Reply To: Are Bank Guarantees worth the paper they’re written on?



Hi Bernard
Will attempt to reply to your questions this way. It’s easier.

“Without getting very bogged down as I’m sure all the banks do it differently all I can say is that in my area the developers have to pay for the guarantee”.
You are correct Bernard. By law the developer has to provide the BG, and by law they are to give it to you free of charge.

“Its no more than an insurance policy in effect and the premium is based purely on the size of the amount to be guaranteed”.
Again correct – and each new stage payment has to be accompanied by a new BG.

“I have never known of a developer to issue a BG, only the banks”.
Sorry, that was me not being specific perhaps when I wrote my post. When I say the developer must issue you with a Bank Guarantee, I don’t mean them personally – they arrange it through their bank and the Bank issues the AVAL (BG)

“The guarantee here states that the property is to be delivered by its contracted date with the LFO or if the property is finished early and the LFO is obtained it is considered completed”.
That sounds just as it should be. And I like the constant mention of the requirement for the LFO.

“The ones from CAM always have a completion date which is the same as the completion date of the property. If the property isnt completed on its contracted day or no LFO is obtained then the guarantee can be called on”.
Again, that sounds correct.
But this is where other BG’s fall down – they don’t even mention the LFO. So completion is based on the developer’s illegal clause in the contract – that completion is due on issue of the Architect’s End of Works Certificate. Which goes against the law.

“What I dont understand is if there is no completion date to when the property should be finished at what point can you demand your money back by saying its not been finished”??
If there is no end date on the Bank Guarantee, in other words is open-ended, it does not affect the fact that the developer is still tied to the completion date in the purchase contract. If the developer goes over this date in the contract then that is when you can demand your money back. From what I understand, the courts only look favourably on a demand for monies to be returned once about 3 months has passed after the contracted completion date thereby allowing a ‘reasonable’ time for unforeseeable delays.

Did I just write ‘thereby’ ??- I’m beginning to sound like The Bible 😯

Basically Bernard, CAM’s Bank Guarantees sound lovely and legal and within the spirit of the law…..and I wish I had had one of theirs!