Does Georgian law protect homebuyers when a developer fails?
Not as a separate group. A developer's insolvency runs under the Law on Rehabilitation and Collective Satisfaction of Creditors' Claims, No 7165 of 18 September 2020, last amended by Law No 1764 of 24 June 2026. It has no rank, fund or special procedure for off-plan buyers. What you get depends on what you hold when the case opens: a registered unit, a preliminary registration, or only a contract and payment receipts. A registered owner is not a creditor for that unit; a buyer with only a contract holds a money claim behind the bank. If your developer is late but still trading, start with what to do when the developer is late.
Which court hears the case, and can a buyer start one?
Law 7165 applies to applications filed since 1 April 2021; earlier cases continue under the former Law on Insolvency Proceedings. It offers two regimes: rehabilitation under a plan approved by creditors, or bankruptcy, in which the property is sold and the money shared out. It covers companies, non-commercial legal entities and joint activities (partnerships), which some projects use. Only Tbilisi City Court (East Georgia) and Kutaisi City Court (West Georgia) hear these cases, by the debtor's legal address; on our reading of Article 8, a Batumi developer goes to Kutaisi.
Any creditor may apply, so a buyer who has paid and not received the flat can file (Article 43). An individual pays 3% of the claim, at least GEL 500 and at most GEL 5,000, and 70% is refunded if the application is inadmissible (Article 118). Managers must file within 3 weeks of insolvency, and the law makes failure to do so a criminal matter (Article 16). Filing is a lawyer's decision: once a case opens, your own lawsuit stops too.
What stops on the day the case opens?
When the court opens a regime, a moratorium applies automatically (Article 55):
- Enforcement stops, and the bank may not take payment from its collateral except as the law allows.
- Lawsuits against the estate stop, except a dispute about separating a thing from the estate.
- Contract penalties stop accruing and being paid, so your delay penalty no longer grows.
- Pre-case obligations freeze. On our reading, the developer cannot simply sign your flat over outside the procedure.
Earlier attachments are lifted (Article 56), and deals made in breach of the moratorium are void (Article 58). Sign nothing with the developer's managers after the opening.
In what order are creditors paid?
In bankruptcy, each rank is paid in full before the next receives anything, and creditors within a rank share pro rata (Article 104).
| Rank | Who is paid |
|---|---|
| 1 | Costs of the bankruptcy, including the administrator's fee |
| 2 | Debts arising after the opening ruling, including new taxes |
| 3 | Employees: up to 3 months' wages and work-injury payments, at most GEL 1,000 each |
| 4 | Indirect taxes, such as VAT, for the last 3 years before the case |
| 5 | Unsecured claims, including older taxes and suppliers: a buyer with only a contract sits here |
| 6 | Interest, penalties and fines: on our reading, the buyer's contract penalty sits here |
| 7 | Claims subordinated by agreement, then partners' corporate claims |
The register of claims is kept in lari, so a dollar price is converted. If penalty and unaccrued interest together exceed 10% of the principal, the administrator cannot recognise them; a court claim is needed (Article 52).
Why is the bank paid before the buyers?
Secured creditors sit outside that table. Under Civil Code Article 150 the building is an essential component of the plot until units are registered separately, so a mortgage on the plot reaches the half-built block too, on our reading. In bankruptcy, the first-ranking mortgagee asks the administrator to sell its collateral; it is paid first, later mortgagees next, and only the surplus enters the estate (Article 105). In rehabilitation, the bank needs the court to release collateral not needed for rehabilitation, and a sale after release extinguishes rights registered after its mortgage (Article 87).
A building contractor may also demand a mortgage on the construction plot for its claims (Civil Code Article 635). Read every mortgage on the plot's extract; our guide to encumbrances shows how. Registered rights rank by the time of the application, so an earlier mortgage beats your later right.
Contract, preliminary registration or ownership: which buyer are you?
Ownership passes only when the transaction is registered in the buyer's name (Civil Code Article 183). Until then, a buyer who has paid holds a claim, not a flat.
| What you hold | Status | Main limit |
|---|---|---|
| Contract and receipts only | Unsecured creditor with a money claim | Paid after costs, employees, recent VAT and the bank |
| Contract plus preliminary registration | Not confirmed; at least the same money claim | May end when someone else's ownership is registered under the law |
| Unit registered in your name | Owner, not a creditor for that unit | An earlier mortgage on the building still ranks first |
Article 60 adds a route: property may be removed from the estate where both sides' obligations under a contract providing for its transfer are "substantially performed". The administrator decides. A buyer who has paid in full for an identified unit looks best placed, but whether this works for a flat not yet built or registered as a separate object is not confirmed; we found no court practice.
