Off-plan buyers ask two different questions and usually think they are asking one. The first is: what can I do if the milestones slip? That question has good answers, and they sit in the contract and the Law on Obligations. The second is: what happens to my money if the developer fails altogether? That question has precise answers too — they sit in the Bankruptcy Law (Zakon o stečaju, Official Gazette of Montenegro 1/2011, with amendments through 1/2022) — and most buyers have never been shown them, because the answers are sobering and nobody selling a unit has an incentive to walk you through creditor ranking.
This page does both, in that order, because the second analysis is what makes the precautions in our off-plan instalments and escrow guide stop sounding like paranoia and start sounding like arithmetic.
While the developer is solvent: the remedies are real
Montenegrin contract law gives a buyer facing slipped milestones a structured exit, and it is worth knowing how structured it is.
If completion by a fixed date is an essential term of the contract, Article 120 of the Law on Obligations dissolves the contract by operation of law when the date passes unperformed — the buyer can keep it alive only by promptly notifying the developer that they still require performance. Where time is not of the essence, Article 121 requires the buyer who wants out to give the developer an appropriate additional period (naknadni rok); if that period expires empty, the consequences are the same as if time had been essential. Article 122 drops even that requirement where the developer's own conduct makes clear it will not perform. Two boundaries frame the right: termination must be communicated without delay (Article 125), and it is not available for non-performance of an insignificant part of the obligation (Article 126).
For instalment-based construction contracts, Article 124 is the provision written for the facts: where obligations fall due successively and one is not performed, the buyer may terminate as to all future obligations if it is evident they will not be performed either — and even as to obligations already performed, where those have no value without the rest. The developer can hold the contract together only by giving adequate security.
The consequences of termination are where the law is quietly generous. Under Article 127, both sides are released and what was given must be returned — and the party returning money owes statutory default interest from the day it received the payment, not from the day of termination. Combine that with Article 284 (default interest at the statutorily set rate, owed on any late monetary obligation) and Article 285 (owed regardless of whether you prove damage, with a top-up where actual loss is higher), and a buyer who advanced €150,000 two years ago is not just claiming €150,000. Claims of this kind sit within the general ten-year limitation period of Article 380, unless a specific shorter period applies — late, but not forgiving of indefinite delay.
So far, so reassuring. Every one of those rights has the same silent precondition: a counterparty that can pay. Now remove it.
The re-ranking: what stečaj does to those rights
The opening of bankruptcy replaces your bilateral relationship with the developer with a collective procedure, and your carefully drafted rights are re-sorted into a small number of statutory boxes. Three deadlines and definitions decide almost everything.
You must file, fast. The decision opening the proceedings contains a call to creditors to file secured and unsecured claims within 30 days of publication of the notice (Article 72). Late filing is possible only until the start of the examination hearing, and only if you prove justified reasons you could not foresee or remove; after that, filings are rejected as untimely (Article 112). Foreign buyers — who often learn of a Montenegrin insolvency weeks after the local market does — lose claims not on the law but on the calendar.
The estate is sorted into four positions, and the labels are everything.
| Your position | What the law calls it | What you actually get |
|---|---|---|
| You were registered as owner of the unit before the opening | Izlučni povjerilac — separation creditor (Article 52) | The unit is not part of the estate at all; you take it out of the proceedings |
| A bank holds a mortgage over the land and building | Razlučni povjerilac — secured creditor (Article 53) | Paid from the sale of the very asset it financed, ahead of the estate; only any shortfall joins the unsecured queue |
| You paid instalments under a contract, annotated or not, but were never registered as owner | Stečajni povjerilac, third payment class (Article 55) | A money claim in the residual class, paid — if at all — after the classes above it and pro rata with every other unsecured creditor |
| Your money sits in a notarial or escrow deposit pending conditions that now cannot be met | Not part of the developer's estate | Returned under the deposit terms; the insolvency never captures it |
Article 55, as amended in 2022, puts employees' basic wage claims and workplace-injury claims in the first class and pension and disability contributions in the second. Everything else — including every off-plan buyer's restitution claim — is the third class. The construction bank, meanwhile, is not in any class: as a secured creditor it is satisfied from the sale of the mortgaged land and building itself, which is to say from the asset your instalments helped build.
"The contract says I get my money back" is not a rank. Your unperformed purchase contract is, in bankruptcy terms, a mutually onerous contract, and Article 96 hands the choice about it to the administrator: perform it, or refuse it. You can force the question — the administrator must answer within 15 days of your written invitation — but you cannot force the answer. If performance is refused, your claim for what you paid is exactly what the table says it is: an unsecured, third-class money claim. The refund clause you negotiated so carefully determines the size of that claim, not its position.
What the annotation actually buys you
Buyers are often told that annotating the contract in the cadastre "secures" their purchase, and the word does more work in the sales conversation than it does in the statute.
An annotation protects the acquisition: it makes your position visible and opposable, so the property cannot be quietly sold or encumbered past you while your right is on the register — the sheet-by-sheet mechanics are in our note on reading the list nepokretnosti. What an annotation is not, and never becomes, is a pledge. Article 53 defines the secured creditor by a založno pravo or registered right of satisfaction — a security interest over the asset. A buyer whose contract is annotated but who holds no mortgage has opposability, not collateral. If the administrator refuses the contract, the annotation does not lift the refund claim out of the third class.
That distinction — opposability of the acquisition versus security for the money — is the single most misunderstood point in Montenegrin off-plan buying, and it is the entire difference between the second and third rows of the table above.
What genuinely improves your position — and what is theatre
Working backwards from the ranking, the measures that actually move you between rows are few and specific.
Money that never enters the developer's estate cannot rank in it. Staged payments through a notarial deposit or a true escrow, released against verifiable milestones, mean that on failure the undisbursed balance comes back under the deposit terms instead of joining the queue. This is the fourth row of the table, and it is the strongest position a pre-completion buyer can occupy.
A claim against someone other than the developer survives the developer. A bank guarantee securing repayment of advances converts your exposure from "unsecured creditor of a failed company" to "creditor of a solvent bank". Its cost is real; so is what it buys.
A registered security interest changes your class. A mortgage in the buyer's favour securing repayment of advances — rare, resisted, but lawful — is what actually makes you a razlučni creditor. If a developer will not discuss it, that fact is itself information.
Registration, as early as the structure allows. Ownership registered before the opening is the first row: the unit is separated from the estate, not distributed within it.
Against that list, the theatre identifies itself. Contractual refund promises, however emphatic, rank third. Penalty clauses rank third. A "guarantee" issued by the developer's own group ranks third, twice over. A reservation paid against a privately signed document may not even produce an enforceable contract, let alone a rank — the form problem we set out in the escrow analysis. None of these is worthless; all of them are unsecured.
A last practical point: if the developer is distressed but proceedings have not opened, timing matters in the other direction too. A termination properly effected under Articles 120 to 127 while the company still pays its debts is worth incomparably more than the same right exercised into a queue — and where recovery needs enforcement or crosses borders, the toolkit is the one described in our note on debt recovery and arbitration in Montenegro.
None of this is a reason not to buy off-plan in Montenegro. It is a reason to decide, before the first instalment, which row of that table you are in — because that decision is only available before the first instalment.
Send us the draft contract and the payment schedule before you sign or transfer anything. We will tell you plainly which row you would currently occupy, what it would take to move you up, and — if a developer is already failing — run the deadlines and the filing. That work sits with our enforcement and insolvency practice, and where the loss has already crystallised, with our compensation claims practice.
