The Financial Bond (Financial Guarantee of Completion) commits the insurer to financing the completion of work on the property covered by the policy in the event of the developer's financial default.
This policy is also known as the Garantie Financière d’Achèvement (GFA).
Who can take out a Financial Guarantee of Completion?
The property developer underwrites the Financial Guarantee of Completion (FGC) during a Sale in Future State of Completion (otherwise known as Vente en l’État Futur d’Achèvement (VEFA) in French). The FGC provides assurance to future buyers by guaranteeing the completion of the property for which they have signed a deed.
Is the Financial Guarantee of Completion mandatory?
The FGC is a compulsory requirement in Luxembourg, and must be taken out before work begins. It is made mandatory under Article 1601-3 of the Civil Code of the Luxembourg State:
Ainsi, l’article 1601-5, alinéa 2, sub f, du Code civil dispose que les contrats de vente en l’état futur d’achèvement visés à l’article 1601-3 du Code civil, doivent prévoir la garantie de l’achèvement complet de l’immeuble dans les termes prévus par le contrat ou du remboursement des versements effectués en cas de résolution du contrat à défaut d’achèvement, dans les conditions et avec les modalités à fixer par règlement grand-ducal.
Source: Circular letter 16/6 of the Commissariat aux Assurances relating to the financial guarantee of completion, 26 April 2016
In order to have the deed of sale notarised, the FGC certificate required.
Advantages for the developer:
- Legal and mandatory cover
- Marketing of the property from the outset and financing of the work
- Possibility of securing an intermediate solution for a new line of credit financing
- Confidence and security for buyers that the project will be completed
What are the steps for subscribing to a FGC?
- Financial analysis of the property developer (including the company's organisation chart, the profiles and professional experience of the directors, a review of the balance sheets, capital and funds, etc.)
- A case-by-case study of the projects (type of construction, technical data, cost calculation , etc.)
How to subscribe to a Financial Guarantee of Completion?
Due to the restrictive terms and conditions of this guarantee and the high costs involved, OCA makes the process easier and offers competitive rates based on our experience and insurance partnerships.
Don't hesitate to ask us for a quote!
