Developer Due Diligence

Developer Due Diligence: Reliability Check

A developer reliability check is a key step before investing in a new-build project or purchasing an apartment on the primary (off-plan) market. In residential and commercial construction, even minor legal non-compliance may result in suspension of works, litigation, or loss of the investment.

A comprehensive legal due diligence review of the developer makes it possible to assess the lawfulness of project implementation, the company’s financial standing, and compliance of the construction process with the requirements of the Law of Ukraine “On Regulation of Urban Development Activities” and applicable state building codes (DBN).

What Does “Developer Reliability” Mean?

A reliable developer is a company that:

• has duly documented rights to the land plot;

• has obtained all required permits and approvals;

• complies with urban planning conditions and restrictions;

• uses lawful mechanisms for raising funds;

• is not subject to bankruptcy proceedings;

• has no critical litigation risks.

Reliability should be assessed exclusively on the basis of legal due diligence, not marketing materials or reputational reviews.

Key Stages of a Developer Due Diligence Review

1. Review of the Company’s Legal Status

The following is verified:

• legal entity registration details;

• business activities (KVED codes);

• ownership structure;

• authority of the executive body/director;

• existence of bankruptcy proceedings;

• tax-related risks.

A developer’s financial instability may directly affect construction completion timelines.

2. Verification of Rights to the Land Plot

Key aspects include:

• ownership title or lease rights;

• term of the lease agreement;

• designated land use purpose;

• compliance with the Master Plan and the Detailed Territorial Plan (DPT);

• existing restrictions or servitudes/easements.

Violations of land legislation are among the most common causes of construction-related disputes.

3. Review of Permitting and Authorization Documentation

Lawyers analyze:

• urban planning conditions and restrictions;

• design/project documentation;

• expert review/examination results;

• a permit or notification of commencement of construction works;

• the facility consequence class (CC1, CC2, CC3).

The absence of even one required document may serve as grounds for supervisory authorities to suspend construction.

4. Assessment of Litigation and Encumbrances

The following are checked:

• court cases involving the developer;

• disputes relating to the land plot;

• criminal proceedings;

• enforcement proceedings;

• property arrests/seizures.

Active litigation significantly increases investment risk.

5. Mechanism for Raising Investors’ Funds

Lawful construction financing methods include:

• Construction Financing Funds (FFB);

• real estate transaction funds;

• collective investment institutions;

• sale and purchase agreements for property rights.

Non-transparent schemes or preliminary agreements without proper legal safeguards create a risk of double sale.

Red Flags: Potentially High-Risk Developers

• No publicly available information on permitting documentation.

• Frequent changes of the legal entity.

• Numerous court disputes.

• Construction launched without commissioning previous phases.

• Apartments sold at below-market prices without a sound economic rationale.

Common Investor Mistakes

1. Relying exclusively on the developer’s brand.

2. Signing an agreement without legal review.

3. Ignoring the land plot analysis.

4. Underestimating litigation risks.

5. Failure to verify the project’s compliance with DBN requirements.

Such mistakes may lead to lengthy court proceedings and project “freezes.”

Checklist: Verifying a Developer Before Buying an Apartment

Before investing, make sure that:

• the land plot has an appropriate designated use;

• urban planning conditions have been issued;

• a valid permit for construction works is in place;

• the project passed expert examination (for CC2 and CC3);

• there are no arrests/seizures or court disputes;

• the investment agreement complies with applicable law.

For a comprehensive review, we recommend using the services of a developer legal audit and investment contract support on gbu.kyiv.ua.

Case Example

A client approached GlobalBud Ukraine to verify a developer before purchasing an apartment in a new-build project. During the audit, we found that the land lease agreement was due to expire earlier than the planned commissioning date of the building, and the construction permit was being challenged in court.

Thanks to timely due diligence, the client declined the high-risk transaction and preserved the investment.

Why Order a Developer Due Diligence Review from GlobalBud Ukraine?

GlobalBud Ukraine provides:

• comprehensive legal due diligence of the construction project;

• analysis of permitting documentation compliance;

• verification of rights to the land plot;

• assessment of litigation risks;

• full “turnkey” transaction support.

The company works with individuals and legal entities, including international investors, providing professional engineering and legal services in the real estate and urban development sector.

Conclusions

A developer reliability check is a mandatory step before investing in the primary real estate market. Only comprehensive legal due diligence allows you to assess real risks and secure a safe investment.

Contact GlobalBud Ukraine to obtain a professional developer due diligence review and protect your investment at every stage of the construction project.