Developer failures are increasing, what are the risks for your site?

If you buy a new home, the bankruptcy of your developer, or at least his placement in receivership, is unfortunately a possibility, in the midst of the real estate crisis. What are you at risk and what are your recourses?

• 
  

  To safeguard
  

  
  
  

  Saved
  

Quite a symbol. On October 14, the company real estate development AFC Holding, owned by Alexandra Francois-Cuxac, former president of the Federation of Real Estate Developers (FPI), was placed in judicial recovery by the Toulouse commercial court. A sad fate recently shared by its competitor NG, in Montpellier. In September, the promoter Réalités initiated a conciliation procedure with the Nantes commercial court in order to restructure its debt. Real estate crisis obliged, “there will be more legal redress for developers”warns Pascal Boulanger, current president of the FPI, on the occasion of the presentation of the sector’s activity figures for the third quarter of 2024, this Thursday, November 14.

What happens to you, the buyer of a home for sale in the future state of completion (Vefa) if your promoter goes bankrupt? An unfortunately plausible hypothesis, the number of procedures (safeguard, recovery and judicial liquidation) in real estate development having jumped by +220.8% in the second quarter of 2024, over one year, to reach a total of 154 in France, according to the design office Altares. Don’t panic! “Whether the developer goes into receivership or goes bankrupt, there is zero risk for the buyer,” assures Pascal Boulanger. “There are legal guarantees which protect the promoter’s clients. Starting with the financial guarantee of completionobligatory, taken out by the manufacturer with an insurer”explains to Capital Jean-Edouard Graemiger, of Consilium Avocats, based in Angers. But the insurer will not come and pick you up : you will need to look at the deed of purchase of your property to identify the insurance company in order to contact them. “The client must declare the loss (the bankruptcy of its promoter, Editor’s note) to this insurer, who will have to find another builder to complete the project within the time initially planned”develops Jean-Edouard Graemiger.

Don’t forget to alert your bank of the promoter’s bankruptcy

But “this is very theoretical because it is not always easy to quickly find a manufacturer who agrees to take over from one who has gone bankrupt.he nuances. In practice, the initial construction time can thus be extended “of a year. And again, this is an optimistic hypothesis.completes his colleague Frédéric Coppinger, partner at Coblence Avocats in Paris. “There may be three months of delay but not much more”shade Pascal Boulanger. The fact remains that, its construction finally completed, your property will not necessarily present the expected quality in terms of finishes, warns Frédéric Coppinger. This is why, alongside the steps you take with the insurer, you must “declare your claim to the promoter’s liquidator”underlines Jean-Edouard Graemiger. For example the 90,000 euros that you have already paid to your developer, as part of the funds called up as construction progresses. Your chances of getting money back are slim, however. “the bankrupt promoter having by definition no more resources and his clients not appearing among the priority creditors”warns Frédéric Coppinger.

Also don’t forget toalert your bank of the bankruptcy of your promoter! Of course, in the case of a Vefa, you do not pay the funds all at once to the promoter but in several stages. The fact remains that your bank charges you each month the so-called interim interests associated with your loan. It is the collection of this interest that we must ask him to suspend. As many “steps that require being rigorous, attentive and patient”summarizes Jean-Edouard Graemiger.