Developer insolvent, building frozen: what to do under Georgian law

What to do

1. Status: check whether a case is open (electronic system, Gazette). Insolvency is presumed if the debtor has ceased its activity. An application may also be filed by a creditor (Law on Rehabilitation and Collective Satisfaction of Creditors' Claims, Art. 7). Such cases are heard by the Tbilisi City Court (east) and the Kutaisi City Court (west) (Law on Rehabilitation and Collective Satisfaction of Creditors' Claims, Art. 8).
2. Apartment paid for and actually ready: seek its removal from the estate. An apartment may be removed from the estate if the contract has been largely performed by both parties and provides for transfer of ownership; the administrator decides on the application (Law on Rehabilitation and Collective Satisfaction of Creditors' Claims, Art. 60). Claims against the estate are suspended, except disputes over the allocation of a specific item (Law on Rehabilitation and Collective Satisfaction of Creditors' Claims, Art. 55). In addition, preliminary registration blocks other rights arising from transactions (Law on Public Registry, Art. 12), but ownership arises only upon registration (Civil Code, Art. 183). If the building is not completed, removal is disputed, and the route runs through the registry.
3. Money: file the claim with the administrator for inclusion in the creditors' register within 60 days from the date the insolvency application is admitted (Law on Rehabilitation and Collective Satisfaction of Creditors' Claims, Art. 52). Penalties and interest exceeding 10% of the debt can be claimed only through the court (Law on Rehabilitation and Collective Satisfaction of Creditors' Claims, Art. 52). The register may be challenged within 10 days from its publication (Law on Rehabilitation and Collective Satisfaction of Creditors' Claims, Art. 54).
4. Prospects: a bank holding a mortgage takes the proceeds from the mortgaged property first, and the remainder goes to the estate (Law on Rehabilitation and Collective Satisfaction of Creditors' Claims, Art. 105). Buyers are unsecured creditors and rank after full payment of the earlier claims (Law on Rehabilitation and Collective Satisfaction of Creditors' Claims, Art. 104). Earlier attachments are lifted (Law on Rehabilitation and Collective Satisfaction of Creditors' Claims, Art. 56).
5. Collective options: a creditors' meeting, a rehabilitation plan, or the purchase of the object at auction to complete construction. If the money was obtained by deception, this is fraud, and a complaint should be filed with the police (Criminal Code, Art. 180).
6. Where to apply: the administrator; the court handling the insolvency case; the police or the prosecutor.
7. Evidence: the contract, payments, the registry extract for the plot (mortgage, preliminary registration), the case data.
8. Pitfalls: an ordinary claim for a refund after the proceedings have opened; relying on a state programme to complete construction: no such programme exists in the law.

Be sure to check

• insolvency application and the court (Tbilisi / Kutaisi); suspension of claims against the estate
• removal of a paid apartment from the estate if the contract has been largely performed; the role of preliminary registration
• the creditors' register and the deadline for challenging it; priority: the mortgage bank first, buyers as unsecured creditors
• criminal complaint if there are signs of fraud