Development financing and multi-party agreements – striking a balance between not so different goals
01 March 2021
If a financier considers financing a development, a certain and timely exit is essential. To achieve this, the project must be finished, preferably within the agreed budget and period. For this to happen it is, in turn, essential that the contractor working on the project completes its job as agreed. This seems obvious and simple. Nevertheless, a lot of things can happen along the way. Where these lead to a gap in the budget, which the investor cannot or will not bridge, contractors working on Dutch developments have a relatively strong position based on the Dutch law statutory right of retention (builders lien), which typically even ranks prior to the development financier’s mortgage, as well as a general right to suspend working on the development until getting paid. Both could seriously affect the position of the financier and ultimately the end result for the contractor might still be that some of its invoices remain unpaid.
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