Purchasing an apartment on the primary market

What is an assignment of mortgage?

A mortgage loan agreement requires compliance with a list of rights and obligations on the part of the debtor and on the part of the banking organization that issued the loan. Each participant in the process, within the framework of the legal documents governing such transactions, has the legal opportunity to transfer these rights and obligations to a third party. This procedure in legal practice has been defined as “mortgage under an assignment agreement.” Such transactions are the main option for canceling the claims and rights of a given person with their complete transfer to the other party. The procedure will allow the borrower to free himself from debt, the buyer to purchase an apartment at a favorable price, and the bank to return its funds in full (plus interest on loan charges). How the registration process goes and what is needed for this – let’s find out.

How to transfer a mortgage

The procedure consists of the following steps:

• the borrower finds a buyer;
• the current borrower and the buyer send an application to the bank with a request to obtain permission to assign the mortgage;
• the bank checks the potential borrower for compliance with the requirements for clients;
• the bank enters into an agreement with the buyer;
• the parties register property rights, after which the buyer pays the seller;
• the modified borrower repays the mortgage according to the established payment schedule.

The new borrower must provide a passport, certificates of employment and income, and marital status. The seller does not need to provide documentation for the apartment, since the lender already has it.

Why is assignment of rights to a mortgage necessary?

The main borrower has the right to transfer ownership of the property to a third party along with its financial obligations to the bank as part of the mortgage lending service. The need to assign property rights may be required under the following circumstances:

1. The spouses are getting divorced, and one of them is ready to voluntarily give up his shared ownership of the apartment. In this case, all contractual credit obligations are assumed by the second party.
2. Need for an urgent sale - if you need an urgent loan closure, an assignment agreement is the best solution. It is processed much simpler and faster than, for example, removing the encumbrance with subsequent sale or early repayment of the loan in full.
3. Receiving an inheritance - if the borrower dies, the person having the right of inheritance fully acquires not only the property, but also the financial obligations for servicing and paying for the loan agreement.
4. The need for urgent closure of the loan - for example, due to a difficult financial situation and further impossibility or unwillingness to pay the remaining amount of the debt.
5. The bank assigns its obligations to another company that is a legal entity. The procedure can be implemented in two ways - within the framework of trading a mortgage portfolio or by completely selling debts to collectors.

In what cases will you be denied state registration of rights to purchased real estate?

The final stage of purchasing any real estate is state registration of ownership and transfer of ownership to the new owner (buyer). This equally applies to the purchase of real estate by assignment. The agreement for participation in shared construction (DDU agreement) is subject to mandatory state registration, and is considered concluded (comes into force) from the moment of such registration.

The agreement on the assignment of rights under the DDU also comes into force only after its state registration. Since the new year 2020, the procedure for state registration of rights to real estate (apartments, houses, plots, etc.) as well as registration of contracts has changed significantly. Read about cases in which you will be denied state registration of rights to an apartment and other real estate.

Receive services for personal income tax refund, filling out tax returns for personal income tax on real estate transactions here

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February 01, 2020

Real Estate Lawyer

How to sell an apartment with a mortgage by assignment?

A mortgage for the assignment of rights under the DDU in the event of the sale of an apartment is drawn up as follows. The buyer studies the reputation of the construction company, and the seller collects the necessary documents:

• agreement of shared ownership of the object;
• the developer’s consent to formalize the transaction - it must be obtained in advance (with the exception of the execution of a will);
• if the owner of the apartment is legally married - written consent of the second spouse to re-register ownership rights (this document must be certified by a notary);
• receipts confirming all previously listed current mortgage payments.

After all the documents are ready, the seller must obtain from the developer official confirmation of the remaining amount of the debt or its complete absence if such obligations were assumed by the bank that issued the mortgage. The next step is to contact the State Register and order an extract from the Unified State Register there. With a complete package of documents, the seller and buyer contact the credit institution and enter into an agreement on the assignment of ownership rights. After the paper is signed by all parties involved in the process, it should be officially registered in the Unified State Register. To do this, the new owner must contact the MFC. The law allows no more than 10 working days to register an agreement.

