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So normally your lawyer will have one bank guarantee for each of your stage payments securing the full amount.
Off plan hazards nowadays frequently outweigh the rewards, making the resale and let market look very appealing; that is until the dust settles and we start the boom cycle anew.Issuing a bank guarantee has high set-up fees for the developer as they must allocate an amount of money in a special bank account besides being a cost of opportunity for them as they could allocate these funds elsewhere.Perhaps this may help to explain why some developers may seem not be particular eager to hand them out willingly unless the purchasers lawyer has requested it from them.A bank guarantee purpose is to secure the full amount of deposits paid by off-plan purchasers.It secures the initial reservation deposit, which strikes the property off the market, the interim or stage payments as well as the applicable VAT (currently set at 7%) paid on said amounts.Bank guarantees may be a daunting minefield for many albeit with the assistance of an independent lawyer acting on your side you will be able to waive the pitfalls both safely and successfully.
Buying off-plan has many advantages but also its associated risks.
Normally in off-plan property after having paid the initial security deposit which strikes the property off the market, you are typically required to make interim payments on 30/40% of the value of the property.
These payments are normally made in regular instalments (i.e. Your lawyer will then request from the developer one bank guarantee at a time to cover each and every instalment besides the initial security deposit.
Not long ago it was normal to obtain a significant discount (premium) on buying off-plan as you assumed a risk (mainly the uncertainty of the property ever being delivered and the time elapsed until completion) until the unit was ready to be delivered legally (with a Licence of First Occupation).
Many took advantage in the boom selling on these properties for a sizeable profit prior to completion (also known as flipping) as it was basically a leveraged investment which only required a fraction of the funds paid up front.
This very short law of only seven articles was enacted to secure the stage payments of purchasers should for example a developer file for creditor protection or the build be cancelled for planning reasons and thus not delivered in the stipulated deadline.