Competition Committee: Developers cannot retain funds from terminated contracts

Over the past eight months, the supervisory body received nearly 1,000 complaints related to housing construction and apartment purchases in multi-storey buildings. Most of the complaints involved violations by developers – including delays in project completion, failure to meet contractual obligations, or unfulfilled promises made in advertisements and announcements.

In reviewing contracts, the committee identified illegal clauses in some cases. Certain developers claimed the right to retain 10% of the paid or contractual amount as a penalty if a buyer terminated the agreement.

However, Article 385 of the Civil Code allows one party to seek damages upon termination of a contract only if actual harm is incurred. Article 14 of the Civil Code defines damages as either actual losses or lost profits. According to the committee, when an apartment purchase contract is canceled, the developer does not suffer a loss, since the unit can be sold to another buyer. Given the high demand for housing and rising prices, developers may even make additional profit.

The committee added that such retention of funds cannot be considered a penalty under the law. Article 260 of the Civil Code specifies that penalties are applied when one party (the debtor) fails to meet its obligations. In most cases, homebuyers pay on time, meaning the developer remains the debtor until the property is handed over.

Moreover, under the Law on Consumer Protection, any contract provisions that restrict consumer rights or contradict the law are deemed invalid.

The Competition Committee advised citizens to carefully review all terms of housing contracts before signing and to consult lawyers if needed. If unlawful provisions are discovered in a signed agreement, consumers are entitled to take the matter to court or report it to the relevant authorities.

Since the beginning of the year, the committee has annulled eight contracts between developers and buyers. Its interventions helped citizens recover 1.5 billion UZS that had been unlawfully withheld.