The Federal Court of Justice (BGH) has delivered a landmark ruling on February 27, 2026, regarding the duties of a Homeowners Association (HOA) in the case of an unfinished new construction ("stuck construction") due to the developer's insolvency.
The Case Facts
In a newly constructed residential complex, the developer filed for insolvency during the interior fitting. Several condominiums were incomplete inside at that time (missing non-load-bearing walls, radiator connections, screed). The common property (facade, stairwell) was also incomplete. The affected buyers demanded that the HOA coordinate the work and finance it from common funds, arguing that proper management would otherwise be impossible. The other owners refused to pay for work on the individual property of third parties.
The BGH Decision
The BGH ruled in favor of the affected buyers. The judges determined that in the event of a developer's bankruptcy, an HOA is obliged to complete not only the common property but also **essential elements of the individual property** (such as heating pipes, load-bearing and non-load-bearing partition walls), provided this is absolutely necessary to make the building habitable at all and to guarantee proper management of the property as a whole.
"If a construction project is stuck, the proper management of the HOA may command the duty to complete parts of the individual property if otherwise the usability of the entire building or the common property is endangered." — Federal Court of Justice, February 2026
Significance for Condominium Owners (HOAs)
This ruling has significant financial and organizational consequences for homeowners associations in developer bankruptcies:
- Collective Organization: The HOA must coordinate the completion as an association. Individual owners cannot do this on their own for unfinished work on common property.
- Funding Obligation: The costs of completion must initially be funded via special assessments or the community's maintenance reserve, even if the work affects the interior of individual apartments.
- Recourse Claims: The HOA can try to assert the costs as damages in the developer's insolvency proceedings – in practice, however, the insolvency estate is usually negligible.
Practical Tip from ImmoLevia
As a specialized HOA management company, we recommend that associations affected by a developer's insolvency immediately call an extraordinary owners' meeting. A construction status report must be commissioned, warranty claims secured, and a detailed financing and completion plan passed. We are happy to support you with our structural engineering expertise.
Note on source: This article is based on the case law of the Federal Court of Justice (BGH), in particular the ruling of February 27, 2026 (Ref. V ZR 219/24), regarding the completion obligations of a homeowners association in the event of developer bankruptcy. The content was carefully analyzed by the ImmoLevia editorial team, independently formulated, and prepared in a practical way for our readers.