Insolvency guarantee

The insolvency guarantee protects the housing company and its shareholders. Defects may appear in the building after years have elapsed since the building was completed. In some cases the responsible constructor may no longer be reached. For example, the company may have gone bankrupt.

The insolvency guarantee protects the buyer of a new dwelling

The insolvency guarantee protects buyers of new dwellings. It covers repairs of construction defects in cases where the founding shareholder has ceased to operate, has gone bankrupt or otherwise can’t be held liable.

The guarantee must remain valid for ten years after the building inspection authority has approved the building for use

The founding member takes out an insolvency guarantee

In new-build projects, the founding shareholder is usually a construction company that sets up the housing company and sells the shares, typically off-plan during the construction. The founding shareholder is obliged to take out an insolvency guarantee before the shares of the housing company are sold to consumers.

In most cases, the insolvency guarantee is an insurance provided by an insurance company, and it is valid for 10 years from the approval of the building.

Before the purchase, buyers should make sure the insurance is valid, as it can be difficult to obtain later.

If the seller does not compensate or rectify a defect for which it is liable under the Housing Transactions Act, the housing company must organise the repairs and claim compensation for the costs from the party providing the insolvency guarantee.

For companies