If an off-plan developer fails, guarantees, insurance, escrow and registration decide what you recover. How it works in eight countries and how to check yours.
The worst-case question for anyone buying off plan is simple: if the developer fails before handing over the keys, what happens to the money already paid? The honest answer is that it depends on a legal mechanism, not on how solid the developer looks, and the mechanisms differ a lot between countries.
What buyers fear
That the advances disappear into the developer's general accounts, and that the buyer ends up in a queue of creditors for a half-built shell. That a guarantee exists on paper but cannot actually be claimed. That a foreign buyer has no standing in a foreign insolvency court. These fears are not irrational: in several markets off-plan money is exposed unless a specific protection is in place.
What the risk really is
An advance paid to a developer is, by default, a claim against the company. If the company is insolvent, the buyer is generally an ordinary (unsecured) creditor, which usually ranks behind creditors with security such as a bank holding a mortgage on the land, and often behind certain statutory claims. Recovery in that position is typically partial and slow.
Protection therefore means taking the buyer out of that position, in one of four ways. A bank guarantee or insurance policy that repays the advances if the building is not delivered. An escrow account where the money is held apart from the developer's own funds and released against construction progress. A registration of the buyer's right at the land registry that gives priority over later creditors. Or a contractual right of retention or other security if you already hold the property. Each has limits: a guarantee must be valid and cover every payment, escrow only works if the account is real, and registration protects the property but not necessarily a refund.
How it works by country
Spain. Advance payments for homes under construction are meant to be guaranteed. The old law of 1968 was repealed from 1 January 2016, and the regime now sits in the first additional provision of the building law (LOE, Law 38/1999): the developer must secure the advances with a bank guarantee or an insurance policy. Which payments are covered and how a claim is made should be read in the guarantee itself, so ask for a copy of it; we did not verify every detail of the account arrangements. The law is on the BOE site.
Italy. For buildings still under construction, the 2005 decree (D.Lgs. 122/2005) obliges the builder to give the buyer a bank or insurance guarantee for the advances received, and the contract can be void for the buyer's benefit if it is missing. Later amendments exist; ask the notary which version applies to your project.
Portugal. A sinal paid under the preliminary contract is returned doubled if the seller defaults, but that only helps against a solvent seller. We did not find a general mandatory guarantee for off-plan advances in Portugal. Case law reports a stronger position for a consumer who already has possession: a right of retention over the property under art. 755 of the Civil Code, which can be claimed in the insolvency proceedings. Without possession, expect to be an ordinary creditor unless the contract gives a guarantee.
Greece. We could not confirm a statutory guarantee or escrow scheme for off-plan advances from an official source. Practice guides describe staged payments and the buyer holding only a contractual claim until the notarial deed. Ask your lawyer to check the building permit, the mortgage register and whether payments can be tied to completed stages or held by a third party.
Cyprus. There is no general escrow requirement that we could verify. The main tool is depositing the sale contract at the Land Registry, which creates a charge and gives priority over later dealings and, reportedly, protection against the developer's financial trouble if done within the legal time limit. Law-firm commentary also describes reforms for buyers who paid but could not get title deeds because of the developer's mortgage; ask a local lawyer how they apply to your project.
Bulgaria. We did not find a statutory guarantee for advances. Practice guides recommend tying payments to construction stages and using a notary escrow account or bank guarantee; the preliminary contract is where you set penalties and refunds. Whether a particular developer will agree is a negotiation point, not a right.
Turkey. Sales of housing before completion to consumers are governed by the Consumer Protection Law 6502 and the regulation on prepaid housing sales (arts. 40-46). A bank letter of guarantee is reported to secure repayment of what the buyer paid, payable on first demand. Check whether your purchase falls under this regime and whether the letter is actually issued in your name.
UAE. In Dubai every off-plan project must have a project escrow account under Law 8 of 2007, and funds are reported to be released against construction progress verified by an engineer; a commercial explainer says creditors of the developer cannot attach those funds. Check that the payment goes only to that account, through the Dubai Land Department system, and see Dubai developer verification: RERA and escrow checklist. The regulator's site is dubailand.gov.ae.
Thailand. We found only secondary reports: no protected payment mechanism for foreign off-plan buyers, money going directly to the developer or its project company, and the buyer being an unsecured creditor in bankruptcy. One source also reports that since 31 January 2025 taking reservation deposits for condominiums is a controlled business activity, which we could not confirm officially. See buying off-plan in Thailand: developer checks and payments.
How to protect yourself
- Ask in writing which of the four protections applies: guarantee, insurance, escrow or registration.
- Get a copy of the guarantee or policy and check the issuer (a bank or an authorised insurer), the amount, the dates, the named beneficiary and the conditions for claiming.
- Confirm directly with the issuer, using contact details you find yourself, that the guarantee exists and covers every instalment.
- Pay only into the guaranteed or escrow account, never to a different account on a later request.
- Tie payments to documented stages and keep proofs: invoices, receipts, site inspection reports.
- Check the developer's own finances, permits and mortgages on the land: see how to verify a developer abroad.
- Read the full country comparison: off-plan purchase abroad: contracts, escrow and delays by country.
When to involve a lawyer or notary
Before the first payment above a token reservation. A lawyer should read the contract, verify the guarantee and the land title, and explain what you hold if the developer fails. After a problem appears (delays, payment demands outside the schedule, rumours of insolvency), involve the lawyer at once: claim deadlines under guarantees and insolvency rules can be short. See also how to read a property purchase contract abroad.
FAQ
If the developer goes bankrupt, do I lose my deposit? Not necessarily. If a valid guarantee, insurance or escrow exists, you may recover some or all of it. Without one, you are usually an ordinary creditor and recovery may be partial and slow.
Is escrow always safe? It is much better than paying the developer directly, but check who controls the account, how funds are released and whether the account is regulated.
What should I do if I see warning signs? Stop further payments, send written notice under the contract, contact the issuer of the guarantee and a local lawyer, and register your claim within the deadlines.
Does registering the contract at the land registry protect my money? It can protect the property or your priority, but not always a refund. Ask the lawyer exactly what it secures.
Can a foreign buyer claim in a local insolvency? In principle yes, as any creditor, but through local counsel and within strict deadlines.
How we help
We are a trilingual platform (Russian, Polish, English) that finds properties and coordinates independent local lawyers and tax advisers who check guarantees and contracts. This text is informational and is not legal, tax or investment advice. Rules change, so verify current provisions with a local lawyer before paying.