What happens when the developer declares itself as bankrupt?

It is worth noting that many people are affected by buildings defects that the developer fails to correct. Bankruptcy is a common claim, but owners should remember that the project Architect often has ultimate responsibility for ensuring that the works are carried out properly, and while the builder goes under, the Architect and their indemnity insurance probably still exist. Further to this the Decenal (10 year) insurance (normally covering structural stability issues only rather than leaking roofs etc) may still give some protection, though it is notoriously difficult to claim against such that court action may well be required. In short if the developer goes under or you simply know they have no money or means to correct your defects, the project Architect is probably your best line of action and some lawyers would haul in the Decenal insurers for good measure where stability issues existed such as subsidence.

A ten-years Insurance is required to cover liabilities described in the following article:

Article 17 of the General Building Act: Civil liability of the agents that intervene in the building process.

1. Despite their contractual liabilities, the individuals or companies that intervene in the building process will answer to owners and third purchasers for the entire building or for part of them, in case they have been divided, of the following material damages happened in the building within the established deadlines, counted from the reception date without reservation or from the rectifying moment:

a) For 10 years, of material damages caused in the building due to defects or vices that affect the foundations, supports, beams, floor structure, charging wall or another structural elements, that directly compromise the mechanic ressistance and the stability of the building.

b) For 3 years, of material damages caused in the building by defects or vices of the building elements or the installations that produce the breach of the habitability requirements of the provision 3,1,c.

The builder will also answer for the material damages by vices or execution defects that affect the elements of finishing of the works within a year deadline.

The habitability requirements set by this Act in artilce 3.1.c are as follow:

Article 3. Basic requirements of building.

In order to guarantee the safety of people, the welfare of society and the protection of the enviroment, buildings must be designed, built, maintained and conserved in such a way that will fulfill these basic following requirements:

The article lists a series of requirments under three different categories. We will cover those regarding habitability, as mentioned in article 17, but I can answer your questions if you want to know more on the other ones:

(a: regarding functionality)

(b: regarding safety)

(c: regarding habitability)

c.1) Higiene, health and protection of enviroment so that acceptable conditions of healthiness and comfort in the internal environment of the building and so that this won´t damage the close enviroment, guaranteeing a proper management of all kind of refuse.

c.2) Protection against noise, so that the perceived noise won´t put people´s helath at risk and will enable them to carry on their activities properly.

c.3) Saving of energy and thermal insulation, so that a rational use is made of the necessary energy for the adequate use of the building.

c.4) Any other functional aspects of the building elements or the installations that will enable a satisfying use of the building.

Maria,

I paid a large deposit for a property in 2006, the apartments were completed but never obtained 1st habitation license, although a lot of others did complete without this. There was a number of us who never completed and to this day don’t know why, eventually I reversed my contact in 2009 with the builder under breach of contract and have been waiting on a court date. I have just heard that the builder has been put into compulsory liquidation and my case has been suspended. A liquidator has been appointed and I will be classed as a creditor.  Can I be treated as a preferential creditor as you refer to in ADS post below? Should my solicitor know to do this?

Many Thanks for your time

Kind Regards Jlynas

Jlynas:

Do you have a Bank Guarantee? If so, go and effect it, if you do not, I would advise to use an action against the bank were you placed your deposits.

I will be pleased to assist you if you needed  further help.

Best regards,

Maria