Category Archives: Litigation

May 5th, 2012

The ruling seemed a logical consequence of a blatant contractual default.

Hercesa Inmobiliaria S.A. has lost a case brought against clients of this firm that intended to force them to complete the purchase of an off-plan property on a property development that was just that, a property development.

Never mind that Hercesa failed to build promised additional facilities, as noted on expensive promotional literature: 3 Golf Courses (2 of which were 18-hole facilities), football grounds, Club House, horse riding premises, restaurants and, if you were still skeptical, a luxury (could it be otherwise?) 6-star hotel boasting business center, spa, gym equipped with
hydrotherapy and several pools.

The Court deemed the intervention of the gone estate agency Andalucian Dream Homes ex-sales rep “crucial”, who swore that selling these units with those brochures was a “piece of cake”.

The Judge addtionally states that, on reviewing a photographic report invoked by the defendants’ counsel (we), the development is far from being in perfect conditions, as a consequence of which article 8 of the Consumers and Users Protection Act is fully applicable.

May 5th, 2012

Court of First Instance number 12 of Malaga has ruled that the discussion on whether a licence of occupancy (licencia de primera ocupación) obtained by administrative silence is valid or not, should not affect bona fide consumers (any consumer unless otherwise proven).

In recent ruling, the Judge has argued that a consumer that buys off-plan property should not be dragged into, and suffer, complex legal debates between a developer, La Reserva de Marbella, and an administrative body, the Marbella Town Hall, as well as the Andalusian Regional Government. The ruling also states that:

  • La Reserva de Marbella is still not fully compliant with the policies of the Marbella Development Plan (PGOU), and has serious infrastructure deficiencies.
  • Both regional (RD 515/1989) and national (LOE 38/1999) laws stipulate that a consumer is entitled to receive a fully legal licence of occupancy, free from litigation.
  • It is not possible to invoke administrative silence, by the mere passing of time, where it demonstrably contravenes planning laws and regulations. The Judge presses on by arguing that administrative silence is to be upheld only if it does not go against both national or EU laws, noting that Spanish laws specify that administrative silence cannot be used to validate situations of illegality.
  • 4 years and 10 months from when the property should have been delivered, la Reserva is still unable to offer an unconditional licence of occupancy.
  • Completion date needs to be interpreted as a fixed date, and not a mere approximation.
  • An unproved strike somewhere down the construction process is not a valid excuse for a 4-year delay in getting a valid licence of occupancy and thus, being able to complete.

Conversely, the Malaga Administrative Courts have ruled on the admissibility of some of these licences and that La Reserva is entitled to them as these were granted pursuant to applicable laws.

The question that remains is: will these Judges ever get together for a pint or two and straighten out -legal- disagreements?

February 15th, 2012

We did not foresee the Appeal Court in Alicante overturning a judgement that left little room for interpretation.

As expected, the Court of First Instance ruling forcing the all-purpose entity SGR- Sociedad de Garantía Recíproca de la Comunidad Valenciana (it comes across as a lender/insurer/guarantor, depending on who you ask) to refund fully a property purchaser of the failed Herrada del Tollo development, promoted by the developer Herrada del Tollo S.L., affiliate of the San José Inversiones Group, was ratified with ease.

 And so, what are the most practical conclusions that can be derived from the premises set forth by the initial ruling that has been confirmed by the Appeal Court in Alicante?

  • That a guarantee can be paid outside the receivership proceedings, whether by a bank, insurer or an all-purpose lender, such as SGR, and thus prior acceptance by the administrators is no prerequisite or prior condition for payment.
  • That the collective guarantee cannot be capped, nor needs to be individualized, nor requires the off-plan property buyer signing any document to avail of its protection.
  • That timescales are, contrary to popular belief, pretty acceptable (The civil lawsuit was lodged with the Court of First Instance in June 2010 and the Appeal Court ruled in February 2012).
  • That SGR’s obstinacy will cost them dearly: judicial interest on the €60k deposit (since 2007, at an average of 4.5% per annum) and legal costs (€8,000 approximately).
  • That SGR, who also guaranteed other developments of the Santa Ana Group, such as El Pinet, will presumably no longer be able to oppose payment on the above grounds.

Meanwhile, we have read that San José Inversiones has managed to emerge from the receivership proceedings and will resume its activities on projects that stalled as a result of the above process.


February 12th, 2012

A recent Court judicial pronouncement by Court of First Instance 17 in Malaga tightens the noose on La Reserva de Marbella. Although the reading of the ruling can be tedious, save for if you are the claimant , the acting lawyers (us) or an avid reader of boring Court rulings, it is remarkable in that when typing up his conclusions the Judge, Mr. Antonio Valero González, has managed to extend the length of one sentence, with no full-stops, to…5 full pages (please help me find one (PDF))!!  The findings of the Court can be summed up as follows:

  • Older case law where a party was to be found deliberately obstructing fulfillment is now replaced by a less severe breach of contract: the standard now in off-plan property construction is one where the breach frustrates the legitimate aspirations of the buyers, preventing them from reaching the economical aims pursued.
  • La Reserva de Marbella S.A. obtained the license of occupancy on the 1st of June 2010, and on the 28th of October 2011 the Administrative Court 2 in Malaga ratified the right of the developer to retain the license, a ruling that is not firm. Mr. Valero points to the irrelevance of this item, given that termination was instigated well before.
  • High litigation activity on this development has meant that La Reserva de Marbella S.A. has created case law of its own, in the Malaga Courts. The judging magistrate concludes that an almost identical court case ruled on the 14.10.10 already deals with the issues surrounding the delay: lack of proper or legitimate planning compliance. Quoting the cited ruling, the magistrate delivers a fatal blow: it is clear that the defendant and seller is obliged to deliver a property in an able condition, to be used and lived in, being obliged to adapt the construction to current planning regulations to the extent that, if this is not in place, the property is not susceptible of being occupied and in fact, could even be demolished.
  • The sale of a property without an occupancy license represents a serious breach of contract, and property buyers are notforced to sustain the vicissitudes of an administrative nature i.e. build license, that was only achieved 5 years after completion was agreed to.
  • Counsel for La Reserva de Marbella S.A. argued, not without reason, that obtaning the license of occupancy was not instrumental in attaining full legal compliance, an allegation based on two Supreme Court rulings of the 10 of October of 1987 and 1989. Luckily, Magistrates at this very High Court in Madrid also get replaced and antiquated viewpoints also get replaced by more modern opinion (Supreme Court 24th of May 1991, 16th of March 1995, 28th of May 1996 and 23rd of October 1997).

Now straight on to the tricky stage of enforcing the ruling!

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.