Development agreement

On 29 April 2012, the following entered into force Act of 16 September 2011 on the protection of the rights of the purchaser of a dwelling or a detached house. The Act comprehensively regulated the relationship between the developer and the purchaser of a dwelling or detached house, and specified what provisions must be included in the content of the development agreement.

Typically, prior to the conclusion of a contractThe developer provides the prospective client with the model contract that he uses. It is very important to familiarise oneself with the template, even if one is in a hurry to conclude a contract. Only if you understand the provisions that are to be binding on you can you protect yourself from the adverse legal consequences of a contract concluded in haste.

It is essential to check the wording of the cancellation provisions, making changes to the work schedule, increasing construction costs, design changes, as well as those relating to the quality of the finishing of the property and contractual penalties. The contract should also be looked at for prohibited clauses.

Law firms in which they practice solicitors i lawyersThey routinely review draft agreements from property developers, consult on their content and take part in negotiations concerning contract terms. Their services also include: explaining the principles of purchasing a property from a developer, the risks and hazards of concluding a development agreementThe legal consequences of the provisions contained in the model and the rights of the purchasers of real estate.

If it turns out that the proposed provisions are extremely unfavourable or even dangerous for their clients, they propose the content of the changes in the form of prepared provisions. If requested by their clients, they also stand ready to undertake and conduct negotiations on their behalf regarding the final wording of the contract.

Experience has shown that developers allow for amendments to the draft agreement they submit.

Therefore, the development agreement should be a tailor-made document rather than a ready-made template.

Only such a one is able to perform its function properly and thus safeguard the interests of the property purchaser.

The entry into force of the Act on the Protection of the Rights of the Purchaser of a Dwelling or a Single-Family House has led to greater transparency in the rules for the conclusion of the development agreements and better secured the interests of purchasers in the event of the developer's insolvency. It has also eliminated the need to search for the correct legal form of the agreement entered into by the parties and standardised its necessary provisions.

In accordance with the provisions of this law, on the basis of development agreement the developer undertakes to establish or transfer to the purchaser, upon completion of the development project, the right to separate ownership of the dwelling unit and to transfer ownership of that unit to the purchaser. The subject of the agreement may also be the developer's obligation to transfer to the purchaser the ownership of the real estate developed with a single-family house or the perpetual usufruct and ownership of a single-family house constituting a separate real estate.

The other party to the development agreement - i.e. the purchaser, which may only be an individual, undertakes to make a cash payment to the developer towards the purchase price of the aforementioned right.

A distinctive feature development agreement is that the fulfilment of the monetary consideration by the purchaser precedes in time the fulfilment of the non-monetary consideration by the developer (transfer of ownership of the specified premises/real estate). A purchaser who transfers money to the developer even before receiving the property runs the risk of losing the money paid without receiving its equivalent. However, the provisions of the Act impose an obligation on the developer to apply at least one measure to protect the payments made by the purchaser towards the developer's remuneration, with which this risk is minimised.

As a result of the conclusion of the development agreement Therefore, the purchaser does not obtain the ownership right to the real estate, which it acquires only by concluding a subsequent agreement transferring that right from the developer to the purchaser. The development agreement obliges the developer to conclude such an agreement with the purchaser, which of course depends on the completion of the development.

It is worth looking at the contract that the developer presents, and it is worth consulting someone who deals with these types of documents on a daily basis to avoid complications in the future.