Conclusion execution modification termination of the construction equity agreement
Public relations related to the activities of equity participation in the housing construction of residential buildings (residential buildings) by attracting money from individuals and (or) legal entities, as well as guarantees for the protection of the rights and legitimate interests of the parties to the agreement on equity participation in housing construction, are regulated by the Law of the Republic of Kazakhstan "On Equity Participation in Housing Construction" from April 7, 2016, No. 486-V.
In accordance with paragraph 1 of Article 2 of the said Law, the legislation of the Republic of Kazakhstan on equity participation in housing construction is based on the Constitution of the Republic of Kazakhstan and consists of the Civil Code of the Republic of Kazakhstan, this Law and other regulatory legal acts of the Republic of Kazakhstan.
According to paragraph 2 of this article, the legislation of the Republic of Kazakhstan on housing relations and on architectural, urban planning and construction activities applies to equity participation in housing construction in the part not regulated by this Law.
Paragraph 3 of Article 2 of the Law stipulates that if an international treaty ratified by the Republic of Kazakhstan establishes rules other than those contained in this Law, the rules of the international treaty shall apply.
Article 3 of the Law defines the scope of its operation.
The law applies to relations in which one party undertakes to ensure the construction of an apartment building (residential building) and transfer, upon completion of construction, residential or non–residential premises in an apartment building (residential building) to the other party, and the second party undertakes to make payment and accept residential or non-residential premises in an apartment building (residential building).
The provisions of the Law regarding the conclusion of equity participation agreements in housing construction also apply to contractors of the developer and (or) an authorized company in the case of settlement with them in shares in an apartment building (residential building).
According to paragraph 4 of Article 3, the said Law does not apply to relations related to:
1) public procurement;
2) by investing in housing construction or organizing construction by legal entities whose controlling stake is directly or indirectly owned by the state, without the right to sell residential and (or) non-residential premises in the construction site before the facility is put into operation, with the exception of the Guarantee Fund;
3) acquisition only by legal entities of residential and (or) non-residential premises in an apartment building (residential building) under construction without the right to sell (assign the rights of claims) to individuals and (or) legal entities residential and (or) non-residential premises in an apartment building (residential building) under construction before its commissioning;
4) low-rise construction.
In accordance with paragraph 1 of Article 7 of the Law, equity participation in housing construction is organized in one of the following ways::
1) obtaining a guarantee from the Guarantee Fund;
2) participation in the second-tier bank project;
3) attracting money from shareholders after the construction of the frame of an apartment building (residential building).
At the same time, the Law (paragraph 2 of Article 7) prohibits the attraction of money from individuals and legal entities for the construction of residential buildings (residential buildings) in other ways not provided for in this article.
In order to carry out activities related to the organization of equity participation in housing construction by obtaining a guarantee from the Guarantee Fund, the developer must comply with the following requirements (paragraph 1 of Article 8 of the Law):
1) have experience in the construction of residential buildings (residential buildings), including as a customer, contractor (general contractor) for at least three years, with a total area of at least eighteen thousand square meters during construction in cities of national significance, the capital and at least nine thousand square meters during construction in other administrative-territorial units;
2) have a break-even operation for the last two financial years according to its financial statements, confirmed by the auditor's report;
3) the value of the coefficient calculated by the ratio of debt and equity capital should not exceed seven during the entire period of construction of an apartment building (residential building) before its commissioning.
In order to carry out activities related to the organization of equity participation in housing construction by obtaining a guarantee from the Guarantee Fund, the developer creates an authorized company that simultaneously carries out activities on no more than one construction project.
A residential building (residential building) construction project may include several construction projects on the same land plot (allotment).
The developer has the right to involve an authorized company that has fulfilled its obligations to transfer to shareholders their shares in a residential building in accordance with Article 15 of this Law.
In order to organize equity participation in housing construction by obtaining a guarantee from the Guarantee Fund, an authorized company must have:
1) a land plot owned by the right of temporary paid land use (lease) provided by the state, or by the right of ownership;
2) design and estimate documentation of a residential building (residential building) construction project with a positive conclusion of a comprehensive non-departmental expertise;
3) money planned to be spent in accordance with Article 20 of this Law, and (or) unfinished construction, confirmed by acts of completed work, in the amount of at least ten percent of the design value if the land plot belongs by right of ownership, or in the amount of at least fifteen percent of the design value if if the land plot belongs to the right of temporary paid land use (lease) provided by the state;
4) money to pay the commission for reviewing documents, the guarantee fee under the guarantee agreement;
5) a contract for the construction of an apartment building (residential building).
