Table of Contents:
- What is the DFG?
- Who is covered by DFG protection?
- What are the DFG contribution rates?
- Why is the DFG necessary?
On July 1, 2022, the so-called new developer act came into force, i.e., the Act of May 20, 2021, on the protection of the rights of buyers of residential units or single-family houses and the Developers’ Guarantee Fund.
The new developer act introduced the Developers’ Guarantee Fund (“DFG”).
What is the DFG?
The DFG is a fund aimed at securing the interests of buyers of residential units or single-family houses from developers in case of non-performance or improper performance of a developer agreement.
The DFG constitutes a separate account within the Insurance Guarantee Fund (“UFG”).
Developers contribute to the DFG based on payments made by the buyer into a housing escrow account in connection with the implementation of a developer agreement, as well as a reservation fee paid by the developer, but actually paid by the buyer directly to the developer.
Who is covered by DFG protection?
The protection covers only consumers—buyers of residential units or single-family houses for purposes not directly related to business or professional activities.
What are the DFG contribution rates?
The percentage rate for the DFG is:
- 0.45% for an open housing escrow account,
- 0.1% for a closed housing escrow account.
The developer calculates the amount of the DFG contribution and pays it to the bank or credit union managing the housing escrow account within 7 days from the day the buyer makes payments into the housing escrow account or from the day the reservation fee is paid by the developer.
Why is the DFG necessary?
The DFG guarantees the payment of money in the event that the developer does not fulfill the developer agreement and does not return the money paid by the buyer.
The DFG aims to encourage developers to perform developer agreements reliably and on time and to avoid financial risk situations.
The DFG ensures that investments involving the purchase of a flat or house from a developer are better protected against unforeseen situations.
