The President of the UOKiK has developed proposals for legislative changes to help protect consumers' interests in the event of the bankruptcy of a developer in which the account was paid for the development project.
Rules for the protection of acquirers on the so-called primary market of dwellings or single-family homes have been regulated by regulations Act dated 16 September 2011 on the protection of the rights of the purchaser of a dwelling or a single family house, hereinafter referred to as ‘Development Act’, which entered into force 29 April 2012 According to Article 40 The Development Act The Council of Ministers was required to review the functioning of the provisions of the Act and to provide the Sejm with information on the consequences of its application, together with proposals for amendments, within the time limit 2 years after its entry into force.
The implementation of this obligation was carried out by the President of the Office for Competition and Consumer Protection (hereinafter referred to as ‘the UOKiK’) between April and December. 2013 and included a study of development contract patterns and practices applied by developers in consumer trade.
In addition, the President of UOKiK conducted a survey to ok. 1000 developers, housing cooperatives or banks. This survey included economic and legal factors that affected the market condition of development companies.
Another jam was to consult with representatives of the insurance, banking, development and notariat industries, as well as with organisations representing consumer interests.
The review by the President of UOKiK showed that the introduction of the Development Act contributed to increased consumer protection, in particular by introducing the obligation to open residential trust accounts for each development project
From January to March 2014 The President of UOKiK conducted interministerial consultations (Ministry of Finance, Ministry of Development and Infrastructure, Ministry of Justice, Committee on Financial Supervision), which were the subject of an opinion on the functioning of the Act in practice together with possible proposals for amendments.
The review carried out by the President of UOKiK showed that the introduction of the Development Act contributed to increased consumer protection, in particular by introducing the obligation to open residential trust accounts for each development project, as well as to conclude development contracts in the form of a notarial act. Despite a positive evaluation of the functioning of the development bill, the entities involved in the study pointed to a number of matters requiring regulation or clarification.
Legislative proposals
Due to the results of the survey conducted by the President of the UOKiK in the draft information of the Council of Ministers for the Sejm on the consequences of the application Act dated 16 September 2011 on the protection of the rights of the acquirer of a dwelling or a single-family home, together with a proposal for amendments, has proposed its own legislative amendments including, inter alia, the regulation of development booking contracts, the introduction of financial sanctions on developers who do not apply measures to protect the payment of purchasers, the clarification of the content of the development contract and the issue of annexes to that agreement, or the regulation of documents that should provide information on planned investments within the framework 1 km from the property.
Following the adoption by the Council of Ministers Information Sejm of the effects of the development act, the President of the UOKiK, on the basis of the authorisation of the Prime Minister, developed a draft of the assumptions for the amendment of the development bill, which eventually took the form of a new bill on the protection of the rights of the buyer of the residential or single-family premises and the Developer Guarantee Fund.
The draft new development bill envisages the introduction of numerous mechanisms aimed primarily at improving the effectiveness of the protection of purchasers of residential premises or single-family homes, improving legal trade safety and increasing the level of acceptance of regulations on the part of entrepreneurs.
Currently, the Development Act provides that in order to secure the funds paid by the purchasers of the developer is required to ensure one of the following protection measures:
- • a closed residential trust account;
- • an open residential trust account and insurance guarantee;
- • an open residential trust account and a bank guarantee;
- • an open residential trust account.
The difference between a closed and open account is that funds deposited in an open account are partially paid out after the completion of the subsequent stages in accordance with the investment schedule, while funds collected in a closed account are paid in full after the bank has received a copy of a notarial deed of the contract transferring ownership of the residential or single-family premises to the buyer.
In practice, developers most often establish open residential trust accounts without additional guarantees. However, this way of securing creates risks for the consumer in the case of e.g. the bankruptcy of the developer. That's right.
Act dated 15 May 2015 The restructuring law granted purchasers of premises or houses a position similar to the situation of creditors in kind, but does not eliminate the risk of loss of funds that the developer had.
In addition, the bankruptcy of a developer who funds its venture with a mortgage gives the purchasers the risk of failing to meet their claims, after satisfying the bank's claim, if the granting of the loan took place before depositing on the trust account.
Introduction of the Developer Guarantee Fund
The draft new law introduces additional security, the Developer Guarantee Fund. Developers will be required to pay contributions to this fund on the basis of the chosen type of protection measure. The contributions will be adjusted to the market situation through the Regulation.
The calculation of the contribution to the fund is based on the value of the payment made by the purchaser to the residential trust account.
Fund funds will be used to reimburse purchasers' payments made to an open residential trust account in connection with the implementation of the development contract in the event of the developer's bankruptcy.
In practice, the bankruptcy of the developer during the development project often left consumers with bank credit and unfinished construction.
Security for purchasers in such a situation, according to the President of UOKiK, is to be the Developer Guarantee Fund, which, in case of bankruptcy of the developer, guarantees payment of all payments paid by the buyer.
The following article will address the solutions proposed in the bill, including the rules for the payment of funds from the residential trust account, the obligations of the developer before the conclusion of the contract, the purpose of which is to transfer the property of the residential or single-family premises, the rules and modalities of the conclusion and the content of the reservation agreement, the rules and modalities of the conclusion and the content of the development agreement and other contracts concluded by the developer with the buyer, the purpose of which is to transfer the property of the residential or single-family premises, the rules and procedures for receiving the residential or single-family premises and the rules on the liability of the parties to the contract in this respect.