Purchasing land for development is an investment that opens a wide range of opportunities, but at the same time carries significant legal risks. Imperfect legislation, insufficient transparency of information, and the dishonesty of some market participants can lead to wasted time, money, and nerves for the buyer.
The most common risks for buyers when purchasing land plots are:
- inconsistencies in the title documents for the land plot;
- purchasing a land plot with a designated use that differs from the required use;
- encumbrances and restrictions on the land plot;
- legal disputes regarding the land plot;
- unfavorable terms of the transaction;
- potential grounds for challenging the contract in the future.
Let us consider these risks in more detail.
First of all, ask the seller for the title documents for the land plot. Title documents usually include: a purchase and sale agreement, a gift agreement, a barter agreement, a certificate of inheritance, a certificate of ownership of the land plot, a state act, or a court decision. Additionally, we ask the seller how the sale will take place — in person or through a representative.
If the transaction will take place through a representative, we request a copy of the power of attorney and agree on its wording with the notary who will conduct the future transaction.
During martial law, it is common practice to provide powers of attorney from abroad. To avoid the risk of the owner’s actual absence of real will, we recommend that you discuss the future transaction directly with the owner, preferably in writing — this can be done via messengers, email, or video communication.
In the text of the power of attorney, it is worth paying attention to the details of the authorized person, the name of the land plot, the cadastral number, the buyer’s details, and the amount for which the sale will be carried out. It is thanks to such details in the power of attorney that the risks of the previous owner challenging the transaction on the grounds of lack of consent to the alienation or sale of the plot on terms unfavorable to him are minimized.
Analysis of the title document
The main thing for us is not the document itself, but the information it contains. Once we have received physical confirmation of ownership of the land plot, we can verify the accuracy of the information.
We check:
- the state register of real rights to immovable property
- the public cadastral map
- extract from the land cadastre
- register of court decisions
- register of enforcement proceedings
- register of urban planning conditions and restrictions
- availability or technical possibility of connecting utilities (we ask the seller or contact local authorities)
What we pay attention to in the state register of real rights to immovable property
It is necessary to verify the accuracy of the seller’s information, the intended use of the land plot, its area, and cadastral number. It is important to check for any encumbrances, such as mortgages, seizures, lease agreements, easements, emphyteusis, or superficies.
Check the grounds for acquiring ownership: find out on what grounds the seller acquired ownership (purchase and sale agreement, gift, exchange, court decision, certificate of inheritance, etc.). This will help identify potential disputes regarding previous agreements or inheritance rights. If the ownership was acquired as a result of a court decision, it is advisable to carefully study the court case materials in order to analyze potential risks.
Verify the intended use and urban planning conditions of the selected land plot with your intentions for it. It is important to carefully check the intended use of the land plot at the stage of selecting the land plot. For a quick (without additional costs and time) start and completion of construction, the land plot you have chosen must correspond to the intended purpose for the desired type of construction (residential, multi-story or administrative building). It should be borne in mind that changing the intended purpose is quite costly and not always possible to implement.
Urban planning conditions are no less important. When purchasing a land plot, it is advisable to have a preliminary project for planning development on a specific land plot. This will allow you to assess in advance whether your construction plans comply with the existing restrictions.
We check court history and enforcement proceedings
On the website “Judicial Authority” in the section “Status of cases” we search for useful information by the names of the seller, previous owners (if known), and the location of the land plot. In the register of court decisions, information about individuals is hidden, but information about the essence of the dispute, its outcome, and the time of completion of the case is available. It is worth paying attention to the date of completion of the legal dispute and the deadline for a possible appeal or cassation appeal.
The ideal option to avoid the risks of involvement in legal disputes is to complete the process more than three years ago.
Formally, a notary does not need to check the court register to conduct a transaction, so there is a risk that the owner may quickly sell the land plot while the dispute is being resolved in court. The only condition for this is that there are no encumbrances entered in the register of real rights to immovable property.
Enforcement proceedings. Check whether the seller is in bankruptcy proceedings. If the seller is a legal entity, it is necessary to check information about its financial condition and legal capacity.
Time of agreement and calculations
This is the final stage of the transaction, after which the land plot becomes the property of the buyer.
What is important? Notarization of the transaction, although for many this issue is not controversial but a constant, it is still worth noting that notarization of the transaction is mandatory.
To avoid the risk of encountering an unscrupulous notary, we recommend checking information about them in the Unified Register of Notaries.
After receiving the purchase and sale agreement on a notary form, additionally check the conformity of the form in the Unified Register of Special Forms of Notarial Documents.
The moment of settlement is important. The legally correct option is to specify the cost of the land plot in the contract itself and make the payment through a bank.
It is quite common practice to transfer funds in cash, and in the contract itself, the notary indicates “… the settlement between the parties was made prior to the certification of this contract” or the actual value of the transaction is understated. These manipulations are done to reduce the tax burden on the parties, but in the long run, this can result in costs for the buyer.
If the contract is challenged and declared null and void, the buyer is entitled to a refund for the amount specified in the contract. The difference between the actual purchase price of the land plot and the price specified in the contract is at the seller’s discretion.
In summary, while the process of buying and selling a land plot is not particularly complicated, it is important to know what to look out for or to enlist the help of a specialist.