ᐅ Setting up a blocked account – which bank should I choose?

Good evening Tox,

toxicmolotow schrieb:

For almost 10 years, this topic has no longer been part of the training for bank clerks or further qualifications. So I dare to predict: eventually, it will disappear entirely.

Maybe it will be called something different then. I don’t believe it will completely disappear as long as there is a 5% retention for security and surety bonds are not an option due to cost.

toxicmolotow schrieb:

Then who is the account holder? Who is the beneficial owner, and who can access the available funds under which conditions? And how is the freeze contractually agreed upon?

The account holder is the builder; I haven’t asked beyond that. If the original poster requests further information from Ing-Diba, she can post the results here.

Regards, Bauexperte

I’m looking at this purely from a logical perspective and setting the name aside. You can call it whatever you want... The account holder is the client, so the client has control over the account as long as no other rights apply, such as an assignment or pledge.

Contract basis... no idea. I’ve also asked because I’m genuinely interested, since a look at the terms and conditions of Ing-Diba reveals:
"Claims of the account holder(s) from the current account contract cannot be assigned or pledged to third parties."

I will report back because I’m really curious about how this is legally structured.

But aside from that... what advantage does this account offer the contractor? They will get the money in 5 years, whether or not this blocked account is involved. Only the contractor is restricted and limited in accessing the funds for up to 5 years. I don’t quite see the point yet.

If the contractor wants the money now, in my view there is only one option: a guarantee from a bank or insurance company.

A simple "sub-account" is no more or less than a second checking account, savings account, or money market account. Whether it’s called a sub-account or has a different account number... where exactly is the restriction? I’ll report back.

Hello Tox,

toxicmolotow schrieb:

I will report back because I’m really interested in how this is handled legally.

Good idea!

toxicmolotow schrieb:

But aside from that… what advantage does this account offer the tradesperson? They get the money in 5 years anyway, whether or not this blocked account exists. Only the contractor is restricted and hindered in accessing the funds for up to 5 years after deposit. I don’t quite see the point yet.

For the tradesperson, having the money tied up in an account blocked from their access always means a cash flow gap. On the other hand, in contracts with open trade packages, there is hardly any other way to handle it if the tradesperson does not want to bear additional guarantee costs, and the client refuses to accept an insurance bond. It’s a catch-22 when the client and contractor can’t agree on how to secure retention funds.

toxicmolotow schrieb:

If the tradesperson wants the money now, in my view there is only one option: a bank or insurance guarantee.

Agreed. But in terms of insurance bonds, very few clients actually agree to use them.

Regards, Bauexperte

A brief update from me: Ing-Diba replied on the same day, stating that a blocked account is no longer offered. My main bank called back the next day and recommended a savings account along with a written agreement ("commitment") with the contractor, stating that the money will be deposited into this account and paid out to them after a specified deadline. The contractor has no other option but to accept this arrangement. I will not pay the money to them without any security for myself. The contractor is probably still entitled to the interest earned (given the current interest rates and inflation, this is a loss-making deal, but that is their decision). The only potential issue could arise if the contractor goes bankrupt and the insolvency administrator claims the money without accounting for the market interest rate. However, I can live with that, as the amount is not very high.

@toxicmolotow My bank also confirmed that blocked accounts have not been offered for years because they are hardly profitable. The only account they offer is a rental deposit blocked account, but that is exclusively for rental deposits—no exceptions.

Same experience for me with Ing-Diba, no blocked account possible. I also don’t see this much in practice anymore.

The only mention is of a "sub-account," but that is basically just a savings account, a money market account, or something similar. No access rights for the contractor. So it’s nothing more than a way for the employer to set aside their money.

Do you know, @Bauexperte, how much such an insurance guarantee costs a tradesperson? In my opinion, the difference to a bank guarantee can’t be that big anymore.

Hello Tox,

toxicmolotow schrieb:

Do you know, @Bauexperte, how much such a surety bond typically costs a tradesman? In my opinion, the difference to a bank guarantee can’t be that big anymore.

It’s not a huge amount; for a coverage of 2,500 euros (about €300.00) the insurance premium for a surety bond is roughly that.

Surety bonds are not uncommon, but they can have significant consequences, especially for small and medium-sized companies, as they can substantially affect financial structure. For example, if the surety bond amount used is partially or fully included in the company’s credit exposure (depending on the institution), this can significantly impact the required company and project financing—liquidity shortages are a frequent result. I therefore understand the contractor’s refusal.

Regards, Bauexperte