Who sells apartments on assignment

Apartments on assignment are sold by:

• The developer, if the apartments are previously registered to some third organization.

The scheme is absolutely legal, but requires proper documentation of the developer’s authority to conclude and sign the assignment agreement. The relevant documents for the assignment must also be available. The scheme is used quite often.

• Suppliers and contractors of the developer, investors.

Being independent legal entities, suppliers, contractors and investors can buy any property, including apartments under DDU agreements. If necessary, these organizations can sell purchased apartments without waiting for completion of construction. The sale is formalized by an agreement on the assignment of rights under the DDU.

The scheme is absolutely legal, but requires proper registration, since the sellers are legal entities. Accordingly, the powers of persons who, on behalf of suppliers, contractors and investors, conclude and sign assignment agreements under the DDU must be properly confirmed.

• Real estate agency. They can enter into assignment agreements independently, on the basis of powers of attorney, agency agreements, agency agreements, or organize the sale of apartments in new buildings and prepare documents. In the latter case, the assignment agreement under the DDU is signed by the appropriate person to whom the appropriate powers have been issued.

The scheme is legal, but requires careful verification of documents.

• Individuals are shareholders.

Registration procedure

To sell an apartment with a mortgage by assignment, you must proceed as follows:

1. The mortgage loan applicant independently searches for potential buyers for his property.
2. After a candidate for the purchase of housing has been found, the seller and buyer contact a financial institution and submit an application there about their desire.
3. Bank employees will check all the circumstances, documents, and credit history of the person wishing to transfer the transaction to themselves. After this, the bank's management makes the final decision on whether to authorize or prohibit the assignment.
4. A contractual agreement is concluded in writing between the credit company and the new buyer. The document is drawn up in two copies. It spells out bilateral rights and mutual obligations.
5. The procedure for re-registration of the transfer of ownership of real estate to a new owner is being carried out.
6. All financial transactions with the seller are carried out.
7. From the moment the contract is signed, the new owner of the property begins to fulfill his obligations under it and, within the framework of the received monthly payment schedule, repays the remaining amount of the debt to the bank.

If the company that issued the loan has doubts about the financial viability of the new borrower, it has the right to demand that the borrower provide collateral or attract guarantors. As a rule, banks do not interfere with the procedure for assigning rights under a mortgage, provided that the person wishing to purchase such an apartment meets all the requirements stated by the company.

Procedure for drawing up a contract and rights

The procedure must be carried out in strict accordance with the Civil Code. Purchasing an apartment with a mortgage through assignment can be done in two ways:

1. According to a pre-drafted purchase and sale agreement. The right to conclude a purchase and sale agreement is transferred from the seller to the buyer;
2. According to the agreement of shared participation in the construction process.

Such agreements usually do not need to be registered and are not a sufficient basis for the transfer of funds.

The assignment agreement must be studied very carefully and special attention should be paid to the following points: what is the position of the developer himself regarding the assignment (is it necessary to obtain his consent and is there a ban on such an operation), what rights and obligations are transferred to the final buyer and whether he agrees with them . In addition, all supporting documents must be attached to the contract.

Risks for the new owner

Despite the fact that the procedure for completing such transactions is simple and quite transparent, there are still certain nuances and associated risks that must be taken into account. The main one is if the house has not yet been completed. You can never be sure that the project will not be frozen and a person will not lose the money invested. The next point is taxes. As part of the Tax Code, the seller transfers a fee of 13% of the difference in value assigned in the DDU agreement and the assignment agreement. In standard cases, in order not to overpay extra funds, sellers insist that the documents indicate an amount less than the actual amount. In the case of mortgage lending, banks do not make such concessions, and you will have to pay tax in accordance with the amount actually received.

In addition, the new owner of the property in case of assignment of rights under the mortgage bears the following risks:

1. The facility is being put into operation in violation of contractual deadlines.
2. Purchasing receivables without the developer's prior consent to the transaction will inevitably lead to the assignment agreement being declared invalid. The legislation of the Russian Federation does not provide for the obligation to coordinate such transactions with the developer, but most of them stipulate this requirement as one of the clauses of the contract - in this case it will have to be fulfilled.

