Developer's liability insurance for shared construction: features when applicable

The developer is obliged to issue a liability insurance contract before the conclusion of the first transaction with the buyer. Otherwise, he will not be able to register it with Rosreestr. These and other amendments were introduced in 2014, Federal Law No. 294 "On changes in certain legislative acts.

The Essence

Since 2014, the construction company is obliged to confirm the performance of duties, having issued a guarantee or insurance of civil liability of the developer in shared construction. This will allow the buyer to return their funds in the event of unforeseen situations.

The adopted bill establishes the responsibility of the developer for:

• Evasion of obligations;
• The delivery of an unready object;
• Bankruptcy before the surrender of property.

Experts fear that innovations will lead to higher prices for real estate. The government has assured that these factors are not interconnected. The cost of insurance even for a large company is 1% of the volume of transactions. Builders will have to allocate funds for these expenses from their budget.

An object

Insurance of the developer's liability in case of shared construction implies protection of the property interests of the clients. This transaction is beneficial primarily to customers. The company can insure the whole house or apartment separately.

Clients

The contract is in favor of co-investors. If certain circumstances arise, they will receive a payment. The developer undertakes to deliver a reliable quality object. The insurer is obliged to notify the client of the changes in the transaction and pay the compensation. If during the construction process, interest holders will change, this should be indicated in the contract, since a separate document is drawn up with the next participant.

Insurers

Far from all the UK are striving to formalize such agreements. It is believed that this type of transaction brings losses. Moreover, the company must meet certain requirements:

• To operate on the market for more than 5 years;
• Meet the requirements of finustability;
• Have a positive development forecast for future periods;
• To have in circulation a minimum of 400 million rubles, and also the authorized capital for the sum of 120 million rubles.

Rates

Insurance of the builder for shared construction is expensive. Average rates in 2015 were 0.5-0.8%. For long-term contracts, tariffs can be reduced by 10-30%. Insurance company (UK) itself sets the rate, as well as calculates the coefficients for the annual percentage, since it is always possible that the developer will completely avoid fulfilling obligations.

On what the rate depends:

• Participation of the developer in the holding.
• Positive experience of the previous transactions: deadline, number of facilities, work in different regions, no complaints.
• Financial stability.
• Legal support: availability of all documents and permits.
• Stage of construction.
• Deadline.
• Number of co-investors.

Execution of the contract

To register a DDU, the developer must submit a contract to Rosreestr. For this it is necessary to collect such documents:

• The project declaration;
• Permission to perform construction work;
• Certificate of state registration;
• A shared construction agreement;
• A copy of the statutory documents;
• Feasibility study;
• A copy of financial accounting;
• Data on creditors;
• A certificate of absence of delinquencies for loans in banks.

What is to be protected

Insurance of the developer's liability in case of shared construction implies the payment of compensation if the developer has not fulfilled the obligations, which is confirmed by a court decision or bankruptcy of the company. The amount is not paid in the case of freezing the construction or extension of the delivery period. The amount depends on the contract price. It can not be less:

• The cost of the object;
• Average market tariff for 1 square. M. Housing in the region.

The law also limits the maximum amount of premiums.

The following are recognized as insured:

• Interruption of construction;
• Bankruptcy of the developer;
• Non-receipt of housing;
• Refusal to return material resources, etc.

Changes in legislation

In 2014, in Federal Law No. 294, changes were made, according to which the liability insurance of the developer of equity participation in construction is now mandatory. Contracts are handled by the developers themselves. They also choose with whom to sign the contract: with the society, the bank, the specialized company.

All participants in the compulsory insurance society are jointly and severally liable. If the transaction is formalized with the bank, then it takes a lot of time to collect the securities. A 30% deposit is required from the value of the facility, which serves as a guarantee for the financial institution. In addition, the Central Bank sets its requirements for such banks:

- minimum period of work - 5 years;

- the authorized capital of 200 million;

- property value - 1 billion rubles.

Developers are more profitable to get a loan than to issue a guarantee. Finuchrezhdeniya also does not include insurance of the contract of share participation in construction to profitable products.

It is better to conclude an agreement with the company. In conditions of strong competition, insurers try to attract customers with low tariffs and prices. The rate for such transactions remains fixed throughout the term of the contract. Insurance of the developer's liability for shared construction is paid after work is completed. Another advantage - the speed of processing documents. The insurer is the developer himself, the beneficiary is the shareholder. The method of provision is chosen for each dwelling separately.

Insurance of responsibility of the developer in shared construction

Companies must provide bail. Most often this is a plot of land on which the object will be located. In addition, the document describes how to secure obligations. The papers are signed before the state registration of the first equity agreement and are valid until the moment of delivery of the facility. Termination of the transaction does not exempt the company from the obligation to pay compensation on the cases that occurred during the period of its operation.

You can insure the whole house or each apartment separately. The first option is not profitable. The developer must immediately make a large amount, be sure that all apartments will be sold. The second problem is that under such contracts it is difficult to determine who is the beneficiary.

The document comes into force from the moment of transfer of the first installment. Insurance of the developer in case of shared construction under the agreement does not provide for the existence of a franchise. The remaining terms of the transaction correspond to the standard ones:

- the insurer undertakes to inform the co-investors about the amount of the compensation paid;

- the company may apply with a regression claim to the developer;

- the insurer is obliged to notify all owners about the early termination of the contract;

- the duration of the agreement depends on the duration of the construction.

The amount of compensation depends on the price and rates. It should exceed the cost estimate of the total area of the living quarters. The company itself decides how the payment will be made: lump sum or in installments.

Problems of liability insurance of the developer in shared construction

This transaction is very specific. In fact, it is about protecting the financial risks of the developer. Companies have a choice - to issue a policy or a guarantee. The second option is more preferable, as credit institutions already have an established mechanism, scoring systems, experts assessing risks, as well as structures that organize the completion of WIP. SC such advantages can not boast. But they offer low rates. People are used to the fact that banking services are expensive. This is really so, because the risk in the transaction is high. Although, after amending the law, companies have also raised tariffs.

Insurance of the developer's liability for shared construction provides for the cumulative effect of losses. In a crisis situation (a decrease in demand for housing, an increase in rates for mortgages), losses will incurred immediately from all developers, and not one market participant.

Another problem is the lack of possibility to reinsure risks even in the foreign market. In international practice, such transactions use bonds (sureties). But their functioning is not enshrined in Russian law. The main difference of such a product is that the insurer can take the object under construction as a pledge.

The Central Bank has raised the requirements for the UK, which can provide services to developers - increased the minimum amount of capital. This greatly narrows the range of possible insurers - up to 19 organizations. From the new list flew companies, which previously accounted for 80% of contracts with developers. What will happen to them now is unknown. Most likely, it is necessary to conclude new contracts with companies from the "white" list. In the event of a license revocation, the UK is liable for earlier transactions within six months. Then it either terminates the documents or transfers the portfolio and liabilities to another market participant. Unlike OSAGO or liability insurance for owners of hazardous industrial facilities, this service does not have other types of protection, such as compensation funds that would pay out to citizens after the insurer's bankruptcy. The market of shared housing construction is great. But there is no established way of regulating the activity of developers.