Real Estate Development — the Legal Framework for the Developer
A development project consists of three legal blocks: construction, financing and the disposal of the result. The construction block rests on the works contract — Article 629: the contractor undertakes to perform the work provided by the contract, the client is obliged to pay the agreed remuneration; and where the contractor makes the thing from his own materials, he transfers to the client ownership of the thing made. Drawing up a cost estimate is not reimbursed unless otherwise agreed. For the developer this means: every construction relationship is framed by this structure, and the scale of the project changes only the number of contracts.
With the growth of scale grows the hierarchy of contracts: the developer often contracts with a general contractor, while subcontractors build their own relationships beneath it. In this chain each claim finds its basis in its own contract, and exactly therefore the documentary architecture of the project — who with whom, for what and on which terms — is the legal map of the development.
Financing — the Mortgage Over the Construction Land
The financial instrument of development is named directly in the law: Article 635 provides that where the subject of the contract is a building or parts of that building, the contractor may demand, for his claims arising from the contract, a mortgage over the construction land plot. This norm works in both directions: it gives the contractor (including contractors engaged by the developer) a means of protecting his claims, and for the developer it creates the environment in which charging the land and financing the construction fit into a single structure. Therefore, when planning a development, the initial legal condition of the land and the possible charges on it must be considered in advance.
Title to the Result — Written Form and Registration
Ownership of the built object arises only when the law's requirements are met. Article 183 provides: for the acquisition of an immovable it is necessary to conclude the transaction in written form and to register in the public registry the right of ownership defined by the transaction in favour of the acquirer. The registry's function is reflected in Article 311: the public registry is a collection of data on rights over things and non-material property benefits, on the origin of pledges and tax pledge/mortgage, changes therein and their termination; the rules of its operation are determined by law. For the developer this means: every title — land, the built object and what is sold off — requires reflection in the registry.
Selling Units in a Multi-Apartment Building
When disposing of a multi-apartment project, the seller's object is an individual property unit — an apartment or non-residential space. Article 208 determines the grounds of acquiring such a unit: for the acquisition of an individual property object it is necessary to conclude the transaction in written form and to register in the public registry the right of ownership defined by the transaction in favour of the acquirer. This norm regulates every single transaction of unit sales: written form and registration are equally necessary, and the buyer's ownership arises exactly at the moment of registration. Therefore the sales schedule is set together with the registration procedures.
One further circumstance matters in organising sales: since the buyer's ownership arises by registration, the preparation of transactions and their submission to the registry must proceed in an organised manner — otherwise the pace of sales is determined not by the market but by the administrative process. For the developer this means that planning the legal processes is part of the sales plan, not a subsequent measure.
Frequently Asked Questions
Below we answer the questions most frequently raised about this field.
Which contract covers the construction?
The works contract (Article 629): the contractor performs the work and the client pays the remuneration; ownership of a thing made from the contractor's own materials passes to the client.
How does the law protect the value of construction?
Under Article 635, when a building or its parts are constructed, the contractor may demand a mortgage over the construction land plot for his claims.
How is ownership of an immovable acquired?
Under Article 183 — by concluding the transaction in written form and registering the ownership with the acquirer in the public registry (Article 311).
What rule governs apartment sales?
Article 208: acquiring an apartment or non-residential space requires the written form of the transaction and registration of ownership in the public registry.
Why do I need a lawyer in a development project?
Because the chain of title, construction contracts, mortgage and sales must be correct together — and the price of an error is measured on the scale of the project.
How We Help on Legal.ge
The structure of a development is a chain: the land title (Article 183) — the construction contracts (Article 629) — the protection and financing of construction (Article 635) — the sale of units with registration (Articles 208 and 311). The correctness of each link strengthens the whole chain: a defective land title is reflected on the next link as well, and a registration error freezes the sales. A lawyer builds this chain from beginning to end: verifying the titles in the registry, preparing the construction contracts, regulating the mortgage questions and ensuring the form and registration of the unit-sale transactions. Legal support in a development project is useful precisely because the price of an error is measured on the scale of the project.