The nuances of registering the purchase of an apartment under a housing cooperative agreement and the features of obtaining a mortgage

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Published: September 15, 2016

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Today, the sale of new apartments in multi-storey buildings with the help of housing cooperatives is becoming very popular.

A housing construction cooperative is a high-risk form of investment in the construction of residential real estate, which is not strictly regulated by law. For more information about what a housing cooperative is, what are the conditions for its functioning, the main positive and negative aspects, as well as possible risks, read on.

• Housing cooperative - what is it?
• Pros and cons of housing cooperatives when buying an apartment Advantages Providing long-term installments when paying for the cost of an apartment
• Transfer of rights to manage the house to the housing cooperative after completion of construction
• Advantages of housing cooperatives in case of bankruptcy and insolvency
• The right of shareholders to participate in the construction and further operation of a house under construction
• Share contributions are not subject to taxation, which reduces the cost of construction

Housing cooperative - what is it?

A housing construction cooperative (HBC) is a form of association of home buyers for the purpose of construction and management, based on the merger of cash shares.

The history of such associations dates back to the 20s of the 19th century, but for ideological reasons they were liquidated. A decree of the Central Committee in 1958, with a significant increase in the population in the post-war years, brought housing cooperatives back to life.

Purchasing housing through housing cooperatives was practically the only possible option to obtain ownership of an apartment before the start of privatization of residential real estate.

Even despite the high cost of this method, it was in high demand among the population.

The reasons were the highest quality of construction and the separate management of such houses.

Legislative regulation of the activities of housing cooperatives is carried out by the Civil Code of the Russian Federation (Article 116 “Consumer cooperative”), as well as the Housing Code of the Russian Federation (fifth section “Housing and housing-construction cooperatives”). The likelihood of using it as a means of raising funds for construction is established by 214-FZ “On Participation in Shared Construction”, where it is determined that it can be used for the purchase of housing on an equal basis with the DDU (equity participation agreement). This federal law directly explains that a housing cooperative is the only permitted alternative to shared construction.

The acquisition of residential real estate through a housing cooperative looks like this: a construction company creates a cooperative and concludes an investment agreement.

The main task of such a cooperative is to attract funds from shareholders. The responsibility of the construction company is the construction of a house and the transfer of apartments in it to shareholders.

If a housing cooperative is created after 2011, it will independently act as a developer, that is, organize the process of constructing the facility and own a plot of land in accordance with the Housing Code of the Russian Federation (Article 110).

It is important to note that all members of the housing cooperative participate in the construction, subsequent reconstruction and maintenance of the house with their own funds. The cooperative may include legal entities, as well as citizens over 16 years of age.

Pros and cons of housing cooperatives when buying an apartment

Advantages

The convenience of the housing cooperative mechanism for home buyers is as follows:

Providing long-term installments when paying the cost of an apartment

The developer offers a flexible payment system in the form of installments, since the payment of share contributions is carried out over several years after the completion of construction.

Compared to equity participation, most of these companies provide payment in installments only until the stage of delivery of the object.

Transfer of rights to manage the house to the housing cooperative after completion of construction

Persons purchasing an apartment under the DDU, after completion of construction, create an HOA (homeowners' association), which will take over the functions of managing the house. The formation of an HOA is possible only after registration of ownership rights to apartments, which usually takes quite a long time. During this time, the apartment building remains without management.

Advantages of housing cooperatives in case of bankruptcy and insolvency

What is meant here is that if the developer who created the housing cooperative goes bankrupt, his

participants can complete the facility
with the help of a new contractor. When purchasing an apartment under a DDU, if the construction company goes bankrupt, the buyers will have to claim their apartments as part of the developer’s insolvency process.
Another way is to create a housing cooperative from scratch and contact the authorities to transfer the unfinished house to the balance sheet of the cooperative. In practice, this process can take a long time.

The right of shareholders to participate in the construction and further operation of a house under construction

Additionally, members of the housing cooperative have direct access to its financial documents and can also re-elect its leadership.

Share contributions are not subject to taxation, which reduces the cost of construction

Thanks to this, an apartment can be purchased much cheaper than on the secondary market.

