Off plan sales: a better protection for buyers
When an off plan property or one under construction is put on sale, the property developer is required to offer buyers a completion guarantee. It guarantees the purchaser that works will be finished and that he will receive the property finished. However there are several kinds of more or less secure guarantees. The “intrinsic” guarantee is directly produced by the developer without the need for a bank which plays the role of a bond or surety, but may be problematic, particularly if the developer comes into financial difficulties because only his funds are used as guarantee.
A new decree, implemented on April 1st has come in to reinforce off plan purchasers’ protection. To offer this “intrinsic” guarantee, the developer has to provide financial data justifying that he will be able to complete the project successfully such as previous sales or credits granted for this project. Thus, the developer has to justify that the building is almost finished or that foundations are in place and that 75% of the financing is guaranteed.
The second guarantee is called “extrinsic”, which means that a bank offers the bond for it and in case of any problem, even if the developer can’t refund the purchaser, the bank will do so.