Often when you buy a property abroad, it will be a through a property developer, especially if you’re buying off plan.
If the market is unstable and values and demands are reducing, situations can arise where your property developer happens to go bust. We saw this in Spain a few years ago with many urbanizations left half finished. So, where does this leave you if your developer goes bankrupt or ceases trades while you’re in the middle of buying one of their properties?
What happens if you have completed your purchase on a property?
If the sale has gone through, it is likely that the developer will have also sold other properties within the same complex. In this situation, the developer becomes your neighbor and is subsequently responsible for his fair share of the community fees.
However, because many developers now operate under the Administrative Receivership, it will be necessary for you to deal directly with the office of the Administrative Receiver and not with the developer themselves.
It may, therefore, be necessary to call a meeting with other members of the development community in order to protect your position regarding unpaid community fees. Once an agreement has been reached, the community will be able to enforce the unpaid fees as a debt against any incoming purchaser and then collect the unpaid balance.
What if you haven’t completed your purchase on a property?
If you haven’t completed your purchase but have perhaps paid your deposit or signed your Private Purchase Contract (PPC), it is likely that you will be in a situation where you will be purchasing the property outright once completion has been met. Legally speaking, there are two different types of creditors; secured and unsecured. The former will have registered charges against the development company’s assets by way of mortgages or other loans, whereas the latter will not.
Unfortunately, until a property is completed, a prospective purchaser who hs paid a deposit but not the amount of the property in full will be classified as an ‘unsecured’ creditor. This means that your rights to recoup the cash that you deposited with the development will come second to funds owed to ‘secured’ creditors.
At EU Property Solutions we are committed to providing those who own property abroad with expert advice. If you find yourself in a situation where your overseas developer has gone bust, get in contact with us as soon as possible. We will advise you on the best steps to take. We can also help with translation and complete any paperwork that you are faced with.