Flaws

In addition to the above advantages of a housing construction cooperative, this mechanism has serious disadvantages:

• the transaction of purchasing an apartment through a housing cooperative is not subject to mandatory state registration, unlike the DDU, which increases the risk of double sales of real estate;
• the inability to hold housing cooperatives accountable in case of failure to meet construction deadlines or discover deficiencies after putting the house into operation;
• it is impossible to indicate the exact cost of the apartment and write it down in the contract;
• insufficient legislative regulation of the scheme for the sale of apartments with the help of housing cooperatives, which are regulated by the provisions of the Housing Code and the norms of the Civil Code of the Russian Federation, and not by the provisions of 214-FZ.

In general, housing cooperatives as a mechanism for purchasing apartments in new buildings are becoming increasingly popular. However, it is very important before joining a cooperative to study in detail all the necessary documentation: the terms of the investment agreement, the charter, title documents. And only after that sign the contract.

How to purchase real estate in a house under an agreement with a housing cooperative?

If anyone doubts the legality of the existence of housing cooperatives, they should look at Chapter 11 of the Housing Code of the Russian Federation. Here you need to pay attention to article numbers 110 and 123.

The modern real estate market is annually replenished with new schemes for the sale of residential property offered by developers. An example is an agreement to join a cooperative with an initial payment.

IMPORTANT! Before you decide to take any step, it is worth keeping in mind that not all options are completely legal.

So what is a housing cooperative agreement when buying an apartment? The cooperative agreement in question is not regulated by any government bodies in accordance with the legislation of the Russian Federation.

That is why there is a fairly significant risk that the same home will be sold several times. Plus, there is a possibility of very large expenses.

If a citizen wants to get an apartment in a new, newly built building, membership in a cooperative is a really great option for him. In this situation, according to current legislation, the official developer will need to not only strictly comply with all laws, but also carefully listen to the opinions of members of the cooperative.

At the same time, you must be prepared to bear responsibility. This means paying monthly contributions and participating in the life of the housing cooperative. It will be necessary to take part in regular meetings, as well as local referendums on the choice of self-government.

REFERENCE: If there is a need to obtain a mortgage, purchasing an apartment under a housing cooperative agreement may become an obstacle. The reason for this is the reluctance of some banks to issue money to community members. However, if the developer is in good standing with the bank, then a positive result is quite possible.

One cannot ignore the rather significant disadvantages that joining an organization entails.

Among them:

• delay in construction time;
• rising prices for residential building construction;
• lack of community responsibility to members in case of delays;
• complete lack of guarantee to the owners;
• lack of a state body for financial and technical control.

An audit commission elected by the participants acts as a supervisory body. If a housing cooperative has connections with companies involved in investments or direct construction of a specific house, the risks listed above are multiplied many times over.

Procedure for purchasing an apartment

Housing cooperative organization

The process of organizing a housing cooperative is as follows:

1. The decision to form a cooperative is made by a meeting of founders, which can be any person. It is they who become its members by voting for the organization of housing cooperatives. After the meeting’s decision is formalized in minutes, the housing cooperative undergoes state registration and receives the status of a legal entity.
2. The housing cooperative must consist of 5 or more persons, but not more than the number of apartments in the house. Management is carried out by a meeting of members of the cooperative if the number of shareholders exceeds 50 people. The meeting elects the board and the audit commission.
3. The Audit Commission is elected for a term of up to 3 years and conducts a scheduled audit of the financial and economic activities of the housing cooperative once a year.

Purchasing a new building

Purchasing an apartment in an apartment building through a housing cooperative is carried out in the following way:

1. By joining a housing cooperative, its member receives from the common fund of shareholders the amount necessary to purchase an apartment, while the cost of the loan will be significantly lower than a mortgage.
2. To become a full member of the housing cooperative, you will need to pay an entrance fee, the amount of which can reach 5% of the price of the apartment. The contribution is not taken into account in the cost of the purchased property.
3. Then everything depends on the charter of the particular housing cooperative. In most cases, you need to put down about 10% as a down payment. Then the shareholder regularly makes certain payments to the cooperative account in accordance with the schedule. When the amount reaches 50% of the price of the proposed housing, the housing cooperative purchases an apartment for it, registering it as its property.
4. A lease agreement is concluded between the parties, he lives in the apartment, gradually paying off the debt. The repayment period can last up to 10 years.
5. As soon as the amount is paid in full, the apartment will become his property.
6. Instead of interest on the loan, the housing cooperative participant annually pays administrative fees in the amount of approximately 6% of the loan amount. Moreover, if a member of the cooperative made share contributions gradually, then he is given a lower rate than someone who immediately paid 50% of the cost of the apartment.

