The decision came unexpectedly: shortly after the Judge ruled in favour our client, a British citizen, SGR (Sociedad de Garantia Reciproca), defendants, filed a motion to appeal hoping to get the decision reversed and requested that enforcement of the ruling was stayed pending the Appeal Court decision, not before lodging the amount of the deposit with the Courts’ bank. 

But the Judge of the Court of First Instance either did not get the petition of stay on time or simply ignored it and, unexpectedly, handed over the payment order written out to BBVA bank to us so that we could collect the payment. Because under Spanish law, you are able to enforce execution of a ruling without having to wait for the appeal decision, nor provide a security in case the decision was reversed, and in this case the defendants SGR argued that if our client received the funds and took them to the United Kingdom, in the event of she losing the case on appeal, it would be difficult or impossible to get the payment back.

The case continues…

antonio Litigation

Sur newspaper publishes today that Aifos´ CEO, alongside his wife, are being accused of missapropriation of approximately €72,571 of a client of theirs that paid a deposit on account of a property that was never built. The indictement and further accusation is the result of two premises:

1. Having taken a deposit upfront without providing a bank guarantee to ensure repayment and
2. Not using the deposit towards expenses arising directly from the proposed construction.

Many developers these are still believing that taking hundreds of thousands of deposits from punters, not guaranteeing them and using them to pay salaries, marketing, dividends (yes, even if no property has been delivered!) is something that, quite simply, is acceptable from a legal point of view.

Contrary to other businesses, property developers cannot incorporate downpayments received into their company normal business account and use for purposes different from the construction of the property, as such purpose would be deemed as unathorised, unless a bank guarantee is provided.

And as such, property buyers on off-plan property may not be deemed as regular creditors, but protected parties that pay deposits to a professional developer who assumes a fiduciary duty.

antonio Litigation aifos, Benalmadena, missapropriation, property, Spain

It’s not as if Peinsa 97 S.L. has much to oppose in this case, but it was not a lay down as we thought because, although the developer accepted liability on the refund of the principal, they opposed the interest count, invoking some minority case law that states, prima facie, that these are to be calculated from the date the claimant effectively sent notice of legal action, and not some years back when the monies were given to them.

It seems the case when we litigate in Murcia that judges have an inclination to favour property developers, perhaps due to the region being governed by the conservative party PP (Partido Popular) but who knows, it may be speculating a bit too much or entering straight into the terrain of conspiranoia, which so many people like.

The developer for Residencial Calas del Pinar in Cuevas de Almanzora was, luckily for them, not given the costs due to them accepting guilt on the principal so our client will have to bear these. Alas, if they pay back quick I’m sure the pain will be mitigated almost in its entirety. If not, an execution case will be then filed where there will be no running away from costs, not this time.

antonio Litigation Cuevas Almanzora, litigation, Piensa 97 S.L., Residencial Calas del Pinar, Spain

Manilva Costa S.A. (MC) has seen it’s appeal rejected by the Malaga Appeal Court on similar grounds to those of the Court of First Instance. The ruling judges maintaned the following:

1. That Ocean View Properties’  (OVP) presence was not required as a defendant, since they were acting agents for MC and therefore, their intervention in the judicial action was irrelevant for which the exception of “joint defendant litigation” was dismissed.
2. That the fact these contracts were not signed by MC was equally irrelevant, particularly where they had ratified them, as was proven it Court. It then goes on to insist that any discrepancies between OVP and MC in respect of the contracts were unopposable to the claimant by virtue of it being a relationship alien to him.

The biggest mistake MC made, according to the appeal judges, was to have summoned the buyers by using a registered letter with ackowlegdement of content (“burofax”), starting off with a “Dear Buyer…”, as quotes the ruling. 

And now, the big question any succesful claimant has in mind: where do we go from here? That is an interesting one considering that MC has most, if not all, properties mortgaged and little equity can be found in them. Its now time to turn to private investigators…

antonio Litigation court ruling, judicial, malaga provincial audience, manilva costa, ocean view properties

We took some chances and it worked out. A claim filed against the guarantor of the Herrada del Tollo S.L., developer for Santa Ana del Monte (and who we jumped over since they’d filed for voluntary insolvency), has been resolved favourable for the claimant. From a procedural point of view, it is an interesting case for it was not heard given that, legally speaking, the issues at stake were purely juridical and therefore, no evidence was to be proposed for admittance. In other words, there was no evidence of probative value in dispute and consequently, the pre-trial was enough to fix the object of the case and conclude that there was no possible settlement.

admin Litigation Herrada del Tollo S.L, Santa Ana del Monte, spanish bank guarantees

I would say so if we take a look at how they have indemnified their clients for not building Lar Sol Estepona. Not only have their insurers repaid 100% of their deposits plus interest, but now an out of court settlement has been reached with Grupo Lar so that a group of investors that never got their homes also get, additionally, compensation valued at almost 50% of the original deposit they paid.

