Author Archives: antonio

August 8th, 2011

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…

July 19th, 2011

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.

May 25th, 2011

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.

May 4th, 2011

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…

March 17th, 2011

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…!

December 18th, 2010

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.

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.

October 8th, 2010

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.

September 5th, 2010

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.

March 19th, 2010

If you are interested in pursuing a legal claim against Calidona, at their development Corvera Golf and Country Club, for contractual rescission and refund of deposit paid, plus interest and legal fees you can submit the following form. The purpose of this is to know how many buyers in this development would consider joining our Group Claim against Calidona in the understanding that it does not commit them to take up services should they eventually retain a different firm or decide to not act (note that buyers in Phase IV are not included here as legal grounds to litigate are different from the rest of phases and therefore form part of a separate claim ).

Contact Details:

Information on the case is being added to the Corvera Case Home Page.

Thank you

Antonio Flores