The financial benefit of such an acquisition is the opportunity to buy an apartment cheaper than its actual price while it is under construction. Its cost will be especially low at the initial stages of the project - for example, at the excavation stage. But the risks in this case are the most serious.

Reasons why assignment of rights is not particularly common:

• difficulty in finding a bank willing to make such a transaction (since the company takes on almost the same risks as the buyer of real estate);
• the difficult economic situation and the crisis in the housing construction industry - all this allows a person to find an option with a simpler registration method, but all the main risks will be present.

If we talk about mortgage lending by transfer of housing that was taken out on credit, then in practice this scheme is almost unrealistic. Typical loan programs do not consider such transactions, and only a few banks can agree to such conditions.

How to reduce the risks of assignment

The risks of assignment can only be reduced by a thorough, complete check in preparation for the transaction and compliance with the law when completing the transaction.

For example:

• Make sure the construction is legal. To do this, read the originals of the developer’s title documents and check the information about the developer with the tax service. Check the building permit and its validity period. Check the documents for the land plot and its compliance with the ongoing construction.
• Check that the developer has no signs of bankruptcy.
• The DDU agreement and assignment under the DDU are subject to mandatory state registration. Therefore, make sure that the DDU agreement for the apartment you are buying is registered.
• Check whether there are any encumbrances on this DDU agreement.
• Assignment of rights under the DDU is possible if the shareholder has fully paid the developer the cost of the apartment under the DDU. Therefore, check the payment documents from the shareholder and check the amounts paid with the DDU agreement.
• Obtain from the developer confirmation of full payment by the shareholder under the DDU.
• If necessary, obtain consent from the developer to assign rights under the DDU.
• If necessary, obtain consent to the assignment from third parties (spouse, governing bodies of a legal entity, guardianship, bank - mortgage lender, etc.)
• Agree with the shareholder (seller of the apartment) all the terms of the assignment agreement, including the payment procedure and state registration.

Ways to buy an apartment in a new building

As a standard, all transactions with new buildings are carried out according to the DDU. But some developers offer people to buy apartments in installments.

In general, there are several ways to buy an apartment in a new building:

• According to DDU. It is concluded at any stage of construction before the house is put into operation.
• Under an agreement of assignment of rights of claim, when one shareholder sells the right to claim an apartment that has not yet been built from a construction company. Shareholders are being replaced.
• Preliminary installment purchase agreement. The riskiest option for the buyer, which is often used by developers to avoid concluding a DDU and paying through escrow accounts. An initial payment is required, the remaining amount is paid by the buyer in several payments. After full payment, the main DCT is drawn up and registered with Rosreestr.
• Purchase of a new building with the inclusion of secondary housing. An unfavorable option for the buyer: the resale property will be valued at the minimum cost, and it will be offset against the price of the new building. Usually, two DCTs are drawn up: one by one the company buys a secondary home, and the second one is used to sell a new apartment. But there may be a different scheme of the deal.

Legal advice: it is better not to experiment and buy an apartment using a regular DDU with payment through escrow. The developer may offer discounts on installment plans, but in this case the seller’s money will not be insured. If problems arise, it will be difficult to get them back.

Elena Plokhuta

Lawyer, website author (Civil law, 6 years of experience)

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Mortgage transfer of ownership rights to an apartment in a new building what is it

APPLY FOR A MORTGAGE AND FIND OUT A DECISION QUICKLY An apartment by assigning the right to claim a mortgage is one of the options to become the owner of a home in a new building. This scheme is not very common and is viewed with caution by banks. It provides for the transfer of ownership of an apartment in a building that is still under construction. For example, if a buyer purchases an apartment with credit money from another individual who owns it on the basis of an equity participation agreement.

The assignment can be made by an individual or legal entity in favor of another citizen or company. The right to it is guaranteed by law - a person who has entered into an agreement with a developer to purchase housing at the construction stage has the right to sell housing that has not yet been built through the assignment of the right of claim. Simply put, there is a change of buyer: after the completion of the new building, registration will take place in the name of the new owner, and not the one who initially financed the construction.

