UOKiK wants to better protect apartment buyers

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The Economic Committee of the Council of Ministers adopted a draft law on the protection of the rights of the purchaser of a residential unit or a single-family house. The draft prepared by the Office of Competition and Consumer Protection (UOKiK) provides for the establishment of a Developer Guarantee Fund (DFG).

Developer Guarantee Fund

Dorota Karczewska, vice-president of UOKiK, told PAP that the project provides for the creation of a comprehensive consumer protection system and a safe development market.

All developers will contribute to the DFG. If any of them fail, cease construction or fail to fulfil their obligations as a result of which the consumer withdraws from the contract, the Fund will cover all losses incurred by consumers.

The DFG was modelled on the Tourist Guarantee Fund and is to be run by the same institution – the Insurance Guarantee Fund.

Contributions to Fund

Developers will pay contributions to the Fund from each payment made by the purchaser. Contributions will vary depending on the type of account and will amount to maximum 1% of the value of the apartment for a closed account and 5% for an open account. Premiums will be stored on separate sub-accounts and sent to the Fund via a bank. The bank is to be responsible for transferring the premiums to the DFG. Only after the developer has paid the premium, the bank will be able to disburse the next tranche for construction. The payments will be linked to the progress of works on the construction site.

The fund will also work if the bank that holds the trust account goes bankrupt.

Higher price for protection?

Developers for whom the premium is an additional cost will most likely pass it on to buyers. According to Dorota Karczewska from UOKiK, even if this happens, it is beneficial for the buyers, because “they will gain peace of mind”. She also added that in reality the premiums are to be even lower. If the risk would be small and the Fund would contain a lot of funds, then the contribution rate could be set at zero in the regulation.

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