Unlike applying for a mortgage loan, a housing cooperative participant does not need to collect a huge package of documents. To join some cooperatives, it is enough to present only a Russian passport.

How to properly purchase real estate?

The process of purchasing an apartment in a housing development community requires compliance with certain rules. The fact is that the main principle of the existence of such an organization is to attract as many as possible of those who want to join it. Such regulations allow us to talk about an established procedure for purchasing residential real estate in a housing cooperative apartment building.

In simplified form, this diagram looks like this:

1. The first step is to join the organization.
2. Next, you need to become the owner of a minimum amount of money, which should cover half the cost of the apartment.
3. The third step is obtaining permission to select real estate.
4. Then you need to buy an apartment.
5. After which you must register in it.
6. And the very last moment is to deposit all remaining share funds.

If a citizen absolutely wants the property to be registered specifically for him, it is necessary to find out the size of the membership fee. The reason for this is that the amount may increase, unlike in cases where the apartment is registered directly to the organization.

What documents will be required?

Carrying out a transaction to purchase an apartment through a housing cooperative will necessarily require the provision of a package of documents.

Here is a list of the most important of them:

• certificate of payment of contributions from the cooperative;
• a copy of an extract from the house register;
• several documents confirming the identity of the owner;
• certificate of state registration of rights;
• technical certificate;
• cadastral passport;

In the process of preparing the necessary documents, it is very important to avoid mistakes. Otherwise, the registration process may be delayed.

Form of certificate of payment of share contributions from the cooperative.

Acquisition terms

Currently, in the legal environment, it is the purchase of housing under this scheme that is considered the most dangerous option.

Considering all the disadvantages listed above, it’s hard to disagree with this. Moreover, it is the housing cooperatives that developers involved in fraudulent activities often pay attention to. But there are a lot of obvious advantages, which is why people agree to such a purchase.

ATTENTION: The period during which the building will be commissioned cannot be known from the very beginning, despite all the assurances of the developers. This also applies to the registration of an apartment building. The developer has the inherent right to reschedule as much as he wishes. Those who bought housing in a housing cooperative, one way or another, will have to wait.

The cost of purchasing an apartment under a housing cooperative agreement

It is quite difficult to give any specific information on the cost of an apartment in a cooperative. The contract concluded between the buyer and the developer implies the possibility of the latter changing the price at any time.

In this case, the price may be initially indicated. Unfortunately, Russian legislation in such cases will always take the side of developers.

Where can I go?

In the process of buying an apartment in a housing cooperative, the question voiced in the subtitle arises involuntarily. Some bodies, both state and municipal, can help the future owner solve some problems.

Among them, it is certainly worth highlighting the following organizations:

• house management service;
• Bureau of Technical Inventory;
• tax authorities (IFTS);
• trustee bodies;
• municipal public housing commission;
• ATS;
• local office of the Federal Registration Service.

Registration of ownership of an apartment

To obtain a certificate of ownership of a residential property built with the help of a housing cooperative, the participant will need:

• membership agreement in the housing cooperative;
• share agreement;
• payment documents confirming payment of share contributions;
• act of acceptance and transfer of real estate;
• certificate of payment of all debts.

On the basis of these documents, state registration of ownership of the apartment is carried out and a title document is issued.

List of required documents

When buying an apartment in a housing cooperative, you must know the list of the most necessary documents that are needed to conduct a sale transaction . Here are some of them:

1. A certificate from a specific cooperative, which indicates that the owner of the property has paid all contributions.
2. Extract from the house register (a copy, not the original).
3. Documents identifying the owner of the apartment (passport, driver’s license, etc.).
4. Certificate certifying the state registration of the right.
5. Cadastral and technical passports.

