Three years ago Roman Gen-De-Fu bought a one-bedroom flat in the Flahman residential building development in Kyiv. Located in the Darnytsya district on the left bank of the Dnipro River, this 27-story, seven-section behemoth in yellow, green and turquoise colors promised to stand out among the old, low-rise Soviet blocks in the area.
Like many other Ukrainians, Gen-De-Fu thought he would save money by investing in property under construction. But years on, Flahman still stands unfinished, while investors have found themselves entangled in a complex web of lawsuits and disputes with the municipal authorities. Flahman, it turned out, was the center of a massive construction scam involving businessman Anatoly Voitsekhovsky.
Anatoly Voitsekhovsky’s case
Voitsekhovsky is believed to be the mastermind and owner of the collapsed Uko-Group and Citi-Group construction companies, which have left behind them 40 unfinished residential projects around Kyiv, and scammed an estimated 10,000–12,000 investors between 2009 and 2014.
In 2016, Voitsekhovsky was arrested and charged with evading Hr 12.5 million ($480,700) in taxes, organizing a crime group that illegally seized land plots through a network of private companies, and embezzling private investments.
According to Voitsekhovsky’s lawyer, Yulian Voloshyn, his client denies all of the charges against him, is out on bail of Hr 14 million ($538,000), and is wearing an electronic tag. Voitsekhovsky’s pre-trial hearing, which has been cancelled three times already, is now scheduled to take place on Nov. 14.
The residential projects built as part of Voitsekhovsky’s scheme were blacklisted as squatter housing built in violation of construction norms. The projects have been frozen and the land plots arrested.
‘Nobody cares about us’
In the last year, little has been done to resolve the problem, lawyers at the Association for Assistance to Scammed Investors say.
In fear of losing their flats and money, desperate buyers have moved into the unfinished buildings. At the same time, many are trying to get compensation or have their ownership rights recognized in court. As a result, every project is embroiled in a number of individual lawsuits.
Several of the unfinished projects were taken up by other developers, such as the Perlyna Troyeshchyny development. Others, such as the Skhidna Brama development were approved for demolition by the city authorities. Most, however, like the Flahman and Sosnovyi Bir projects, are in limbo, with residents trying to finish construction with their own resources.
“Nobody cares about us,” Gen-De-Fu said. He is a member of a self-organized cooperative union of residents who are trying to improve their living conditions.
No gas or heat
Kyiv City Administration is reluctant to legalize the uncommissioned property, which stands on an arrested land plot, or connect the residential blocks to utilities. Today the residents of the Flahman project only have electricity — no gas or heat supplies.
“There is a fine line. If we legalize those buildings, it will be against the law and create a precedent. If we tear them down, the investors will be left without any property at all,” a Kyiv city administration official said.
The position of the Kyiv City Administration is non-intervention in contractual relations between individual investors and private companies. Instead, the administration has worked out a procedure that should allow investors scammed by Voitsekhovsky’s companies to finish the construction of their apartment blocks and legalize their property, which is currently categorized as squatter housing.
The plan has 11 stages, from recognition of the investors ownership rights through the courts, to registering a company to take over the land plot and obtain a construction permit to finish the buildings.
Missing documents
Maksym Chepelenko, a lawyer of the Association for Assistance to Scammed Investors, says that documentation for many residential projects built as part of Voitsekhovsky’s scam is missing, complicating litigation.
“The investors are to blame as well. People just look at the low prices and location and don’t consult with lawyers before signing contracts,” Chepelenko said.
The Ministry of Regional Development, Construction and Housing of Ukraine will propose a new law to protect investors, Deputy Minister Lev Partskhaladze told the Kyiv Post. The ideas include insurance funds and a registry of ownership rights to real estate planned to be built in future.
In the meantime, residential construction in Kyiv is on the upswing. As of October, 66,000 new apartments were on the sales market.
Property is still viewed as an investment, despite the risk of losing money. However, there’s reason for buyers to beware about new construction.
Moreover, the city’s infrastructure isn’t keeping up. It’s common for new buildings to go up before independent utility lines are laid. In many cases, the new constructions are simply connected to the networks of buildings nearby, causing the overloading of water and sewage lines, damage to networks, and the risk of supply disruptions to entire neighborhoods.
