Buyers in the real estate market often rely on guarantees to safeguard their investments. However, these assurances may prove inadequate, especially when developers declare bankruptcy midway through construction. This situation leaves buyers vulnerable, particularly if they’ve already made substantial payments for unfinished properties.
In Finland, many new projects involve selling properties before completion, increasing risks for buyers. If a developer goes bankrupt during construction, completing the project becomes uncertain, and buyers may face additional costs and delays if they opt to take over the project.
Although buyers have some protections, such as security during construction and post-construction bonds, these measures may not fully mitigate risks. The adequacy of these securities is often questioned, especially if significant repairs are needed post-construction.
Addressing these issues requires legislative changes. Experts recommend enhancing collateral requirements, expanding non-performance guarantees to cover bankruptcy during construction, and clarifying provisions related to deductibles and buyer protections.
Additionally, there’s a need for clear provisions regarding responsibility for ongoing projects in the event of developer bankruptcy. Some suggest involving external entities to monitor construction progress and ensure transparency for buyers.
Ultimately, the aim is to improve protections for building societies and shareholders and provide greater clarity and accountability in case of developer bankruptcy. These proposed changes aim to enhance buyer confidence and mitigate risks in the real estate market.