On 16 June 2022, the Prime Minister issued a Decree organizing the sale of units in real estate development projects, whether residential or touristic, to ensure buyers’ rights are protected.
Real estate developers are obliged to comply with the project time line approved by the competent authority and open a separate bank account for each project or phase therein to deposit or cash out any revenues or expenses pertaining to said project/phase.
The developer shall deposit in said account the sufficient funds (to be calculated based on the construction cost of the phase in view of the project total area) covering the value of the project, phase or part thereof launched for sale (“Financial Coverage”) in order to obtain a permit to launch the phase.
The Financial Coverage shall be retained in full at least until the start of the construction works. Afterwards, the Financial Coverage is gradually reduced with the actual completion of the project/phase until completely withdrawn upon achieving the completion percentage set forth for projects of the like under the Decree.
In addition to that, the developer shall submit semi-annual audited financial reports attesting the funds collected from buyers and the amounts expended on the phase.
The developer shall also retain a reserve or a letter of guarantee amounting to 5% from the total collected amounts for each phase for refunds to be reduced proportionally with the units delivered; and open a separate bank account for maintenance fees to be used for managing and maintaining the project upon completion.
Moreover, the Decree provides that the developer shall not advertise (a) the sale of units before it obtains the ministerial decrees approving the project layout and the detailed phase layout; and (b) the launching of new phases before the compliance with the approved time line for the previous phase is confirmed.
In the event the developer fails to meet the agreed delivery date of a unit, the latter is granted a twelve months grace period to deliver the unit. If the delay exceeds twelve months, the instalments are deferred after delivery. If the delay exceeds twenty-four months, the buyer may either continue with the instalments deferral until delivery or return the unit and be refunded within three months from submitting the refund request. This applies to new and ongoing projects.
If a developer violates the new regulations, the latter is granted six months to rectify the breaches. The failure to rectify within the granted period exposes the developer to harsh measures imposed by the competent authorities including suspension of approvals pertaining to the sale of units in new phases.
Lastly, the Decree provides that new phases for ongoing projects shall be subject to similar procedures provided therein.