The property defined in paragraph 3 of this article must be free from any encumbrances, rights and claims of third parties.
If the developer and the authorized company comply with the requirements established by this article, the Guarantee Fund verifies the documents for the construction of an apartment building (residential building) in accordance with the procedure approved by the authorized body and concludes a guarantee agreement.
The concluded guarantee agreement is the basis for attracting money from shareholders and does not require the developer and an authorized company to obtain permission to attract money from shareholders from the local executive body.
In order to comply with the requirements of this Law, the developer submits annual financial statements to the Guarantee Fund, confirmed by an audit report, and the authorized company submits quarterly financial statements to the Guarantee Fund in accordance with the legislation of the Republic of Kazakhstan on accounting and financial reporting during the term of the guarantee agreement.
To carry out activities related to the organization of equity participation in housing construction by participating in a second-tier bank project
-the developer must have experience in the construction of residential buildings (residential buildings), including as a customer, contractor (general contractor) for at least three years, with a total area of at least eighteen thousand square meters during construction in cities of national significance, the capital and at least nine thousand square meters during construction in other administrative-territorial units. (paragraph 1 of Article 9 of the Law). To organize equity participation in housing construction by participating in a second-tier bank project, the developer creates an authorized company that simultaneously operates on no more than one construction project. A residential building (residential building) construction project may include several construction projects on the same land plot (allotment).
The developer has the right to involve an authorized company that has fulfilled its obligations to transfer to shareholders their shares in an apartment building in accordance with Article 15 of this Law. In order to organize equity participation in housing construction by participating in a second-tier bank project, an authorized company must have:
1) a land plot owned by the right of temporary paid land use (lease) provided by the state, or by the right of ownership;
2) design and estimate documentation of the residential building (residential building) construction project with a positive conclusion of a comprehensive non-departmental expertise.
The property defined in paragraph 3 of this article must be free from any encumbrances, rights and claims of third parties, with the exception of a land plot that may be pledged to a second-tier bank financing construction on one land plot (allotment).
If the developer and the authorized company comply with the requirements set out in Article 9 of the Law, the developer and (or) the authorized company apply to the second-tier bank to obtain a decision from the second-tier bank on the readiness to finance the construction of an apartment building (residential building) in an amount sufficient to complete the construction.
If the financing of an apartment building (residential building) is ready, the second-tier bank enters into an agreement with an engineering company. If the developer and the authorized company comply with the requirements established by Article 9 of the Law, the developer and the authorized company apply to the local executive body of the region, city of republican significance, capital, district, city of regional significance to obtain permission to attract money from shareholders in accordance with the procedure established by Article 18 of this Law.
The second-tier bank has the right to make a decision on using the money of shareholders from the bank account of an authorized company, taking into account the requirements established by Article 20 of this Law, only after the construction of the frame of an apartment building (residential building), confirmed by the engineering company.
The property specified in subitems 1) and 2) of paragraph 3 of this article is considered to be held as collateral by equity holders from the moment the agreement on equity participation in housing construction is registered with the local executive body.
When the second-tier bank makes a decision on the sale of the pledged property specified in subitems 1) and 2) of paragraph 3 of this Article, the money earned from the sale of the pledged property is directed to satisfy the claims of the shareholders who have submitted a claim for a refund and the second-tier bank.
If there is a shortage of money earned from the sale of mortgaged property, the difference after deduction of the amounts necessary to cover the costs of foreclosure on this property and its sale is distributed between the shareholders and the second-tier bank in proportion to the size of their claims at the time of satisfaction of these claims.
The money owed to equity holders who did not declare their claims before the date of the public auction, at which the mortgaged property was sold, is sent to the bank deposit account in accordance with the terms of the agreement on equity participation in housing construction. From the moment of conclusion of the agreement on equity participation in housing construction, the second-tier bank is recognized as a trustee of shareholders when foreclosing on mortgaged property and its sale.
From the moment when an authorized company transfers a share in an apartment building (residential building) to an equity holder in accordance with the procedure established by Article 17 of the Law, the right of pledge is terminated.