A preliminary registration (Public Registry Law Article 12) excludes other rights "on the basis of a transaction", such as a second sale. It ends when another person's ownership is registered in the manner set by law, which on our reading could include an auction buyer.
To be added by the team: the partner lawyer to confirm (1) whether Article 60(3) of Law No 7165 lets a fully paid off-plan buyer remove an unbuilt or unregistered unit from the estate, (2) whether a preliminary registration survives a mortgagee or insolvency sale, (3) whether a delivery claim is registered as a money claim in lari, and (4) our other readings of Articles 8 (Batumi), 55 (hand-over), 59 (permit), 65-66 (claw-back), 69 (plan sale) and 104 (penalty rank), and of Civil Code Article 150.
What happens to the plot and the half-built block?
The estate includes transferable licences and permits (Article 59), so on our reading the construction permit can pass with the project. A rehabilitation plan, due within 2 months of the opening and approved by creditors within 6 months (each extendable once), may sell the business or its assets as a whole (Article 69): on our reading, the legal route for handing the project to another company. Unsecured creditors vote by claim value, separately from secured ones, so many buyers together can carry that vote (Article 82).
In bankruptcy the administrator sells as a single complex or in parts (Article 101), publishing the method at least 10 days ahead; creditors have 7 days to propose a better one. Otherwise the National Bureau of Enforcement auctions the property from 75% of market value, then 50% (65% on request), then half the second price (Article 102). We found no rule obliging the purchaser to honour old buyers' contracts.
Which deadlines does a buyer have to meet?
The administrator sends each known creditor a notice of the amount the developer recognises. If the books under-record what you paid, act at once.
| Step | Deadline |
|---|---|
| Appeal against the opening ruling | 5 days from publication in the electronic system |
| Your view on insolvency and the regime | 15 days from publication on matsne.gov.ge |
| Claim differing from the amount recognised | 30 days from the administrator's notice |
| Claim if no notice came | 30 days from learning of the case, at most 1 year from the opening |
| Creditors' register drawn up | 60 days from admission |
| Challenge to the register in court | 10 days from its publication |
After these deadlines a claim cannot be filed or increased, and it is registered at most at the amount the developer recognised (Article 5). Posting in the electronic system counts as delivery, so the clock can start without a letter reaching you.
What happened to buyers when a big developer collapsed?
Center Point, one of Georgia's largest developers, collapsed in 2010. Civil.ge reported that it declared it could not finish its projects, leaving up to 30 unfinished, and that up to 6,200 customers said they had been cheated. Reports describe it as near or in bankruptcy, but we found no record of a formal insolvency case or of buyers being paid through one.
Help came by other routes. In a December 2012 statement, the company that took over management said it had restarted 23 buildings, asked families to pay about 20% extra, mostly for VAT on transferring the flats, and that a bank had taken land plots. Remaining sites passed years later to completing companies under Tbilisi City Hall deals that gave them extra building rights, and in July 2026 families at two former sites were still waiting. Our page on construction delays covers these cases. Rescue, when it came, was negotiated, and buyers often paid more. Fraud is separate: a 2026 conviction for taking money for a building never completed came from a criminal court.
How can you see whether a developer is in an insolvency case?
- matsne.gov.ge court acts. Every opening ruling is published here, with the court, case number, regime and administrator.
- ecourt.ge. Published rulings name it as the insolvency electronic system, where all rulings and the creditors' register appear. Filing there needs a Georgian personal number and a qualified e-signature, so a foreign buyer usually acts through a property lawyer.
- Registry of Debtors (National Bureau of Enforcement): a listing in the past 12 months is a legal presumption of insolvency. Its website did not respond on 3 November 2026.
Our matsne search of 3 November 2026, by the standard title of an opening ruling, found 44 rulings opening bankruptcy and 1 opening rehabilitation, dated 2021 to 2026. We could not identify a residential developer among the debtors, though the search may miss rulings. We found no developer insolvency case in Batumi; for the wider market, see Tbilisi apartment supply.
Your developer has failed: what to do, step by step
- Confirm the case. Find the ruling and check that the debtor is the company that signed your contract and owns the plot.
