Buying a new home

A new build with its gleaming surfaces and modern solutions is an attractive choice, but signing a binding purchase agreement during the construction phase also means you’re paying for a home that doesn’t yet exist. In this article, we’ll go through the biggest risks of buying a new build, how the law protects you from them, and a concrete checklist to help you know what to investigate before the purchase.

The biggest risks of buying a new build

Buying a new build differs from buying a completed home precisely in its risk profile – you’re not buying a finished product, but a promise of one. The main risks:

The builder’s financial situation and delays

The single biggest risk is that the builder won’t be able to complete the home on the agreed schedule or will face financial difficulties mid-project. A delay postpones your moving date and can cause overlapping housing costs if your current home has already been sold or your rental agreement is ending.

Company loan and rising charges

In new builds, the company loan can be as much as 70 percent of the home’s selling price. A low selling price may be tempting, even though the actual monthly cost with the financing charge would be high – and the interest rate risk remains with the buyer if the loan share isn’t paid off. Read more about company loans and whether it’s worth paying them off.

Market situation changes during construction

Years can pass between signing the purchase agreement and the home’s completion. If the housing market weakens during that time, the home’s value at handover may differ from its value at purchase – this is a particularly significant risk when buying for investment purposes.

Teething problems and an unfinished environment

A new building typically experiences minor teething problems, for example in sound insulation or ventilation settings. If the area is still under construction, neighboring building sites – noise, dust, traffic – can continue for years after you’ve moved in.

Delays in ownership registration

Congestion in the Residential and Commercial Property Information System (HTJ) has led to situations where a new shareholder doesn’t make it onto the shareholder register before the next shareholders’ meeting and therefore can’t vote on decisions concerning their own building. Read how to prepare for HTJ congestion.

How the law protects you – the RS system and guarantees

The RS system (Housing Transactions Act, Chapter 2) was developed precisely to manage the risks described above. Compliance with it is mandatory when a housing company share is sold during the construction phase. Under the RS Act, the builder must, among other things:

• Obtain a performance guarantee (Housing Transactions Act, Chapter 2, Section 19), which covers defects for 10 years from commissioning that are essentially the builder’s responsibility to correct
• Provide a construction phase guarantee, which protects the installments paid by the buyer until the home is handed over
• Provide a post-construction guarantee, which secures warranty period repairs if the builder is unable to carry them out
• Submit safety documents to the bank before starting sales
• Report the transaction to the Residential and Commercial Property Information System

In practice, this means that even if the builder goes bankrupt mid-project, the installments you’ve paid and future warranty repairs are insured – provided the guarantees have actually been properly arranged. Verifying this from the transaction documents is exactly what OUN® does for you.

The annual inspection under the Housing Transactions Act (12-15 months from commissioning) is the buyer’s most important moment to exercise warranty rights – that’s when all defects and shortcomings discovered during use that the builder is responsible for are recorded.

Checklist for new build buyers

Before signing the purchase agreement:

• Investigate the builder’s financial situation and previous reference projects
• Verify that the RS system guarantees (construction phase guarantee, performance guarantee) have actually been arranged – don’t assume
• Calculate the actual monthly cost based on the debt-free price and financing charge, not just the selling price
• Find out the estimated completion time and what the contract says about delay situations
• Check whether the area is still under construction and what’s planned for the neighborhood
• Review the safety documents before signing

During construction:

• Follow the builder’s updates and participate in offered inspections
• Report your contact details to the housing company as soon as ownership is confirmed – the obligation to pay charges begins even before HTJ registration
• Confirm the date of the upcoming shareholders’ meeting and if necessary arrange representation with the seller or builder if your shareholder registration is pending

At handover and afterwards:

• Go through the handover inspection carefully and record all defects before handover
• Mark the date of the annual inspection in your calendar (12-15 months from handover) – it’s your most important opportunity to exercise warranty rights
• File complaints about discovered defects within the deadline
• Ensure ownership registration in the Residential and Commercial Property Information System

New build or old home – in brief

A new build is a good choice when you value everything being new and under warranty, energy efficiency being up to current standards, and still being able to influence material choices – but you accept a higher price per square meter and the risks described above. An old home, on the other hand, generally offers better value for money and an established location, but without the warranty protection of a new build.