The Council of Ministers, at the request of the President of the Competition and Consumers Protection Office, adopted a new draft Act on Protection of the Rights of Buyers of residential Premises or a Detached House (the so-called Act on Developers). The modifications are supposed to improve the protection of buyers and increase the certainty of transactions.
The draft act provides for the establishment of the Developers Guarantee Fund. The funds in a separate bank account shall protect the interests of property buyers e.g. when a developer is declared bankrupt. The guarantee shall cover all the agreements with property buyers under which a buyer must deposit funds in the Housing Trust Account. The draft act provided for two types of the maximum rates on the basis of which the contribution to the Developers Guarantee Fund will be calculated: 5% in the case of an open-ended housing trust account and 1% in the case of a closed-ended housing trust account.
The draft act provides for clarifying the functioning of the booking agreement. For the time being the developers use it at their absolute discretion, but the consumer interests need to be protected and therefore the authors intend to specify the maximum rate of the booking fee which shall not exceed 1% of the price set out in the prospectus.
The draft act modifies the complaint-handling procedure e.g. a buyer will be entitled to rescind the agreement if the purchased premises suffer from a significant defect. The authors propose introducing the mechanism of the tacit acknowledgement of the defect if the developer fails to provide its declaration of acknowledgment of or refusal to acknowledge such defect in 14 days of signing the certificate.
The proposed regulations are yet another step on the road to provide property buyer with protection by imposing new restrictions on the developers.