After a project is successfully closed, disbursement to the borrower can take place. Before that happens, however, a number of steps need to be completed. Once all preconditions are met, the funds are only paid out from the trust account by the notary. This article explains these steps and preconditions.
At Crowdrealestate, all funds between investors and borrowers flow through an independent third-party account managed by the notary. A third-party account is a bank account for funds accruing to third parties. It is always a blocked bank account held with a neutral and financially reliable third party.
1. Establishing the security
First of all, a notarial deed establishes the mortgage right on the relevant registered property. This is the most important security right you can obtain as an investor. Depending on the country where the project is located, this is done via a notary in the Netherlands, Germany or Belgium. In addition to the mortgage right on the property, additional collateral is regularly provided. The most common is a pledge of rent payments.
The content of the collateral documents is carefully checked in advance and, if necessary, revised in consultation with the notary.
2. Completion of the file
Together with the authenticated security documents, an overview with the amounts to be paid out and the beneficiaries is delivered to Crowdrealestate's permanent notary. This is an itemised representation of the spending purpose as included in the Special Loan Terms. In addition, there may be a bill of settlement showing the purchase or refinancing. A bill of settlement is drawn up by the notary and lists the amounts to be paid in connection with the purchase or sale or refinancing of a project.
All documents are checked (again) for accuracy and completeness, as well as the project's deposit. The disbursement is then made to the borrower or directly to another beneficiary of the project, such as the seller.
3. Release of construction deposit
If the funds are (partly) used to meet the costs of construction, conversion, restoration and/or renovation works, they are held in the trust account as a construction deposit. The borrower will also owe the fixed interest for the project on this amount. The funds can be disbursed all at once or in phases. The funds will remain on this deposit and will be released only after the invoices are submitted and correspond to the planned work and the budget for the work.