Admittedly, this penalty clause was not imposed by us back in 2005-6, when exchange of contracts took place, but was offered by Grupo Lar to prove their commitment to the project and boost their sales.

This is probably the best outcome any investor could have had as not only was the deposit returned, with interest, but also an additional payment received at a time where the exchange rate will allow them to buy 20% more sterling than they had to disburse to buy the Euros and…, they did not have to complete on a property that would have been worth, in the best of cases, 30% less.

antonio Litigation Estepona, Grupo Lar, Larsol, out of court settlement

El Mundo reports today on the case of a hundred or so purchasers from Northern Ireland who between them paid 6 million € in deposits in the years 2005 and 2006 for 350 apartments in the Estepona Beach and Country Club, via the British real estate company, Ocean View Properties.

The newspaper brought some 70 families of those affected to a meeting in Belfast where the Marbella lawyer, Antonio Flores, from the company lawbird.com explained that the urbanisation was promoted by the Spanish company Sun Golf Desarrollos Inmobiliarios S.L.

The lawyer explained that there was a ‘commercialisation agreement’ between Sun Golf and Ocean View, under which the latter was to pay commissions to the former for the collection of deposits. Ocean View also found lawyers in both Spain and the U.K. to represent them and recommend the promotion.

Lawbird now has the idea of starting legal action in the Estepona courts, although they have not ruled out starting proceedings in the National Court because the single administrator of Sun Golf, Ricardo Miranda Miret, has his headquarters in Madrid, and the Ocean View representatives are based in Britain.

Similar frauds to the Estepona development are alleged to have been carried out in Morocco and the Dominican Republic.

The Northern Ireland victims have called for a meeting with the N.I Prime Minister, Peter Robinson, over the matter, and have also lamented the lack of coverage of the case in the Ulster media.

El Mundo prints statements from many of those defrauded, who say they were told the LTA British Tennis Federation were to invest, and that they were told that Disney World was going to Estepona.

Original Story: José Carlos Villanueva | El Mundo - Un centenar de familias irlandesas, víctima de una estafa inmobiliaria en Estepona

English Translation Courtesy of Typically Spanish.

Links to News Articles

• 13-12-2010 – El Mundo Printed Edition - Cien familias irlandesas denuncian una estafa inmobiliaria en Estepona (1-2) (PDF)
• 13-12-2010 – El Mundo Printed Edition - Cien familias irlandesas denuncian una estafa inmobiliaria en Estepona (2-2) (PDF)
• 13-12-2010 – elmundo.es - Un centenar de familias irlandesas, víctima de una estafa inmobiliaria en Estepona
• 13-12-2010 – typycallyspanish.com - El Mundo newspaper highlights case of 100 Northern Ireland victims in Costa del Sol real estate fraud
• 13-12-2010 – The Telegraph – Britons lose millions on the Costa homes that never existed
• 13-12-2010 – El Ideal de Granada - Familias denuncian una estafa en promoción de 350 viviendas en Estepona
• 13-12-2010 – finanzas.com - Familias denuncian una estafa en promoción de 350 viviendas en Estepona

Television

Canal Sur Noticias 13-12-2010

admin Litigation

Again, it is not one of the those spectacular cases that has been fought hard, but one where the Judge has upheld consistent Spanish Supreme Court jurisprudence in respect of delays in delivering property.

The Judge quotes case law that reminds that in the rescission of a contract, a default of an obligation incumbent on each one of the parties has to be serious, and it´s interpretation is a matter of fact.

According to the quoted ruling, the default needs to be of such importance in the economy of the contract that justifies the resolution in the common intention of the parties, not being enough a mere partial default of obligations, or one where such obligations are accessory or complementary to the main ones. It also then talks about the frustration of the legitimate expectations and aspirations of the party that applies for contractual resolution.

In connection to this, the Judge considers that delivery of the property is the main obligation of the developer, and that the license of occupancy is an essential element of the contract for it is not real estate what the developer is selling but a dwelling, a parking space and a storage room, where every day life is to be conducted. The lack of the license of occupancy is critical, and not because one cannot survive without it, but because it impedes the buyer from enjoying the services that society deems as necessary to be able to live with dignity, inasmuch as the lack of the license compromises water, electricity and similar services and supplies.