To carry out activities for the organization of equity participation in housing construction by attracting money from shareholders after the construction of the frame of an apartment building
(residential buildings) the developer is obliged within the last five years, including as a customer, contractor (general contractor) in aggregate, to build and commission on the territory of the Republic of Kazakhstan residential buildings (residential buildings) with a total area of at least sixty thousand square meters during construction in cities of national significance, the capital and not less than less than thirty thousand square meters under construction in other administrative-territorial units. This takes into account the combined experience of the developer's subsidiaries.
To organize equity participation in housing construction by attracting money from equity holders after the construction of the frame of an apartment building (residential building), the developer creates an authorized company that simultaneously operates on no more than one construction project. A residential building (residential building) construction project may include several construction projects on the same land plot (allotment). The developer has the right to involve an authorized company that has fulfilled its obligations to transfer to shareholders their shares in an apartment building in accordance with article 15 of the Law.
In order to organize equity participation in housing construction by attracting money from shareholders after the construction of the frame of an apartment building (residential building), an authorized company must have:
1) a land plot owned by the right of temporary paid land use (lease) provided by the state, or by the right of ownership;
2) design and estimate documentation of a residential building (residential building) construction project with a positive conclusion of a comprehensive non-departmental expertise;
3) the presence of the completed construction of the frame of an apartment building (residential building), confirmed by the report of the engineering company
4) an agreement with an engineering company.
The property defined in paragraph 3 of this article must be free from any encumbrances, rights and claims of third parties. If the developer and the authorized company comply with the requirements established by this article, the developer and the authorized company apply to the local executive body of the region, city of republican significance, capital, district, city of regional significance to obtain permission to attract money from shareholders in accordance with the procedure established by Article 18 of this Law.
After obtaining permission to raise money from shareholders, the authorized company will organize the construction of an apartment building (residential building) by attracting money from shareholders in accordance with the requirements of Article 20 of the Law.
The property specified in subitems 1), 2) and 3) of paragraph 3 of this article is considered to be held as collateral by equity holders from the moment the agreement on equity participation in housing construction is registered with the local executive body. The pledge of the property specified in subitems 1), 2) and 3) of paragraph 3 of this Article is not allowed. In case of non-fulfillment or improper fulfillment by an authorized company of obligations to complete the construction of an apartment building (residential building), shareholders have the right to initiate bankruptcy proceedings for an authorized company in accordance with the legislation of the Republic of Kazakhstan on rehabilitation and bankruptcy.
In case of bankruptcy of an authorized company, shareholders have the right to form a housing construction cooperative in accordance with the housing legislation of the Republic of Kazakhstan to complete the construction of an apartment building (residential building). From the moment an authorized company transfers a share in an apartment building (residential building) to an equity holder in accordance with the procedure established by Article 17 of this Law, the right of pledge is terminated.
In accordance with paragraph 1 of Article 11 of the Law, an agreement on equity participation in housing construction is concluded in writing and is considered concluded from the moment it is registered with the local executive 7 body at the location of the residential building (residential building) in accordance with the procedure provided for in Article 12 of this Law. For the parties to the agreement on shared participation in housing construction, paragraph 2 of this article provides for the mandatory requirement to inform each other about changes in the actual address and (or) other personal data in writing within thirty calendar days.
An agreement on equity participation in housing construction, amendments and (or) additions to it, as well as an agreement on assignment of the right of claim under it, are subject to registration with the local executive body at the location of the residential building (residential building) upon presentation by an authorized company. Accounting for equity participation agreements in housing construction is carried out in accordance with the rules for accounting for equity participation agreements in housing construction, as well as contracts for the assignment of claims under them, approved by the authorized body (paragraphs 1, 2 of Article 12 of the Law).
According to paragraph 1 of Article 13 of the Law, amendments and (or) additions may be made to the agreement on equity participation in housing construction after its conclusion by agreement of the parties in accordance with the procedure provided for by the civil legislation of the Republic of Kazakhstan.
