Unfinished Construction Projects: Legal Nature, Risks, and New Guarantees for Investors

In civil law, an unfinished construction object has always been a problematic phenomenon. It already exists physically — there may be a foundation, structures, and engineering networks — yet at the same time it is not considered full-fledged real estate in the classical sense, as it has not been put into operation.

It was precisely this “dual nature” that created a legal vacuum.

For a long time, legal practice lacked a unified approach to:

• what exactly constitutes the object of civil rights — a tangible thing or a proprietary expectation;
• what rights an investor may have before construction is completed;
• whether such an object can be considered the subject of a mortgage, transfer, or division.

Law No. 2518 addressed this issue systematically for the first time. It clearly established that an unfinished construction object is real estate in respect of which:

• the right to perform construction works has been obtained;
• construction has actually commenced;
• the object has not yet been put into operation.

Of key importance was also the distinction between divisible and indivisible unfinished construction objects.

This distinction is fundamental for investors: in divisible objects (for example, apartment buildings), rights may arise in relation to specific future apartments, whereas in indivisible objects they may arise only in relation to the object as a whole. It is precisely this classification that determines how and in respect of what exactly an investor’s rights may be registered.

The central element of the reform was the introduction of a special proprietary right — an institution that had effectively not existed in Ukrainian law before.

Unlike traditional investment agreements or preliminary contracts, the special proprietary right has a proprietary (real) legal nature. It:

• is subject to state registration;
• has an absolute character of legal protection;
• is recognized by courts, creditors, and third parties.

In essence, it serves as a legal “bridge” between contractual obligations and future ownership rights. The investor no longer merely finances the developer — they acquire a registered right to a specific future or unfinished real estate object.

It is precisely the registration of the special proprietary right that resolves one of the most acute problems of the primary real estate market — double sales. Once an entry is made in the State Register of Property Rights, no notary or state registrar may execute another transaction in respect of the same object.

In addition, the special proprietary right:

• records the investor in the register;
• allows the object to be identified even before construction is completed;
• creates the legal basis for the subsequent transition to full ownership.

Thus, for the first time, the investor receives not a “right to hope,” but a real legal title.

Law No. 2518 did not stop at introducing a new legal right. It comprehensively reshaped the entire framework of buyer protection.

First, contractual mechanisms were updated. The agreement for the sale and purchase of property rights became the central legal instrument and must now contain detailed information about:

• the future property;
• its design characteristics;
• construction completion deadlines;
• the payment procedure;
• the developer’s liability.

Second, one of the most important financial safeguards was introduced — the obligation to return funds within 60 days in the event of contract termination. For a market where refunds could previously take years, this represents a fundamentally new standard of protection.

Third, the investor obtained the right to demand completion of construction through the courts, rather than being limited solely to compensation. This changes the very philosophy of protection: the buyer may insist not on exiting the project, but on its actual completion.

Special attention should also be paid to the procedure for transitioning from a special property right to ownership after the property is commissioned. The law has established a clear, step-by-step model that minimizes legal “gaps” between construction and the state registration of real estate.