Legal risks in real estate transactions

Real estate transactions in Kazakhstan are complex as in many countries because of legal issues and documentation. Documentation is one of the most important parts of real estate along with its condition and location.

Not long ago our lawyers close the deal with several real estates. This deal was complicated by various mistakes in real estate documentation. In other words, the documents were not “clean”.

Our lawyers helped to “clean up” all mistakes before the transaction in order to close the deal in time.

In this article, you can find out common mistakes in real estate documentation that our lawyers faced, what consequences they could lead to, and how to avoid them.

Common mistakes in real estate documentation

In practice most real estate transactions are suspended because of several common mistakes in documentation that could be fixed in advance:

• Information in documents do not match with data from a state database
  • the address of a real estate was changed, but the documentation was not changed;
  • state database could contain old or incorrect information due to misprints;
• There were mistakes in previous transaction
  • the previous transaction was not registered;
  • real estate documents do not contain stamps of registration;
• The seller did not prepare a real estate for sale
  • there was a reconstruction without state approval;
  • there is no consent from a spouse or no corporate approvals for sale.

Consequences of the mistakes in real estate documentation

Mistakes in documentation may cause the following negative consequences:

• a real estate transaction could be declared as invalid if there are no proper consents or no proper corporate approvals;
• notaries will refuse to certify a real estate contract;
• state authorities will refuse to register a transaction;
• transaction will paused while you will fix mistakes;
• if previous owner reconstructed a real estate without state approval, then you should go through a long legalization process;
• in some cases it will be necessary to go to court in order to recognize the owner.

What should the buyer do in order to minimize the legal risks of real estate transactions?

The buyer could avoid all the above-mentioned negative consequences, if the buyer will follow our advice.

For this purpose the buyer should do the following:

1. to request scans of a real estate documents in advance;
2. to analyze a real estate documents before transaction in order to make sure that the documents are ok;
3. to check a previous transaction;
4. to request all necessary consents/corporate approvals;
5. to check whether the real estate encumbered, pledged or not;
6. to demand to improve real estate condition and to fix mistakes in real estate documentation;
7. to draft a correct contract so that no one disputes the transaction.

Summarizing, we would like to note that Kazakhstan legislation and practice in the real estate field constantly change. Thus we recommend checking any updates before real estate transactions.

Authors: 

Mr Nurzhan Stamkulov, Mr Ali Dautalinov
Lawyers, Synergy Partners Law Firm