Business Law: protection of buyer contributions in developer apartments in case of bankruptcy2016-04-08 | Business Law
At the beginning it is necessary to say that the "Apartment or a detached house buyer rights protection act" of 16th September 2011 (the Polish Journal of Laws 2011, number 232, item 1377) imposes on the developers the obligation to provide the buyers with a protection in the form of a closed or open escrow account.
Considering the above, the developer has to collect the received resources on an escrow account. With an open account, the developer has access to the resources, transferred by the customers stage by stage - according to the progress and in case of a closed account, the payment takes place in one instalment, only after the title transfer to the buyer.
The above means of protection in the form of closed or open escrow accounts guarantee protection of developer apartment buyers, still they do not solve the case of bankruptcy of the bank, operating the escrow account.
On the basis of article 7 of the Apartment or detached house buyer rights act, in the current legal situation, in the case described above, the developer will have the right to damages from the Bank Guarantee Fund. The developer will have the right to demand from the Bank Guarantee Fund the amount, specified in article 23 of the Bank Guarantee Fund Act of 14th December 1994 (i.e. the Polish Journal of Laws 2014, item 1886), i.e. the equivalent of EUR 100,000.
In case of million złoty development investments, the guarantee sum of EUR 100,000 is far too low. Additionally, in the current situation, the Beneficiary of the guarantee of the Bank Guarantee Fund shall only be the developer, who is only entitled to the guarantee at the amount equalling EUR 100,000, regardless the resources, gathered on the escrow account and the number of buyers, providing the funds.
Being aware of the problem, the legislator started to work on amending the Bank Guarantee Fund Act. The draft act, directed to Sejm, assumes e.g. that the guarantee beneficiary would not be, as previously, the developer only, but each of the entrusting parties, within the limits resulting from their share in the amount, gathered on the account (article 26 item 2 of this project).
Implementation of these amendments means that every entrusting party, providing resources at the escrow account will have a guarantee of payment up to EUR 100,000.
Considering the above, in the situation of the present financial and bank crisis, the direction taken by the legislator, aimed at better protection of developer apartments buyers, deserves full approval.