Possible risks when buying an apartment

When joining a housing construction cooperative, its participants bear some risks:

1. The risk of increased construction costs and the need for additional payment in excess of the paid share contribution.
2. Risk of double sale due to lack of state registration.
3. The risk of failure to meet the designated construction deadlines (even if the deadlines are specified in the contract, they are not binding on the cooperative and will not entail serious consequences for the developer).

The identified risks are significant and have an impact on the protection of the legal rights and interests of housing cooperative participants, and are even more amplified when the management bodies of the housing cooperative are directly or indirectly connected with investment, construction and other companies involved in the construction of the house.

Mortgage and housing cooperatives

It was mentioned above that banks are not always ready to make concessions and give a mortgage to a housing cooperative, however, there are also positive aspects of participating in a housing cooperative when getting a mortgage and buying an apartment:

1. Documenting. When participating in a housing cooperative, an agreement is concluded between a legal entity and a cooperative, according to which, upon joining the organization, a citizen is obliged to pay a monthly contribution (in professional language, this contribution is called a share contribution).
2. Members of the cooperative have the right to find out any information about the purchase and sale of apartments in the building, which, again, eliminates the risks of double sales.
3. At the meeting, members of the housing cooperative can at any time make a verdict to change the developer.

For your information, we suggest you read about the risks of housing cooperatives and housing cooperatives. We also offer you additional information about:

• leaving the cooperative;
• registration;
• activities;
• membership;
• payment of shares;
• and the general meeting of owners.

How to protect yourself from deception?

Buyers who decide to purchase an apartment in a new building with the help of a housing cooperative can be given some effective advice to avoid fraud, financial and material losses:

• study in detail the charter of the cooperative, paying close attention to the financial side of the issue (the amount of the entrance fee, the procedure for paying out the share), the duties and rights of the parties, fines and liability for violation of obligations;
• become familiar with the management procedure in the housing cooperative (whether the cooperative itself or a hired contractor is engaged in the construction of the facility);
• make sure you have permits for building a house;
• pay attention to the reputation of the developer, experience and history of its activities;
• carefully read the terms of the contract and sign it only after all conditions are transparent.

Following these recommendations, purchasing an apartment through a housing cooperative will help you acquire housing on attractive terms.

Find out what kind of housing the Russian state has provided for migrants and refugees. Before renting an apartment, it is recommended to collect a certain package of documents. Which? Find out in our article. What a letter of credit is and how it can help you purchase real estate, you will find out in our material at the link.

Timing and cost

Based on the data that you can read on the Internet or ask lawyers, you can say for sure that buying an apartment in a housing cooperative is the most dangerous option . No, of course, it has its advantages, but cooperatives are the most favorite place for profit among unscrupulous developers. Absolutely any person who agrees to become a member of a cooperative is taking a very big risk.

As for the cost of housing in the case of a housing cooperative, this is very difficult to understand: according to the laws, if the cost of an apartment is specified in the contract, then the developer has every right to unilaterally change it as he pleases. The legislation of the Russian Federation, in this case, is on the side of the developer.

The timing of the commissioning of an apartment building and its subsequent registration may also be unknown. The developer, again, can postpone and extend the construction date as much as his heart desires. People who have purchased certain housing in the building can only wait.

The risks of buying an apartment in a housing cooperative are presented in this video:

When changing housing, the question always arises: “ What authorities can help in the event of a purchase and sale transaction ?” Here is some list:

1. House management.
2. Inspectorate of the Federal Tax Service.
3. Unified Information Settlement Center (UISC).
4. Bureau of Technical Inventory (BTI).
5. Guardianship and trusteeship authorities.
6. Public housing commission under the municipal district.
7. Internal affairs bodies.
8. Office of the Federal Registration Service.

To summarize, I would like to repeat that searching for and subsequent purchase of housing in connection with cooperatives is not the best prospect .

There have been many cases in history when people placed too much faith in a company and seemingly friendly developers. Then they lost their property, earned money, long-awaited apartment and were left with nothing.

Therefore, before you start looking for the desired home, you should ask for advice from a qualified lawyer and notary.