Houses under construction, eye on the surety!

Not all those who wish to buy a “new” house, that is under construction, are aware of some fundamental rights that are almost always violated by the real estate developer.

The first guarantee to be delivered to the purchaser is the property insuranceagainst defects and construction defects for the following ten years starting from the date of completion of the works and covering material and property damage to the property, including damage to third parties, to which the manufacturer is required pursuant to art. 1669 cc It is clear that the purchaser must be able to count on the fact that it is an insurance to pay in case of damages chargeable to the manufacturer and subsequent to the transfer of ownership. In fact,  without insurance, who can guarantee the buyer that the manufacturer has the money to cover his responsibilities in a period of ten years? Nobody!

The second protection prepared for the buyer is the right to release by the manufacturer – who is obliged to do so without being able to claim any excuse – a surety policy to guarantee the sums collected or to be collected by the buyer for the purchase of the building under construction. The sanction established by the order for the breach of the obligation to provide the guarantee is the nullity of the contract for failure to issue the policy.

The policy must be issued by banks, insurance companies or financial intermediaries subject to checks and supervision by the Bank of Italy. The issue and delivery of the policy to the purchaser of the house serves to guarantee the aforementioned consumer the return of the amounts paid or still to be paid to the manufacturer in the event that the latter incurs in a situation of crisis of the enterprise such as bankruptcy, liquidation compulsory administrative, preventive arrangement, extraordinary administration, or real estate execution.

The effectiveness of the surety ceases at the time of transfer of ownershipor other real right of enjoyment on the property or of the final assignment act to the purchaser.

The reform was therefore extremely useful for increasing the protection of the purchaser of the house under construction. The chronicles are in fact full of people who after having paid to the builder, then failed, the savings of a lifetime is to be entitled to a small percentage of what is paid, if it is good 10-30%, without getting the house. Therefore the right to issue the surety policy meets the need for certainty of purchase.

Many manufacturers, deceiving the buyer, they sign instead of a real purchase preliminary agreement a simple book with which the seller does not assume any obligation to the future transfer of the property but is committed only once the building initiative has become concretely realized, to give preference to the booker in the stipulation of the preliminary contract. The manufacturer could, however, after returning the price paid, sell to those who want not being in any way bound to the booker.

By operating in this way, the manufacturer is not only obliged to issue a surety, but even manages to get the construction financed by the buyer who is unbeknownst to make the “bank” against the seller . In addition, the buyer who paid a large sum is not certain of the final purchase of the house having only a right to a refund, if it is fine, of the amount paid as a reservation.
In the so-called booking, the payment of the prospective buyer is generally modest. Increasingly, however, the builders are made by the buyers to pay substantial amounts of work progress making them believe that they have signed a real preliminary purchase and expose them to the risk of business with operations that are not transparent.

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