the fact that he himself is a bona fide purchaser of an elite object under the contract.

The risk of the seller refusing to transfer the elite property to the buyer

Even if the parties have concluded an agreement that the buyer has paid, even if the buyer’s right is registered in the prescribed manner, the seller may evade the obligation to transfer an elite object to the buyer: do not give the keys to the apartment, house, gate, etc.

The exercise of the right to receive a house or apartment from the seller is possible through a court, which will oblige the seller to transfer the apartment to the buyer. Instead of transferring the apartment or house to him, the buyer may demand compensation from the seller.

The risk of acquiring a burdened apartment or house

Registered citizens, renting a house or apartment and other similar cases are encumbrances that impede the full use of real estate by the new owner.

Therefore, it is important to ascertain the presence of encumbrances even at the stage of the first viewing of a house or apartment and ensure that the seller transfers the object free of any encumbrances.

These are the main risks of the buyer. In addition to these, the risks of poor quality even of elite housing, its hidden shortcomings, are quite frequent. Also, the seller may delay the process of registering the transfer of rights from him to the buyer, there is also a risk of suspension of the registration process and others.

Seller Risks:

The risk of invalidating the contract and the risk of invalidating the contract

These risks are also relevant for the buyer of elite residential real estate, not only for the seller. The consequences are similar.

Buyer refusal risk to pay for the acquisition of real estate

The buyer can deliberately delay the payment, as a result of which the seller has the right not to transfer the house or apartment to him until payment, or go to court. The least risky payment scheme for the seller: one hundred percent advance payment before the transfer of the house or apartment.

The risk of buying a property in a mortgage

As a rule, banks seek to exclude the condition of a pledge in favor of the seller, leaving the bank the sole pledge holder of the property, which is associated with the seller’s risk of not receiving the amount specified in the contract for the sale of real estate.

These are the main risks of the seller. You can also designate as risks the subsequent claims by the buyer regarding the quality of the elite real estate property, its hidden shortcomings discovered during operation, the risk of the buyer refusing to accept the property, the buyer preventing the state from registering the transfer of rights to it and other risks.

In the event that your litigation or other dispute, contractual work or any other form of activity concerns the issues discussed in this or our other material, we recommend checking and making sure that your legal position complies with the latest changes in practice and legislation.

We will be happy to provide you with legal assistance regarding the minimization of legal risks and available opportunities. We will try to find a solution that is right for you.

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Elena Mironova, legal analyst. Blonde. I love pink. Like pop music. I give preference to bankruptcy litigation, loans.