- Gather evidence: contract, annexes, every payment record and the plot's current extract.
- Within 15 days of publication, decide with a lawyer whether to tell the court your view on the regime.
- Within 30 days of the notice, submit your claim if the amount recognised is wrong; without a notice, within 30 days of learning of the case.
- Within 10 days of the register's publication, challenge it if your claim is missing or understated.
- If you own the unit or paid in full, apply to the administrator to separate it from the estate.
- Organise with other buyers under one lawyer: together you carry more votes.
- Watch the sale and talk early to any company bidding for the project.
- Report fraud to the police or prosecutor as well; a criminal case does not replace your claim.
A refund or flat received from the developer in the year before the case can, on our reading, be challenged as a preference; the period is 2 years for related persons (Articles 65 and 66).
What reduces your exposure before you pay?
Georgia has no statutory off-plan regime or required escrow, and a 2026 legal guide says title insurance "is not a developed product in Georgia". Protection comes from how you buy.
- The right company. The seller should own the plot and hold the permit; Center Point reportedly had more than 50 subsidiaries. See how to check a developer.
- Register what you can. A preliminary registration costs GEL 150 to GEL 350 by speed; later, ask for your unit to be registered in your name. The pre-sale entry shows when.
- The bank's consent. If the plot is mortgaged, get the bank's written consent to release your unit on payment; see the developer contract clauses.
- Pay by visible stages. Less money is at risk; see construction stages. Article 60 favours buyers who have paid substantially, so ask your lawyer to weigh both.
- Escrow only if release is tied to registration; released at signing, it protects nothing.
- Weigh the discount. In our view, an early price is partly payment for this risk; see pre-sale prices.
Bank financing is not buyer protection: it puts the bank ahead of you on the plot. To sell a contract while the project looks healthy, see resale.
Risks and exceptions
- A contract alone. Without a registered right you are one unsecured creditor among many.
- An earlier mortgage on the plot. The bank or contractor is paid first.
- A missed deadline. The claim cannot be raised afterwards.
- Side deals after the opening. They are void.
Frequently asked questions
Do off-plan buyers get priority in a developer's bankruptcy?
No. A buyer with only a contract is an unsecured creditor, paid after costs, new debts, employees, recent indirect taxes and the secured creditors.
Can I get my flat instead of money?
A registered owner can claim the unit out of the estate. A fully paid buyer may apply under Article 60, but whether this works for an unbuilt flat is not confirmed.
Does my preliminary registration protect me?
It blocks a second sale by contract, but not an earlier mortgage, and it may not survive an insolvency sale.
Can I file for the developer's insolvency myself?
Yes. An individual creditor pays 3% of the claim, between GEL 500 and GEL 5,000.
Will my delay penalty keep growing?
No. Penalties stop when the case opens, and if penalty and unaccrued interest together exceed 10% of the principal, a court claim is needed.
Filing claims from abroad? See our guide to a power of attorney.
Sources
- Law No 7165 on Rehabilitation and Collective Satisfaction of Creditors' Claims, consolidated text, Legislative Herald of Georgia, last amended 24 June 2026 (accessed 3 November 2026)
- Civil Code of Georgia, consolidated text, Legislative Herald of Georgia, 25 June 2026 (accessed 3 November 2026)
- Law on the Public Registry, consolidated text, Legislative Herald of Georgia, 6 April 2026 (accessed 3 November 2026)
- Ruling opening bankruptcy proceedings (example), Tbilisi City Court, 16 August 2022 (accessed 3 November 2026)
- Real Estate 2026: Georgia, Chambers and Partners, 7 May 2026 (accessed 3 November 2026)
- Charges Filed in Major Construction Firm's Alleged Swindle Case, Civil.ge, 12 July 2013 (accessed 3 November 2026)
- Dexus solved one third of Center Point group problem (company statement), FINCHANNEL, 17 December 2012 (accessed 3 November 2026)
- What scheme did the City Hall offer to complete Center Point's unfinished facilities, BM.ge, 16 September 2021 (accessed 3 November 2026)
- Marijani Street construction company fined after slope collapse, Georgia Today, 8 July 2026 (accessed 3 November 2026)
Change log
- - Explainer published from the current text of Law No 7165, the Civil Code and the Public Registry Law, published court rulings and reports on past failures; legal points under review by the partner lawyer.