In such cases, additional agreements to the agreement on equity participation in housing construction are also subject to registration with local executive bodies. The assignment by the shareholder of the right of claim under the agreement on equity participation in housing construction is allowed only after payment of the contract price or at the same time if the authorized company agrees to transfer the debt to a new shareholder in accordance with the civil legislation of the Republic of Kazakhstan in a non-cash manner. The assignment by the shareholder of the right of claim under the agreement on equity participation in housing construction is allowed from the moment the agreement on equity participation in housing construction is registered with the local executive body at the location of the residential building (residential building) until the parties sign the transfer act on the transfer of shares in the constructed residential building (residential building).
In the event of the death of an individual shareholder or his declaration of death, the rights and obligations under the agreement on equity participation in housing construction shall pass to the heirs in accordance with the civil legislation of the Republic of Kazakhstan. By Order of the Minister of National Economy of the Republic of Kazakhstan dated July 28, 2016 No. 345., registered with the Ministry of Justice of the Republic of Kazakhstan on August 31, 2016 No. 14185, the Standard Form of the agreement on equity participation in housing construction was approved.
The standard form of an equity agreement in housing construction provides for the subject of the agreement, the cost of the agreement, the settlement procedure, the rights and obligations of the parties, the procedure for accepting and transferring shares, force majeure circumstances, liability of the parties, additional provisions, legal addresses and bank details of the parties.
After its conclusion, the agreement on equity participation in housing construction may be amended and/or supplemented by agreement of the parties in accordance with the procedure provided for by the civil legislation of the Republic of Kazakhstan. In such cases, additional agreements to the agreement on equity participation in housing construction are also subject to registration with local executive bodies.(paragraph 1 of Article 13 of the Law) The assignment by the shareholder of the right of claim under the agreement on equity participation in housing construction is allowed only after payment of the contract price or at the same time if the authorized company agrees to transfer the debt to a new shareholder in accordance with the civil legislation of the Republic of Kazakhstan in a non-cash manner.
In such cases, additional agreements to the agreement on equity participation in housing construction are also subject to registration with local executive bodies. The assignment by the shareholder of the right of claim under the agreement on equity participation in housing construction is allowed only after payment of the contract price or at the same time if the authorized company agrees to transfer the debt to a new shareholder in accordance with the civil legislation of the Republic of Kazakhstan in a non-cash manner. The assignment by the shareholder of the right of claim under the agreement on equity participation in housing construction is allowed from the moment the agreement on equity participation in housing construction is registered with the local executive body at the location of the residential building (residential building) until the parties sign the transfer act on the transfer of shares in the constructed residential building (residential building).
In the event of the death of an individual shareholder or his declaration of death, the rights and obligations under the agreement on equity participation in housing construction shall pass to the heirs in accordance with the civil legislation of the Republic of Kazakhstan. By Order of the Minister of National Economy of the Republic of Kazakhstan dated July 28, 2016 No. 345., registered with the Ministry of Justice of the Republic of Kazakhstan on August 31, 2016 No. 14185, the Standard Form of the agreement on equity participation in housing construction was approved.
The standard form of an equity agreement in housing construction provides for the subject of the agreement, the cost of the agreement, the settlement procedure, the rights and obligations of the parties, the procedure for accepting and transferring shares, force majeure circumstances, liability of the parties, additional provisions, legal addresses and bank details of the parties.
After its conclusion, the agreement on equity participation in housing construction may be amended and/or supplemented by agreement of the parties in accordance with the procedure provided for by the civil legislation of the Republic of Kazakhstan. In such cases, additional agreements to the agreement on equity participation in housing construction are also subject to registration with local executive bodies.(paragraph 1 of Article 13 of the Law) The assignment by the shareholder of the right of claim under the agreement on equity participation in housing construction is allowed only after payment of the contract price or at the same time if the authorized company agrees to transfer the debt to a new shareholder in accordance with the civil legislation of the Republic of Kazakhstan in a non-cash manner.
The assignment by the shareholder of the right of claim under the agreement on equity participation in housing construction is allowed from the moment the agreement on equity participation in housing construction is registered with the local executive body at the location of the residential building (residential building) until the parties sign the transfer act on the transfer of shares in the constructed residential building (residential building). In the event of the death of an individual shareholder or his declaration of death, the rights and obligations under the agreement on equity participation in housing construction shall pass to the heirs in accordance with the civil legislation of the Republic of Kazakhstan. Fulfillment of obligations under the agreement on equity participation in housing construction (art.15 of the Law).
