My contractor has gone bankrupt: what now?

You are fully engaged in building your dream home or have finally started renovating your existing home, and then things go wrong. Your contractor goes bankrupt after you have signed the construction contract or accepted the quotation. A situation that can always arise, especially now that the number of bankruptcies is rising sharply (14.7% in June 2020 compared to May 2022 according to the latest figures). Do you know what your rights are should this situation arise? 

Consequences of bankruptcy 

The bankruptcy results in a receiver being appointed to take over the management of the company. This also means that you may no longer make payments to the bankrupt party itself, only to the receiver (if any payments still need to be made). You must therefore contact the receiver for the further handling of the matter. 

Below we briefly outline for you the specific consequences depending on the current state of affairs: 

The works have not yet started 

Contrary to what many people think, the bankruptcy does not immediately terminate the construction contract (unless something to that effect has been included in the construction contract). Therefore, you cannot simply engage another contractor, on pain of having to pay damages to the receiver. 

What can you do in this case? You must contact the receiver and ask for their position. The receiver must take a position within 15 days on whether or not they will continue the contract. If the receiver does not take a position, the contract is in principle dissolved and you may contact another contractor. 

Have you already paid an advance? In that case, you can only file a claim in the insolvency register on regsol (www.regsol.be). You can then contact the trustee to ask whether you will still be able to recover anything. Since you do not have a preferential claim, there is a strong chance that you will not see this money again.

The works have already started

When the works have already started, the situation is more risky. The trustee may always choose to continue the agreement and still have the works carried out. In practice, this will only happen exceptionally, but it remains an option available to the trustee.

If the trustee chooses to terminate the agreement, a final account will be drawn up. Together with the architect and the trustee, you can in that case try to determine the ‘value’ of the works already carried out by the bankrupt contractor, and a statement of the current status will be prepared.

In this case, 2 situations may arise:

1. You have already paid more in advances than the current value of the completed works: you do not have to pay anything further to the trustee. For the amount overpaid, you must file a claim in the bankruptcy.
2. The ‘value’ of the works is more than you have already paid. The trustee will ask you to pay the balance into the bankruptcy account.

Have you bought a house or apartment off-plan? In that case, in the event of the contractor’s bankruptcy, you may be able to rely on the protection of the Breyne Act, also known as the Housing Construction Act. The Breyne Act requires the contractor to provide a completion guarantee through the bank in case he goes bankrupt or cannot complete the works himself. You can only rely on this guarantee as long as the works have not yet been finally accepted.

The works have already been completed 

The works have been completed (almost) in full. If you no longer have to pay anything, you do not need to do anything further. If there are still outstanding invoices, you must pay them to the trustee on the bankruptcy account. If a few minor items have still not been completed, you can raise this with the trustee and ask whether he/she will have them completed, or you can try to reach a settlement regarding the amount to be paid.

Defects in the works carried out? The only issue that arises here is that you can no longer hold the contractor liable if the completed works show defects. After all, you can no longer rely on the ten-year liability. You may, however, try to turn to the manufacturer and the factory warranty provided.

Conclusion: Prevention is better than cure! 

The bankruptcy of your contractor can have far-reaching consequences. It may lead to a loss of money, but also to major delays in the works, or both. This is especially the case where no contractor agreement, or no complete contractor agreement, has been concluded. Therefore, have the contractor agreement or your contractor’s general terms and conditions reviewed before engaging with them.

Reyns Advocaten has extensive expertise in real estate law, which has, among other things, led to a collaboration with the Construction Confederation. In addition, the Reyns Advocaten team includes 5 trustees, enabling them to assist you should you require advice if you find yourself in one of the above situations. 

Voor een gespecialiseerde bijstand bij bouw- en/of aannemingsgeschillen kan u eveneens vertrouwen op Reyns Advocaten.