Another document that the parties should be aware of, since on its basis the ownership right is transferred, is called an assignment agreement. The parties participating in the transaction are called:

• assignor - seller,
• assignee – buyer.

In addition to the above-mentioned persons, the developer and the bank (in case of purchase with a mortgage) take part in the process.

There are two types of assignment of rights to property:

1. Through a DDU agreement, the party to the agreement transfers its rights under it to the buyer. Until the house is put into operation, such deals can be concluded an infinite number of times.
2. Through a preliminary purchase and sale agreement - according to this document, the parties undertake an obligation in the future (after putting the house into operation) to conclude a purchase and sale agreement on pre-agreed conditions. But banks do not lend to this form of transactions, considering them too risky.

Before agreeing to enter into a transaction, a potential buyer should examine the reputation of the developer. After all, the plan is not to purchase a finished apartment, but only the rights to future housing, which is in the process of construction. In this case, the main emphasis should be placed on the following points:

1. How many years has the developer been working on the market?
2. Are there any completed objects?
3. The quality of the work performed.
4. Check whether all permits for construction are available, incl. land lease agreement.

Next, the seller needs to collect documents:

• share participation agreement,
• the developer's consent to the assignment,
• consent of the spouse in notarial form to transfer property rights,
• receipts and bills confirming payment of shared contributions.

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The buyer will only need a passport and the consent of the second spouse. The third party to the transaction is the bank, which enters into a mortgage agreement with the buyer.

Briefly, the process of buying an apartment in a new building by assigning the right can be represented as follows:

1. Inform the developer about your plans.
2. Obtain official permission from the developer to conclude a transaction (usually it is paid).
3. The developer also issues a certificate confirming the absence or presence of debt.
4. Order an extract from the Unified State Register from Rosreestr.
5. Obtain notarized consent of the spouse to transfer ownership of the real estate.
6. Conclude an agreement for the assignment of the right of claim and register it with Rosreestr.

Registration of the document will take 10 working days; documents can be submitted through the MFC.

It is not difficult to acquire the rights to an apartment through the assignment of a mortgage, although this is not a standard procedure. The main thing is to collect all the necessary documents and be confident in the reputation of the developer. After all, until the house is put into operation, there are risks of freezing construction, as a result of which the buyer may lose his funds.

There are also a number of other difficulties:

1. Banks are reluctant to provide mortgages for the purchase of apartments under an assignment agreement. If the party to the transaction is a developer, and one accredited by the bank, the likelihood of approval is much higher than if the apartment is purchased from a private person. An exception may be purchases through real estate agencies partnering with the bank.
2. Taxes - in accordance with current tax legislation, the seller is required to pay 13% income tax on the difference in the price of real estate specified in the DDU and the assignment agreement. For example, the first owner acquired the rights to housing for 1 million rubles, but since the house was almost ready for commissioning for some time, the cost of the apartment increased by 700 thousand rubles, to 1.7 million rubles. And this is the price it will be sold at. In this case, 700 thousand rubles are subject to income tax of 13%. The seller usually does not want to overpay and asks to write down in the contract an amount less than what he actually receives. But with a mortgage, such a scheme is impossible - not a single bank will agree to this.
3. Purchasing an apartment by transfer from a private person does not qualify for state support programs for mortgage borrowers.

After receiving the last document, the citizen must contact the tax office with an application for a property deduction for income during the tax period when the transfer deed was signed. You need to bring with you the agreement under which the transfer of ownership was carried out.

The main risks borne by the buyer of an apartment:

1. The facility will not be put into operation on time.
2. The sale of rights of claim without the consent of the developer may lead to the recognition of the assignment agreement as invalid. The law does not establish an obligation to coordinate the assignment with the developer, but most companies include such a clause in the DDU.

The benefit of buying an apartment in this way is the opportunity to purchase housing cheaper while it is under construction. At the stage of excavation and preparation of the foundation, the price of housing is minimal, but at the same time the buyer takes on the highest risks. Currently, this type of transaction is not particularly popular for simple reasons:

• it is difficult to find a bank that is willing to provide a loan for transfer from a private person;
• The crisis in the construction industry and the abundance of apartments in new buildings allow the buyer to find an apartment with a simpler design.