3.1. Preliminary and Main Sale and Purchase AgreementsUntil 2022, it was permissible in Georgia to conclude a main sale and purchase agreement and register ownership rights for real estate objects that had not yet been commissioned. Therefore, registering ownership rights for properties that are, in fact, completed, have all utilities (electricity, gas, water, and a functioning elevator), and are successfully in use, but still have the status of "under construction," is not uncommon in Georgia. This status does not hinder the marketability (i.e., the ability to buy, sell, lease, or mortgage) of such apartments at all.
As of January 1, 2022, amendments were made to the Spatial Planning Code — now, the registration of ownership rights for properties whose building permits were obtained before the specified date became possible only after the property is commissioned.
As mentioned above, there is no specific legislation in Georgia regulating the sale of properties at the construction stage. Therefore, contractual relations at this stage fall under the norms of the Civil Code:
- Before the property is commissioned, a preliminary sale and purchase agreement is concluded between the Developer and the future owner. This agreement provides for the obligations of the Developer and the Buyer to conclude a main sale and purchase agreement after the property is commissioned. It also describes the requirements the property must meet, determines the price of the property, and outlines the payment procedure.
- After the property is commissioned, the parties sign the main sale and purchase agreement. As a rule, the main agreement is concluded on the condition of full payment for the property by the Buyer.
3.2. Essential Terms of the ContractWhen signing a preliminary sale and purchase agreement, the investor should pay particular attention to the following essential terms:
• Clear definition of deadlines: the completion date of the construction, the commissioning date of the property, the date of the apartment transfer to the buyer, and the date of signing the main sale and purchase agreement must be clearly defined.
• Detailed description of the requirements for the property: layout, finishing, materials used, and other characteristics stated by the developer in advertising materials and renderings. Such a description allows later comparison between what was promised and the actual condition of the property, and serves as grounds for holding the developer accountable in case of any violations.
• Payment procedure and schedule. Possibility of early payment.
• Provision for a penalty in case of construction delays or other breaches of the developer’s obligations: absence of an indication of the penalty amount and the possibility of its recovery deprives the investor of the right to claim the penalty in court, allowing only the recovery of actual damages. A statutory penalty for the use of another’s funds, as well as a statutory penalty for the developer, is not established under Georgian law.
• Grounds and conditions for unilateral termination of the contract by the buyer and the developer.
• Encumbrance of the property due to the developer’s obligations (in case the project is financed by a bank) and conditions for the removal of such encumbrances.
• Additional obligations of the buyer, including: entering into a management agreement, obligations not to alter the facade and layout of the property.
• Additional obligations of the developer regarding the provision of infrastructure, management of the property, immutability of the area and technical specifications.
It is very important to compare the language versions of the contracts — by default, the Georgian version of the contract will have predominant legal force.
3.3. Registration of the Agreement and Ownership RightThe basis for the emergence of ownership rights to a real estate object is the registration of the ownership right in the Public Register. The basis for such registration is the purchase and sale agreement. The applicants during the registration are both parties to the agreement. The right of future ownership, which arises on the basis of a preliminary purchase and sale agreement, does not require mandatory registration, but such registration is highly recommended — it guarantees protection against double sales and also serves as unconditional proof of the future owner’s right to the object in the future.
The agreements themselves (both preliminary and main) do not require state registration. Such agreements are concluded in simple written form and are signed in the presence of a registrar, if the signatories are the parties themselves or their representatives acting on the basis of a power of attorney issued in Georgia. If the agreement serving as the basis for the registration of the ownership right (or the right of future ownership) is concluded on the basis of a notarized power of attorney issued abroad, such agreement requires notarized form.