Off plan sales have not always benefited from a protective framework. In the 1960s, an unscrupulous developer or contractor used the funds paid by buyers for purposes other than the construction of the promised building, whether to rescue another building site or simply to divert the sums. This was followed by the contractor’s bankruptcy and, inevitably, the halt of the construction of apartment buildings, even though, in most cases, the unfortunate buyers had already financed the entire construction of their building. Other similar scandals emerged. To put an end to these abuses, the law of 9 July 1971, known as the Breyne Act, was adopted and published in the Belgian Official Gazette on 11 September of that year, later amended by the law of 3 May 1993, published in the Belgian Official Gazette on 19 June of that year. Today, this law strictly governs such transactions and offers buyers an essential safety net against the risks of construction.
What is the Breyne Act and what are its fundamental principles?
The Breyne Act governs the sale of buildings that are yet to be built or that are under construction. It is based on the principle that the buyer should only pay for what has actually been completed. This means that ownership of the materials and constructions is transferred gradually as the works progress. This principle protects against bankruptcy or delays on the part of the builder.
This law also introduces strict financial guarantees, including a guarantee deposit, so that the buyer is not left without recourse if the building site is stopped. In addition, it imposes precise information requirements and a strict contractual framework in order to avoid any ambiguity in the relationship between seller and buyer.
When does the Breyne Act apply to a property purchase in Belgium?
The law applies to buildings to be constructed in Belgium and intended wholly or mainly for residential use. It applies as soon as, on the day of signing the authentic deed of purchase, the works promised by the seller, developer or contractor have not yet been completed or have not even started. One final condition must also be met: the project owner, meaning the person who ordered the works, must bear successive instalment payments until the works are completed.
If the project owner wishes to coordinate the works personally and contractually appoints several contractors, or if the building site is limited to closed structural work, the law does not apply. Transformation or extension works are covered by the Breyne Act only if they are mentioned in the property transfer agreement. They must also be of a certain scale, namely 80% of the sale price of the building, with a minimum of 18,600 €.
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Ownership of the constructions is transferred to the buyer as the materials are incorporated into the building. Only materials integrated into the ground or the building are concerned. Through an agreement between the seller and the buyer, the latter gradually becomes the owner of the home as it is being built and, above all, pays the seller or contractor according to the progress of the works through an instalment system.
In this way, the buyer continuously acquires only what actually exists and will no longer suffer significant harm in the event of the contractor’s bankruptcy or misfortune, since the risks remain at the contractor’s expense.
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To strengthen buyer protection, a 5% guarantee deposit must be paid by the seller or an approved contractor to the Deposit and Consignment Fund. If no such approval is in place, a bank or financial institution must guarantee the seller’s or contractor’s commitments to the buyer. In this case, the completion guarantee rises to 100% (Art. 12).
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The contract must include detailed plans and specifications of the works. This helps clearly define the scope of the project and ensures transparency between all parties.
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These annexes must be signed by an architect authorised to practise this profession in Belgium. This requirement is obviously intended to better guarantee the seriousness of these documents and the technical compliance of the project.
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The legislator wanted the building contract to state that the parties have been aware for fifteen days of the information mentioned in article 7 of the law. Stating this means granting the project owner a reflection period, because article 7 includes most of the protective measures. This time allows the buyer to verify the essential information and make sure that they properly understand their rights and obligations.
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If the contract fails to include a clear, separate and bold statement confirming the buyer’s or project owner’s right to request nullity, it may be invalidated. The same rule applies to Articles 7 and 12 of the law. This requirement reinforces buyer protection by promoting full transparency.
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Whether it concerns a new construction or a transformation, the agreed total price stated in the preliminary agreement or in the notarial deed may not later be changed. This obligation does not exclude a price revision clause, which remains optional. It concerns an adjustment to the price of materials and wages, which may be revised yearly. Provided that such a price revision clause is included in the agreement, it may be applied. The deposit may not exceed 5% of the price.
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The most common suspensive conditions are obtaining a mortgage and a planning permit. Under the Breyne Law, the buyer has a maximum of three months to secure financing. The loan amount and its terms must be clearly defined to prevent the buyer from using this clause to withdraw later by claiming a refusal from the bank.
Similar conditions exist for the building permit regarding the date of issue and the terms for obtaining it. When the permit has not yet been issued at the time of signing the contract, the possibility of suspending the effects of the contract in case of refusal of the permit must be expressly mentioned. In general, when there is a suspensive condition, it is best to avoid paying a deposit.
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It is best to calculate timeframes using calendar days instead of working days, despite common practice. Since working days can equal around two calendar days, this can create confusion or complicate deadline tracking at the end of the project.
If a delay in execution attributable to the contractor is established, compensation is owed to the project owner. This is typically based on the rental income that could reasonably have been expected if the new or renovated property had been let. In practice, however, it is strongly advisable to provide for a higher amount, taking into account additional costs and inconvenience such as ongoing mortgage repayments, postponed moving plans, and the cost of extending a lease, etc.
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When a building under construction is considered sufficiently complete to receive the project owner, a provisional acceptance takes place. The architect, the contractor and the project owner meet on site and carry out a careful inspection together, room by room. A contradictory report is drawn up. The purpose of such a meeting is to identify any imperfections to be corrected or shortcomings to be remedied.
Please note: the project owner who does not wait for this moment and enters the completed premises on their own initiative is presumed to have tacitly accepted the provisional acceptance. If that is not the case, the burden of proving the contrary lies with them. No later than one year after this meeting, the final acceptance will confirm that all still necessary works have been properly completed. The Breyne Act provides that only a contradictory written document, namely the acceptance report, will count as provisional or final acceptance.
The guarantees provided by the Breyne Act: guarantee deposit and other safeguards
The guarantee deposit is the main protection for the buyer. It amounts to 5% of the price of the building for approved contractors and is paid to the Deposit and Consignment Fund. For non approved contractors, the completion guarantee amounts to 100%, backed by an institution or a bank. This mechanism protects against the risk of insolvency of the seller or contractor.
Additional safeguards may also be put in place, such as holding payments in escrow with a third party or taking out specific insurance policies. These mechanisms are designed to protect the buyer financially throughout the construction process and to limit the risks associated with off-plan purchases.
Sale under the VAT regime: impacts and specific features
When an off plan purchase is subject to VAT, this changes certain financial aspects, notably the total amount to be paid and the payment terms. VAT is generally applied to the full agreed price, which may represent a significant part of the overall cost.
The Breyne Act also applies in this context, but it is essential to properly understand the additional tax rules involved. For example, certain price revision clauses may take VAT variations into account, which affects the buyer’s final budget.
FAQ
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The guarantee deposit is a mandatory financial safeguard that secures the buyer’s payments until the property is delivered. It protects against the risk of developer insolvency and ensures that any amounts paid are refunded if the project is not completed.
