Unfinished Construction Objects: From a “Grey Zone” to a Clear Legal Status

The real estate market in Ukraine has traditionally been one of the most crisis-sensitive sectors of the economy. Military hostilities, economic instability, financing constraints, and legal uncertainty are felt most acutely in the primary market. For many years, its most vulnerable segment has been unfinished construction projects—a sphere where the interests of investors, developers, creditors, and the state intersected without clear rules of the game.

The situation changed fundamentally after the adoption of Law of Ukraine No. 2518-IX “On Guaranteeing Property Rights to Real Estate Objects to Be Constructed in the Future.” This act did not merely clarify individual provisions; it effectively built a new model for regulating the primary real estate market. Below is a systemic overview of these changes, relevant both for practicing lawyers and for investors.

For a long time, an unfinished construction object existed in an intermediate legal state. On the one hand, there was already a material object—foundations, structures, utilities. On the other hand, ownership in the classical sense did not exist, since construction was incomplete and the object had not been commissioned. This “duality” generated numerous conflicts.

Law No. 2518, for the first time at the level of a special legislative act, clearly defined an unfinished construction object as real estate for which the right to perform construction works has been obtained, but which has not yet been put into operation. Equally important is another approach: the legal regime of the object is determined not only by its physical condition, but also by the availability of permits, project documentation, and the state registration of a special property right.

A fundamentally new feature is the differentiation between divisible and indivisible objects. For apartment buildings or commercial complexes, this enables the individualization of rights to future apartments or premises already at the construction stage. For indivisible objects, it provides a clear understanding that the property right relates to the object as a whole.

The Special Property Right: A “Legal Bridge” to Ownership

The key innovation of Law No. 2518 is the introduction of the special property right. It resolved a systemic problem that had persisted for decades—the absence of a real legal title for investors prior to commissioning.

By its nature, the special property right is:

• real (in rem), as it is subject to state registration and enjoys absolute protection;
• temporary, as it exists only until ownership is registered;
• protective, as it prevents double sales and other abuses.

In essence, it is the legal оболочка (framework) of future ownership, allowing the investor to be not merely a contractual party, but the holder of a registered real right.

State registration of the special property right in the State Register of Property Rights turns the investor’s expectation into a publicly recognized right acknowledged by courts, creditors, and public authorities.

Sale and Purchase of Property Rights as the New Primary Market Standard

Following the adoption of Law No. 2518, the contractual model of the primary market also changed fundamentally. Fragmented investment agreements and complex financial schemes were replaced by a single core instrument—the sale and purchase agreement of property rights.

By its legal nature, this is a mixed agreement combining elements of sale, investment, and participation in construction. Its subject matter is not an “apartment” that does not yet exist, but a set of property rights to demand the creation and transfer of the object upon completion of construction.

The legislator significantly expanded the list of essential terms. For the first time, mandatory clear identification of the future object is required: address, design characteristics, area, functional purpose, and construction completion deadlines. In addition, the developer must disclose information about the land plot, permits, and financial statements for previous years. This changes the very philosophy of the primary market—from opacity to maximum transparency.

Investor Guarantees: From Declarations to Effective Mechanisms

One of the key objectives of Law No. 2518 was to establish a multi-level system of investor protection through a combination of registration, financial, and judicial mechanisms.

1. First, registration of the special property right technically makes double sales impossible: the system simply does not allow repeated registration for the same object.
2. Second, the law introduced a clear deadline for refunds—no more than 60 calendar days in the event of contract termination. This represents a decisive break from prior practice, where investors often waited for years or lost any realistic chance of recovering funds.
3. Third, the holder of a special property right obtained the right to judicial protection not only in the form of compensation, but also through claims demanding completion of construction. This is particularly important where delays are caused not by force majeure, but by poor project management.

Transition to Ownership and the “Dynamic” Status of the Object

After construction is completed, the special property right is transformed into ownership through a standard registration procedure: acceptance certificate, technical passport, and registration in the state register. From that moment, the investor acquires full ownership, and the special property right ceases to exist.

Special attention should be paid to the mechanism for changing the status of an unfinished construction object—from indivisible to divisible and vice versa. Law No. 2518 establishes clear conditions for such transformations, allowing lawful adaptation of projects to changes in design documentation without undermining investors’ rights.

Conclusions

The adoption of Law of Ukraine No. 2518 marked a fundamental shift in the legal regulation of the primary real estate market. The institution of the special property right, the new contractual model, and the system of guarantees effectively moved construction investment out of a “high-risk zone” into the realm of predictable civil turnover.

For lawyers, developers, and buyers alike, this means one thing: the rules have become more complex, but also far fairer and safer. In the context of wartime challenges and future post-war recovery, such legal certainty is a necessary prerequisite for restoring trust in Ukraine’s real estate market.