The Judge finally chooses not to delve into the reasons for the delay in granting the license of occupancy as, in spite of being outside the control of the developer, it is a predictable situation considering how Town Halls operate. He concludes by ruling out application of article 1105 of the Civil (Force Majeure/Acts of God).

As usual, a copy of the Court ruling is available upon request.

antonio Litigation, Uncategorized Cajasol, Contractual rescission, license of occupancy, Prienesur, resolution, Spanish Supreme Court

It may not be worth mentioning, given it was a bit of a no-brainer, but Larsol’s obstinacy in challenging the validity of a penalty clause has merited an otherwise underserved publication.

The particular clause was a classic client-pitching enticement to lure fresh money into their accounts. It stipulated, on the Larsol-Estepona contracts, that if the development was not built, a 50% penalty refund (calculated on the deposit paid) was inmediately available to clients.

Larsol fought back stating that the works had not been completed due to delays attributable to ”third parties”, even if these were not identified nor proof put forward to substantiate the claim. 

The judge stipulated that the clause was fully valid insofar as the works had not been finished on time, irrespective of whether those third parties were at fault.

Zurich had already repaid the capital previously, via enforcement of the developer’s insurance policies, and this was further used as proof of Larsol’s contractual default.

antonio Litigation Developer Contracts, Larsol, Penalty Clause, Zurich España

Lawbird has won a court ruling against the developer Nadalsol, currently under voluntary insolvency administration, and Zurich España S.L.

This is a very interesting ruling, because the Granada Judge, so as to reach his conclusions and findings, resorts to “fresh” case law being written up in the midst of the economic crisis by mercantile courts dealing with insolvency cases, and therefore has that extra little bit of interest for our readers:

1. The Judge starts criticizing the developer for bringing as a witness a son and nephew of the 2 shareholders of the defendant company, thereby with a “forecast of logical bias”. He also criticizes the fact that the owner of the report drawn up to prove force majeure is not called to give witness statement, particularly when he is not related to the owners (this is what I call a bad start!).
2. Recorded the above, the Judge cites the developer Nadalsol quoting article 62.3 of the Insolvency Act whereby “even if the Judge finds that there are sufficient grounds for cancellation of contracts he may uphold the validity of these based on the interest of the Insolvency administration”. Here the judge says that yes, this may well be the case, but adds that “it is paradoxical that if the interest of the insolvency administrators is primarily to protect the creditors, such protection should not come at the cost and expense of other creditors, which are the purchasers of properties”. In this respect the Judge invokes established mercantile case law that concurs in one opinion: “such prerogative to uphold the validity and enforceability of contracts should be referred to suppliers’ contracts and generally all of those that are related to the phases of production, processing and formation, of the goods or services object of the commercial activity, and NOT real estate private purchase contracts.”
3. The Judge also establishes a distinction between suppliers and property buyers and states that a supplier who has not been paid cannot be compared with property purchasers who have not received the promised property within 3 years from buying, and therefore the legal treatment should be clearly distinct. In any event, he warns that in the interest of equity a rationalized use of discretion should be made, on a case by case basis.
4. Going to the delay, the Judge establishes that a 3 years delay is so long that, and read this well, “there is not one tribunal that would understand that such delay would not generate a right to cancel, for the contrary would equate to prostituting the principles of equity and proportionality of obligations” (could he have come up with a more graphic word?!).
5. The developer argues that having had to change building contractors, a delay was expected and the Judge argues back, not without sarcasm: do you really need 3 years to swap contractors? Adopting a more serious tone, the Judge cites well established case law pointing to the inexistence of force majeure when the developer becomes insolvent, has disagreements with the contractor, suffers administrative expropriation, etc. “Force Majeure refers exclusively to events, certainly extraordinary and uncertain and detached from the will, prevision or forecast of the parties, a force superior to all control and prediction and that necessarily excludes guilt on any of the parties.”
6. Finally, the Judge opposes the contention thrown by Zurich España S.L. that since the buyers had extended the validity of the insurance policies written out by the defendant’s insurance company till 2010, then that date would have to be upheld as a newly agreed completion date. Although the judges mistakes here the facts, as he does not realize that the buyers did indeed sign this document of extension of policy, he concludes by saying that this option never implied a will to extend the validity of the delivery date on the contract, but only the validity of the policy, as the mere filing of the claim pointed to exactly the opposite.

As usual, a copy of the Court ruling is available upon request.

admin Litigation Force Majeure, Nadalsol, Zurich España