Constraction Scam

Relations Refinement Registration with the Builder. Part III

Continuing a topic of the relations correct registration  between investors and the builder we continue to inform about legal niceties of  such relations possible options registration within a “Construction scam”special project.

We have already said about how to arrange the agreement of share participation, the purchase and sale provisional agreement. Today it will be an  interaction features question between the builder and the investor at a stage of the relations documentary registration. In other words, it  is a security purchase and acquisition of property rights at Fund of financing of a construction.

What is the FFC

Rather reliable method of investment into a real estate object under construction is the conclusion of the contract with Fund of financing of a construction.

Let’s remind that fund of financing of a construction  is the person which  financial institution created. Its purpose of activities is   the private investor’s financial resources attraction, the organisation of a construction and control over the builder.

As practice shows, the similar method of investment is rather reliable because state bodies activities controlled the financial institutions carefully. However, the performance of laws depends on contractors and to a lesser extent on the legislator.

As well conditional “reliability” of a construction financing fund depends generally on the decency of the manager (financial institution) who created a similar fund.

Nuances about which unacceptable to speak

There are materials on the Internet  which colourfully describe the reliability of  the investor’s rights investments if to invest financings of a construction in a fund. Having understood a situation, Lawyers Daily speaks about what they try to hold back. It is the following:

  • the “centre”controlled the fund of financing of a construction and the builder in 90% cases ;
  • there are provisions in contracts of participation in construction financing fund according to which are, as a rule, provided in contribution agreements. The fund represents the interests of the investor only;
  • the investor has no written agreements with the builder;
  • often terms of the contract contain the provisions violating  rights of investors to please to the builder (or to fund);
  • the bankruptcy of builder in certain cases attracts total loss of investments.

You can answer on a question  how the above-stated factors influence of the investor rights observance in such way: “Most of the builders protect the interests. It is quite explainable.  The investor can always refuse the conclusion of the contract with fund”.

We pay your attention to:

the builder and fund are interested in the sale of apartments much more than the investor is interested in their purchase.

It is explained by quite a wide choice of builders and construction objects in our capital. It means that during negotiations with a construction financing fund is quite possible to reach a certain balance between the rights of the investor and his obligations.

Risks of the investor

The private investor risks refers the following:

  • absence at the investor of an opportunity to influence also activities as the fund and the builder;
  • absence at investments of protection against the bankruptcy of builder;
  • fundamental breach of the house entering terms by the builder in operation with the  claims presentation impossibility directly to the builder as between the investor and the builder there are no contractual relations.


Summing up the results, we note that in comparison with other methods of investment, the conclusion of the contract with  a construction financing fund looks rather reliable. However, we ask not to forget that one who acts as the manager of the fund and builder plays  a key role here.


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