The unfinished building was transferred to the creditor: The Supreme Court explained what will happen to investors' contracts

The alienation by the construction client of an unfinished construction object during the liquidation procedure in favor of a creditor, with the imposition on them of all obligations related to the construction, indicates partial (singular) succession, does not terminate the validity of the concluded investment contracts, and does not deprive investors of the right to protection. An investor who has fully fulfilled their obligations under the investment contract has the right to recognition of ownership of the invested object, and if the ownership right is registered to another person — to reclaim this property. This conclusion was made by the Supreme Court in the composition of the United Chamber of the Cassation Civil Court.

On June 22, 2026, the Supreme Court considered in written proceedings the cassation appeal of PERSON_2, PERSON_3, PERSON_4, PERSON_5 in the case based on the original claim of PERSON_2, PERSON_3, PERSON_4, PERSON_5 against LLC_1 regarding recognition of property rights to the investment object — an apartment, obligation to perform actions, recovery of penalties, inflation losses, and three percent annual interest, and the counterclaim of LLC_1 against PERSON_2, PERSON_3, PERSON_4, PERSON_5, third party — LLC_2, regarding the recognition of the termination of four-party agreements.

To substantiate their claims, the plaintiffs stated that they fully paid the cost of apartments in a residential complex in Boryspil under investment agreements. The original construction client (LLC_3) was declared bankrupt. In 2010, four-party agreements were concluded between investors, the client, and the new developer (LLC_1), under which the defendant undertook the obligation to complete the object and transfer the apartments to the investors. In 2013, within the bankruptcy procedure, the defendant acquired this unfinished construction object. Despite the commissioning of the building, LLC_1 refused to transfer the apartments, demanding additional payment.

LLC_1 filed a counterclaim, asserting that due to the liquidation of the original client in 2016 without succession, all investment obligations to the plaintiffs ceased.

The court of first instance partially satisfied the original claim (recognized the plaintiffs' property rights and obliged to transfer the apartments) and dismissed the counterclaim. The court noted that the obligation to complete the construction passed to the defendant, so they must fulfill the terms of the four-party agreements.

The appellate court overturned this decision, dismissed the original claim, and satisfied the counterclaim. The court concluded that LLC_1's obligations to investors ceased with the liquidation of the original client.

Moreover, the court considered that recognition of property rights after the building’s commissioning is an ineffective means of protection.

The Supreme Court in the composition of the United Chamber of the Cassation Civil Court disagreed with the conclusions of the lower courts regarding the resolution of the original claim on recognition of property rights to the investment object and obligation to perform actions, canceled the appellate court’s ruling in this part, and sent the case for a new hearing to the appellate court; it canceled the appellate court’s ruling on satisfaction of the counterclaim and left the first instance court’s decision in this part in force for the following reasons.

The alienation by the construction client of an unfinished construction object during liquidation in favor of one of the creditors, with the condition of accepting all obligations related to the construction of such an object, may indicate singular/partial succession of the rights and obligations of the construction client.

In case the construction client is declared bankrupt and the unfinished construction object is alienated during liquidation in favor of one of the creditors with the condition of accepting all obligations related to the construction of such an object, the investment contracts do not lose their validity.

A proper and effective way to protect the rights of investors who have fully fulfilled their obligations under investment contracts but have not received ownership of the invested real estate after the commissioning of the residential building is a claim for recognition of ownership rights to such an object.

If the disputed real estate has been unlawfully seized by another person and the ownership right is registered to such a person, a proper and effective way to protect the investor’s rights is a claim to reclaim the real estate due to them under the investment contract.

Since the appellate court did not verify the fact of possible registration of apartments to third parties, the case regarding the original claim was sent for a new hearing.

More details and the text of the Supreme Court ruling dated June 22, 2026, in case No. 359/9448/19 (proceeding No. 61-13241svo23) can be found at this link.

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