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On 16 December 2016, changes were made to the rules on developer guarantees in the Housing Construction Act. The changes came into force on 1 January 2017.
The starting point is still that the developer must provide a guarantee immediately after entering into the agreement, cf. § Section 12, second paragraph, first sentence. With effect from 1 January 2017, the developer is given a statutory right to postpone the time for providing the guarantee if a relevant reservation has been made in the agreement, cf. bufl. § Section 12, second paragraph, second sentence. Relevant reservations under the provision are;
- Opening of construction loans
- Sale of a specific number of homes
- Commissioning licence
The Building Construction Act does not allow for the postponement of the guarantee to be postponed as a result of circumstances other than those expressly stated in bufl. § Section 12, second paragraph, second sentence. However, in our judgement, the best reasons indicate that the relevant reservations can be combined.
If the developer has made a relevant reservation in the agreement with the consumer, the obligation to provide a guarantee arises as soon as the reservation lapses. The reservation can lapse either by the reservation being fulfilled or by the developer waiving the reservation.
If the developer does not fulfil the obligation to provide a guarantee after the reservation has lapsed, the consumer may set a deadline of at least 10 days to rectify the situation. Failure to provide a guarantee within the deadline set by the consumer entitles the consumer to cancel the agreement, cf. bufl. § Section 12, ninth paragraph, last sentence.
The amendment allows developers to defer the costs associated with a guarantee under section 12 of the Bufl. § Section 12, and developers should be aware of this possibility for agreements entered into after 1 January 2017.