The cost of the share stipulated by the agreement on equity participation in housing construction is paid by the shareholder by making payments within the time limits set by the agreement to the bank account of an authorized company. The obligations of the shareholder are considered fulfilled from the moment of payment in full of the cost of the share and its acceptance in a residential building (residential building) in accordance with the agreement on equity participation in housing construction. In turn, the obligations of the developer and (or) an authorized company (a legal entity, one hundred percent of the voting shares (shares in the authorized capital) of which belong to the developer, engaged in activities to ensure the shared construction of an apartment building (residential building) and the sale of shares in an apartment building (residential building), which is not entitled to engage in any kind ofor other commercial activity, with the exception of activities in special economic zones) for the transfer of a share in an apartment building (residential building) are considered fulfilled from the moment the residential building (residential building) is put into operation and the parties sign an agreement on the transfer of a share in an apartment building (residential building).
The obligations of the contractor (general contractor) under the warranty period are considered fulfilled after they fulfill their obligations to eliminate violations of compliance with the construction indicators of an apartment building (residential building) specified in the design and estimate documentation and in the agreement on equity participation in housing construction that occurred during the warranty period. The risk of accidental death or accidental damage to a share in an erected apartment building (apartment building) prior to its actual transfer to the shareholder is borne by an authorized company.
After the actual transfer of a share in an apartment building (apartment building), the risk of accidental death or accidental damage passes to the shareholder. The responsibility of the parties under the agreement on shared participation in housing construction. The authorized company is responsible for ensuring control over the progress and quality of construction, which follows from its powers, defined in paragraph 2 of Article 16 of the Law on the disposal of funds for the construction of an apartment building (building), on the terms defined in the agreement on equity participation in housing construction.
The authorized company is responsible, as provided for by the legislation of the Republic of Kazakhstan or the agreement on equity participation in housing construction, for:
1) targeted and timely use of shareholders' money;
2) compliance with the requirements of regulatory and technical documents during the construction of the facility;
3) the quality of the building materials, structures, equipment used and the conduct of construction and installation work;
4) deadlines for the commissioning of the facility;
5) transfer of his share to the shareholder. The authorized company is also responsible for selecting a contractor (general contractor) based on the submitted qualification requirements.
Among the duties of the authorized company is its obligation to notify the shareholder of the non-payment of the next payment (by mail). Such notification must be made by registered mail with an inventory of the attachment or delivered to the shareholder personally against receipt. The law provides that in order to recognize the fact of a shareholder's refusal to fulfill contractual obligations, it is necessary to establish the presence of at least three notifications of non-payment (payments) with a total delay of at least three months.
In case of non-payment by the shareholder of the next payment and the absence of a written request within the period specified in paragraph 4 of this article, according to the terms of the agreement on equity participation in housing construction, the authorized company has the right to make one of the following decisions:
1) accept financing (money) from a third party to pay for such a share, followed by assistance in processing the assignment of the right of claim (with the return of the deposited money to the former shareholder);
2) terminate the contract and sell the share to a third party and, within three months from the date of acceptance of the apartment building (residential building) into operation, return the proceeds from the sale to the shareholder or ensure their storage in a bank account until the former shareholder applies for them. The authorized company is obliged to transfer to the shareholder his share in the constructed residential building (residential building) no later than the deadline stipulated by the agreement on equity participation in housing construction, after signing the act of acceptance of the constructed residential building (residential building) into operation.
The authorized company is obliged to send a letter to the shareholder on the completion of the construction of an apartment building (residential building) in accordance with the agreement on equity participation in housing construction and on the readiness of the share for transfer, as well as to warn the shareholder about the need to accept the share and about the consequences of the shareholder's inaction provided for in the agreement on equity participation in housing construction. The letter must be sent by registered mail with a notification of receipt by the recipient of the postal item or delivered to the shareholder personally against receipt.
An equity holder who has received a written notification from an authorized company about the completion of construction of an apartment building (residential building) and the readiness of a share in an apartment building (residential building) for transfer is obliged to begin accepting it within the time period stipulated in the agreement on equity participation in housing construction or, if such a period is not established, within ten working days from the date of receipt the specified notification.
An equity holder who finds deviations from the design estimates and the agreement on equity participation in housing construction during the acceptance of work results has the right to demand that the identified deficiencies be eliminated from the authorized company within the time period agreed by the parties.
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