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According to the draft law on Making Amendments to the Civil Code of the Republic of Armenia authored by the NA deputy of the Civil Contract Faction Gevorg Papoyan, it is proposed to prohibit the pledge agreement between the constructor and the buyer or its amendments until the completion of construction of the building under construction or until the signing of the deed of transfer of ownership or until obtaining a permit for the operation of a building, construction, termination of the right to pledge a part of the constructor’s special account funds opened in the bank.

The key rapporteur, the Chair of the NA Standing Committee on Financial-Credit and Budgetary Affairs Gevorg Papoyan mentioned that the draft regulates the organization of the real estate acquisition process from the constructor.

It was noted that the purpose of the draft is to limit the possibility of managing the funds of the constructor’s special account and to eliminate access to the funds of the special account for the constructors until the end of the construction.

The author, introducing the current situation in the field in detail, stated that the necessity to adopt the bill is conditioned by the organization of the process of purchasing an apartment with a mortgage from the primary market, in particular, it is necessary to limit the possibility of managing special account funds.

According to him, taking into consideration the fact that there are a number of cases where citizens have already paid a part of the money necessary for the construction of the given building in order to purchase apartments and non-residential areas of the multi-apartment or subdivision buildings under construction, but for various reasons the mentioned constructor stopped the construction, having access to the funds of the special account opened on the basis of the contract, there are risks related to what funds should be used to continue the further construction of the building. To avoid those economic risks, it is proposed to make the above-mentioned amendment in the code, preventing both the buyer, the construction organization, and the bank from bearing unnecessary economic risks.

Gevorg Papoyan also noted that new amendments were made in the draft, as a result of which the bill was thoroughly revised. Thus, the law will come into effect from July 1, 2024. The aim is to give opportunity and time to all constructors to reorganize. It was stated that the pledge agreement between the constructor and the buyer or its amendments cannot provide for termination of the constructor’s special account funds or a part of them as a pledge of 70% of these funds, and from January 2025 it will become 50% until the completion of the construction of the building under construction by the constructor or until the signing of the deed of transfer of ownership or until obtaining a building operation permit. “This approach is more effective and it is aimed at risk neutralization and consumer protection,” the author said.

According to the member of the Committee, the deputy of Armenia Faction Artur Khachatryan, the draft law will create problems for small organizations, because they will have to borrow additional money from banks.

In response, Gevorg Papoyan stated: “We tried to make sure that no problems were created for the constructors. Especially for small constructors, there will be no problem, as the law will come into force from July 1, 2024. It is the positive right of the state to protect the interests of its citizens.”

According to the member of the Committee Arusyak Manavazyan, the second amended version is the best.

The Government endorsed the bill. The RA Deputy Minister of Economy Narek Teryan noted that the issue was discussed with the constructors and they responded positively.

The Committee members voted for the presented proposals and endorsed the legislative initiative.

The issue was debated in the second reading at the regular sitting of the NA Standing Committee on Financial-Credit and Budgetary Affairs on September 4.

It should also be noted that the deputies voted to approve the 2023-2024 annual schedule for the admission of citizens to the NA Standing Committee on Financial-Credit and Budgetary Affairs.