The Supreme Court determined how an apartment buyer can protect their rights if the developer raised the price after payment due to 'price increases'

The primary real estate market in Ukraine has been and remains an area of increased legal risks for buyers. Multi-level schemes of "reservation," "investment," and preliminary contracts often create situations where, after full payment for housing, the investor still faces additional demands from the developer.

The Supreme Court, in case No. 554/12929/24, significantly strengthened the position of protecting investors' rights in primary real estate.

The Supreme Court, composed of the First Judicial Panel of the Cassation Civil Court, encountered a rather common problem: the developer, having received 100% payment for the apartment back in 2021, three years later tried to change the rules by demanding an additional payment amounting to 144% of the original cost. Thus, an important issue before the Supreme Court was not only the price but also the choice of a procedural tool that would genuinely, not formally, protect a person's right to housing.

Case chronology

The conflict began with a reservation agreement for real estate transfer into ownership, concluded in 2021 between the developer and the buyer.

The plaintiff immediately paid the full cost of the property — 327,000 UAH. However, the developer did not fulfill the contract terms: the purchase and sale agreement of property rights was not concluded, and the building was not put into operation on time. Instead, in September 2024, the developer offered the investor to conclude an agreement at a new price per square meter, which increased the total cost of the apartment to 799,439 UAH. That is, the plaintiff was offered to pay over 472 thousand hryvnias more for already paid real estate.

Therefore, the plaintiff filed a lawsuit to oblige the developer to fulfill the contract terms and to recognize ownership rights to the property rights.

The court of first instance partially sided with the investor: it obliged the developer to conclude the purchase and sale agreement on the old terms. However, the court refused to recognize the ownership rights, considering it premature since the agreement itself had not yet been signed.

The appellate court changed the approach and canceled the decision regarding the obligation to conclude the agreement and instead recognized the plaintiff's ownership rights to the investment object. The appellate court noted that forcing the conclusion of the agreement is an improper way of protection, as it does not give the investor real control over the property.

Developer's counterarguments

The developer tried to prove that the reservation agreement was only an agreement of intent, and the paid funds had a securing nature and were not an investment. However, the court established that according to clause 2.10 of the agreement, these funds were directly credited towards payments for property rights. Assessing the real nature of the relations, the court recognized the plaintiff as a full-fledged investor, regardless of the agreement's title.

Supreme Court's motives and legal justification

The Supreme Court left the appellate ruling unchanged, formulating several important conclusions.

The court confirmed that property rights are an independent object of civil rights and can be considered a non-consumable thing. In the context of investment in construction, this means that the property right effectively acts as a right to expect acquiring ownership of the real estate object in the future.

Thus, a person who has fully paid the funds possesses not only a contractual obligation but also a separate property right subject to judicial protection.

The reservation agreement is not a preliminary agreement within the meaning of Article 635 of the Civil Code of Ukraine, according to which the parties undertake to conclude a future agreement within a certain period on the terms established by the preliminary agreement.

The arguments of the cassation appeal that the price of property rights under the purchase and sale agreement cannot be identical to the amount of money paid to confirm the intention to acquire ownership of property rights to the real estate object are refuted by the fact that according to clause 2.11 of the agreement, the developer did not provide the court with evidence justifying the need to increase the construction cost.

The court found the developer's increase in the cost per square meter of the disputed real estate object unjustified.

At the time of the case consideration, the agreement between the parties was not terminated, not declared invalid, and not amended. Meanwhile, the developer did not fulfill its obligations and did not conclude a purchase and sale agreement of property rights with the plaintiff.

Under these circumstances, the courts concluded that the plaintiff retains the status of an investor of the construction object and has the corresponding property rights.

The appellate court, assessing the content of the agreement, its legal nature, and the purpose of its conclusion, took into account the principles of good faith, fairness, and reasonableness. The court also noted that the building was not put into operation despite full and timely payment by the investor.

Under such conditions, the panel of judges concluded that there are grounds to protect the plaintiff's rights by recognizing their property rights to the apartment.

The Supreme Court confirmed established practice: if the developer does not fulfill obligations and the building is not put into operation, then recognition of property rights is the most effective way of protection. This allows the investor to legally secure their status as the owner of the investment object without the need for further signatures from a dishonest developer.

Concept of "legitimate expectations" and ECHR practice

The court referred to the practice of the European Court of Human Rights, particularly the cases "Broniowski v. Poland" and "Fedorenko v. Ukraine." These decisions establish the approach that the concept of property under Article 1 of Protocol No. 1 to the Convention also covers legitimate expectations.

If a person has fulfilled their contractual obligations, including full payment for the object, they have a protected expectation to receive the corresponding property.

The court rejected the developer's arguments regarding the "dynamic" price of the reservation agreement. It was established that the defendant did not prove an objective increase in construction costs as provided by the contract terms.

The unilateral increase in cost by 144% was recognized as contrary to the principles of good faith, fairness, and reasonableness enshrined in Article 3 of the Civil Code of Ukraine.

Failure to meet the deadlines for commissioning and attempts to manipulate the price lead to the investor obtaining property rights through the court, bypassing the developer's complex contractual procedures.

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