Interesting Ruling Against an Aifos Buyer

November 12th, 2010

aifos-sell-before-completionThe 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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