Developers and shared construction: penalties and defects

What is happening

The handover date has passed, the developer is sending out notices of postponement and asking you to sign a supplementary agreement with a new date. The buyer does not know whether they must agree or what they lose by signing.

At the inspection the flat turns out to have dozens of faults, from cracks and crooked walls to ventilation that does not work. The developer's representative is pressing for the certificate to be signed and promises to fix everything "in due course".

The flat was accepted, six months or a year have passed, and hidden defects have surfaced: cold corners, a leaking roof, a cracked screed or facade. The management company sends you to the developer, and the developer sends you to its contractor.

What the law says

• Handover dates and procedure, the developer's liability and quality warranties are governed by Articles 6 to 8 of Federal Law No. 214-FZ of 30 December 2004 "On Participation in Shared Construction of Apartment Buildings and Other Real Estate and on Amendments to Certain Legislative Acts of the Russian Federation" (the Shared Construction Law).
• For late handover to an individual, the developer pays a penalty of 1/150 of the Central Bank refinancing rate on the contract price for each day. The Government has repeatedly declared periods during which no penalty accrues, so any calculation starts by checking those periods.
• The warranty on the property, excluding technological and engineering equipment, is at least five years, and at least three years on the equipment; within that time the buyer may bring claims about defects.
• For defects, the buyer may demand free rectification, a proportionate reduction in the contract price or reimbursement of the cost of putting them right; material defects may justify withdrawing from the contract.
• Since September 2024 the Shared Construction Law has been amended: the inspection and handover procedure for recording defects has been clarified, and the fine for refusing to meet a buyer's demands voluntarily, and compensation for defects, are now calculated and capped under that Law's own rules. Earlier calculations and case law therefore do not always apply.
• If handover is more than two months late, the buyer may withdraw from the contract; funds held in an escrow account are then returned by the bank.

What we do

• We examine the contract, supplementary agreements and correspondence to establish which handover date applies and whether it could lawfully be moved.
• We calculate the penalty period by period, taking account of the moratoriums and the applicable rate.
• We help at inspection and handover: which defects to record, how to draw up the certificate and what to do if the developer refuses to list them.
• We arrange a building survey of the flat and a costing of the remedial work.
• We prepare the claim to the developer and answer its counter-arguments, including that the defects are "insignificant".
• We prepare the lawsuit and represent the buyer in court, including on the court-appointed survey.
• After judgment we follow enforcement through, bearing in mind the deferrals the Government has granted developers at various times.

What we will need from you

• The shared construction agreement with all annexes and supplementary agreements, and proof of payment or of the escrow account.
• The developer's notices of completion and of any postponement.
• The handover certificate, inspection report or non-conformity report, if any were drawn up.
• Photos and video of defects and any specialist reports you have already obtained.
• Correspondence with the developer and the management company about the defects.