Terracotta Residential Complex legal review

The TERRACOTTA residential complex by Perfect Group had long been known as a “mystery”, since for a long time investors didn’t even know the project’s location, let alone the developer’s name. This article is a legal review that will help you learn more about the construction, the land, the court disputes and, most interestingly, why the building permit troubled me so much.

Infrastructure of the Darnytskyi District

The TERRACOTTA residential complex is being built in the Darnytskyi district of the capital, practically at the exit from Kyiv towards Boryspil. It’s a 7-minute walk from the complex to Vyrlytsia metro station, and 10 minutes to Boryspilska metro station.

Another residential complex, “OLYMPIC PARK”, is being built very close by and its completion is scheduled for the end of 2022. Therefore you should take into account that construction and all the consequences that come with it (dust, noise, equipment) will continue quite close to you. But this can also be seen positively, because the more new complexes built near you, the more new infrastructure objects will become available to you.

TERRACOTTA is 4 buildings with 21–27 floors. They are supposed to be commissioned all at once; according to information from the sales department, commissioning is planned for June – July 2021. On the complex’s website there is a section where you can view the construction progress, at what stage the construction is and what work is being carried out.

Developer and Developer: Perfect Group

The developer is the company that handles the organization and promotion of the residential complex. It is not the builder and not a legal term, but rather a marketing one. You have no contracts with the developer and it owes you nothing. But many people rely on the developer’s fame and reputation. According to information on the TERRACOTTA website, two developers are involved: Perfect Group and Altis Development.

Perfect Group is a fairly large developer; its notable projects include Lebedynyi, Stanford, Polaris, Rybalskyi.

The builder is the one who directly obtained the building permit and actually performs the construction. The builder of TERRACOTTA is the company “INKOLOR UKRAINE” (35830557). It was registered in 2008. I noticed that the company’s address is the construction site’s address, which seemed rather strange to me. The company’s founder is located in Cyprus and among the company’s activities is the construction of residential buildings. I did not find any debts that the enforcement service would attempt to collect from the company.

Building Permit for the Terracotta Residential Complex

The building permit (ІУ 113182432243) exists; it is registered in the DABI register, but it was issued for the construction of 11-storey buildings. However, in fact much more is being built, and in some houses up to three times more. Two AMENDMENTS were later made to this permit. I studied them, but the new floor counts are nowhere indicated, which means the number of floors was not changed.

This could become a huge problem for commissioning the complex. Therefore I continued to look for information further and found the Urban Development Conditions and Restrictions. Simply put, the city is not developed chaotically. Before designing a building, the developer receives a document that specifies what exactly he can build on this particular plot of land. And the developer of TERRACOTTA was told that if he designs a building over 50 meters (and 21 floors is clearly higher), then he must coordinate everything with the state aviation authorities. This is related to the close proximity to Boryspil Airport.

Land for the Terracotta Residential Complex

The land use designation in the Public Cadastral Map corresponds to what is actually being built, so there are no questions here. The land is municipally owned and belongs to the city of Kyiv. By its decision in 2009, the Kyiv City Council transferred the land for use to the developer for 10 years. But 10 years have already passed, so I continued to investigate the land further. In the extract from the real estate register we see that the lease agreement between the Developer and the Kyiv City Council is dated February 2012, so apparently the developer’s lease term is still valid until 2022. In this same extract I checked that there are no arrests on the land.

Investment Scheme

The following scheme is used in TERRACOTTA – first you sign a preliminary agreement and under it you pay the cost of the apartment, and after the house is commissioned the Developer first registers the finished apartment in his name and then sells it to you. At that stage you sign the main sale and purchase agreement. BUT the thing is that this scheme is considered the most risky and least protects the buyer’s rights.

Below I describe the key points in the preliminary agreement of TERRACOTTA that I paid attention to:

1. Usually the preliminary agreement is concluded directly with the developer. But in this case it is not. You sign the preliminary agreement with some other company and it’s not that scary. BUT before signing the agreement, you should ask the sales department to show you the contract between the developer and the company that is selling you the apartment. Because you need to make sure that the company you are contracting with has the right to sell that apartment.
2. The contract stipulates a “planned date for the building’s commissioning” and it’s important to understand that this is only a planned date. It’s much better when the contract specifies a final deadline by which the building must be delivered. In addition, in the preliminary agreement I DID NOT FIND any penalties for construction delays. So the planned date is included in the contract, but if the developer does not fulfill this promise, you can only count on an “apology”, since no penalties are provided.
3. You can terminate the contract at any time and withdraw the invested funds, but you lose 10%. This is actually, in my opinion, not a bad option, since not every contract provides the possibility to terminate it at any time and withdraw the invested funds.
4. You can also assign the contract, that is, sell your apartment to someone before you register ownership, but you lose up to 5% of the invested funds. And you can only do this if you have already fully paid the apartment price. Why do I draw your attention to this point? Because if a buyer sees that construction has stopped, the first thing he will try to do is to withdraw his money, and if the developer does not return it, for example, if the developer has no money, the only option is to resell this apartment to someone else.

Perfect Group’s Court Disputes

The developer had a court dispute over TERRACOTTA with a public organization that tried to challenge the legality of the building permit. But this case already went through cassation and the Developer won. Therefore we conclude that the complex currently has no court problems.

Conclusion

Overall TERRACOTTA made a good impression on me. It has a fairly well-known developer and no active court disputes, which is quite rare among Kyiv residential complexes, and there are also no obvious problems with the land.

The main questionable point for me remained the building permit for only 11 storeys, since much more is being built. And there are two outcomes – either the developer will make changes to the permit, or this will become a problem.

Another point is the technical conditions. This is the document needed to connect the building to utilities and I did not find current technical conditions on the complex’s website or publicly on the internet. Therefore I recommend that you definitely request them from the sales department if you plan to invest in this complex.

One more aspect I would pay attention to is the location. That the complex is at the exit of Kyiv is, in my view, not a problem — nearby are Partisan Glory Park, two metro stations, and a wide highway. But in the Vyrlytsia metro area in summer, I personally have noticed rather unpleasant smells more than once. This is because there is an incineration plant and the Borynychka aeration station about 2.5 km from the complex. Whether this is a problem is for you to decide, but if you are sensitive to smells, just come several times and walk near the complex, talk with local residents.