To our former clients it has come as a bit of a surprise that the Courts in Cordoba have all, invariably, ruled against them: the reason for their surprise? That they were told they had a strong case by a Fuengirola-based lawyer.

The developer for Altos de Alcaucin had finalized the construction on time and seemingly in accordance to the plans given to the buyers, and was hoping they would make arrangements to complete. Buyers on the contraty wanted to pull out as their hearts were no longer in this part of Spain. They sought legal advice from us and we said there was no case to be had. They then went to a see a lawyer that had the opposite opinion…

The contract in question stipulated that that in the event of the buyers failing to pay any of the instalments, as agreed to in the contract, they developer would be entitled to rescind the contract and return 80% of the sums received up to date, keeping 20% in concept of penalty. When our clients, due to the adverse economic climate, chose to invoke this stipulation to pull out, notwithstanding the developer’s complete fullfilment of their obligations, we advised that it was not in the essence or nature of such convention the right to pull out in case of convenience, but rather the developer’s prerrogative to do so, should he chose to.

Unfortunately for our clients they were herded away by the very unnatural legal thesis that this was a Get Out Clause and could enforce it. Far from it, 2 different Courts held that:

• That the prerrogative to rescind the contract is only available to whoever meets their contractual obligations, and not to who defaults and invokes its own default.
• That the penalty clause is a legal tool that serves one of two purposes: to coerce the party to the contract to fullfil the obligation he has entered into and to fix, in advance, the sum of damages caused by reason of default. According to the Court, the bursting housing bubble has prevented that such clause is used for one of the above two purposes and paved the way for it to be used incorrectly and unfairly: as a get out clause for buyers for whom the purchase is no longer a profitable venture.
• That, having the Courts the right to modify the penalty clause by either reducing (when excessive) or increasing it (when notably small compared to the default in question), in the light of the circumstances, it is clear that the 20% penalty clause is clearly insufficient to cover the losses incurred by the buyer when defaulting, as it does not cover the real estate commission paid to the intermediary, bank interest and the loss of value sustained by the property (the Judge puts it at 15%, according to the Ministry of Housing).

Luckily for them the developer counter-sued to retain the full deposit, and not to force the buyers to fullfil the contract. Unluckily, there are costs incurred in that the developer could chase them for.

antonio Uncategorized

The Court of First Instance had resolved, when presented with a request for contractual resolution and refund of deposit, that although a delay was visible it was not essential and therefore, granting contractual cancellation was too harsh a measure. This Judge also found reasonable justification of a delay that a strike took place in December 2005 and January 2006 although only newspaper articles were submitted to back this up.

Furthermore, this judge had deemed that when the claim was filed the delay was of only a few months even though 8 months later, during the course of the trial, it was proved again by our lawyer of choice Mr. De las Heras that the works still remained many months away from completion (in fact, still today it has not been concluded).

The Appeal Court, as usual more sensibly, departed considerably from this understandingand applied a different legal criteria based on the following points.

1. That it was clear that the developer Brisamar Cuatro S.L. had defaulted subtantially given that, when the trial took place, build works not only had not been finalized but the delay was then already running into the 24 month period.
2. That the developer, although submitted journalistic evidence of a strike, had not proved that this incidence resulted in any delays. Furthermore, even if this delay was accepted as valid, it would have had little impact on a 24 month default in delivery of the unit.
3. That in consideration to the above, the Appeal Court finds that the developer hasplain and simply defaulted on the essential obligation, that being delivering a unit

Cajamar, who had resisted paying on the basis that an individual bank guarantee policy was not issued, even if everyone else had it, refused to cover the loss. On a meeting with the branch manager some time ago, I was advised that the policy was actually in safe deposit, somewhere in his office, but that he had no instructions of giving it to the buyers or paying up the loss.

Evidently, such a silly argument carries little weight and therefore Cajamar is now poised to pay up over €100,000, particularly where the Court has now found that their client was in default.

From a legal stand point the ruling has little juridical interest although it does expose the uncertainty any litigant will find himself in when faced with one Judge that sees black where another one (supposedly more experienced) feels it is actually white…!

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The title is certainly misleading, as it gives the impression that Aifos has won a case (a very rare scenario indeed); the reality is that a client of ours sued an Aifos buyer from whom he had bought, prior to completion, via transfer of rights and obligations of a private purchase contract, for refund of the deposit.

The defendants, being the assignors of the private purchase contract rights and obligations, claimed that the fact that the contract had not been fulfilled by the developer, by signing title deeds at a Notary Public office, was not attributable to them and certainly not a reason to cancel the contract. According to the defendants, the inexistence of a license of occupancy, certificate of finalization of works, water and electricity contracts, lack of completion of works and lack of bank guarantees are not obligations incumbent on the assignors of the private contract rights.

In reaching a decision, the Judge considered that the above was not a valid argument to dismiss the case, and ruled that:

1. A private arrangement between a assignor and a assignee of an off-plan property contract can only be fulfilled inasmuch as the developer complies with the obligations pertaining to him, namely finalize the construction in a timely manner and according to the legal and contractual specifications. In other words, the validity of a private agreement on an prior contract depends fully on the validity of the latter.
2. The contract specifically stated that, in order for a private sale of rights to be fully valid, the full price would have to be paid. This meant, in essence, that for the assignor of the rights to have released him from further obligations, the property should have been finished.
3. In spite that such private sale of rights was not given a time to be consummated, by reference to the main private purchase contract, it was stipulated that 20 months from the license of works was a reasonable timetable to expect delivery of the property. This is justified by reference to applicable legislation that prohibits open-ended delivery times as it would leave performance of the contract in the hand of one of the parties.
4. Finally, the defendants argue that the funds they received were paid to Aifos, without proving this point.

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

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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

Lawbird have won a first ruling against developer Aifos on the 22nd December 2008 acting on behalf a British client.

The client had purchased an off plan property from developer Aifos through real estate agency Ocean View Properties (OVP), which are now in receivership, at development Calahonda Hills, Mijas, Málaga. The developer had breached the Private Purchase Contract because of late delivery in handing over the property.

The court has sentenced Aifos to refund our client in full her deposit amounting to 60,697€, plus the legal interests accrued.

admin Uncategorized aifos, calahonda hills, ocean view properties

A first ruling against developer Grupo Mirador on the 17th January 2008 has been won by Lawbird acting on behalf a British client.

The client had put a deposit for an off plan property from developer Grupo Mirador through real estate agency Palmera Properties, at development Mirador Linked Villas, Antequera, Málaga. The developer had breached the Private Purchase Contract because they had swapped unilaterally, without giving prior notice to the purchaser, the dwelling that was being sold to him.

The court has sentenced Grupo Mirador to refund our client in full his deposit amounting to 15,985.87€, plus the legal interests accrued.

admin Uncategorized grupo mirador, mirador linked villas, palmera properties