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Cajasol has been ordered to pay €180,000, plus costs and legal interest, to 2 claimants who had bought 2 properties in Jardines de Manilva (Gardens of Manilva) some years back, through Ocean View Properties.
In spite of the properties being finished, it was established by the Courts that the unattained licenses of occupancy on the completed projected were a fundamental breach of contract that hampered the legitimate aspirations of property purchasers, following undisputed case law on the matter.
With regards to Cajasol, who was found jointly liable to repay the deposits as they had offered a collective bank guarantee to protect advance deposits (no individual bank guarantees had been issued) the Judge dismissed the allegation that the collective bank guarantee was capped at €2,500,000 and that it had already been fully used up to repay other claimants.
Quoting the Judge in charge of Court number 3 in Estepona, article 1 of the 57/1968 Act on Guarantees on Off-Plan Property Deposits states that the bank is responsible of ensuring, under its own responsibility, compliance with the conditions of the guarantee as well as the above cited Act for which reason, it is not acceptable that the bank now tries to excuse its obligation by invoking a quantum limitation established on the collective bank guarantee to now pay.
Cajasol should be paying out the sums ordered by the Court within the next 3 weeks.
As usual with cases dealt with by Lawbird Legal Services, a copy of the ruling is available for review.
The title is perhaps not entirely correct as the developer was not part of the ruling, but a reseller that answers to the name of Bancales Inversiones S.L., a company that had bought to resell a particular unit at Los Lagos de Santa María.
On a recent Court decision, the Appeal Court reversed (again) an earlier ruling by the Marbella Court of First Instance 5 who had found this company not responsible for delivering a property that was granted occupancy rights by means of a license that ran against local planning ordinances.
Roberto Leiro Bascones, acting for the claimants, convinced the Appeal Court that having a finished property with adequate supplies is not enough to “effectively transfer ownership” where the license of occupancy was not granted, or was granted via that fiction, or loophole, called “administrative silence” when, as is the case here, violated planning regulations.
As a result, the Malaga Appeal Courts ordered Bancales Inversiones to reimburse over 60k Euros to the claimants.
Following the enactment of the Royal Decree 13/2010, almost anyone setting up a new company in Spain has opted for the fast track Spanish “Express” Limited Company. The reason? It takes no more than 24h to have a fully functioning limited company (up to 3 days where the company’s share capital exceeds €3,100 but is less than €30,000).
Interestingly, the number of newly incorporated companies has increased 18% compared to last year, being October 2012 a record month in the last 5 years. This is not only thanks to the economic crisis pushing unemployed individuals to take up the self-employed option after the little chances to find employment but also to the reduction in the timing and registration expenses. Additional benefits include the standard limited liability, to many the most strong incentive to start a business securely.
Lets revisit what the specific limitations are in respect of this expedited company incorporation format:
- The share capital is limited to €3,100.
- Founder members have to be individuals; this leaves out companies, whether national or offshore.
- The Directorship configuration is limited to one of three: a sole administrator, 2 joint administrators or more than one joint and several administrators.
- Compliance of the statutes of such company with the new regulations in place.
The listed limitations make sense: the Mercantile Registry will not carry out due diligence on national founding companies nor the authenticity and legitimacy of an overseas company in such a brief period of time, even if the Notary already does this; yes, the drawbacks of a legality control double-filter system imposed in Spain.
One important recommendation for a non-Spanish shareholders and/or director is to have an NIE number, registered at the Tax office if possible, prior to attending the Notary Public meeting (in fact, this is a compulsory requirement nowadays for any public document). That, or else the process will be delayed by10 days approximately.
Have you had any problems when incorporating this type of company? Do you need help in setting up one?
Yet another important political reform, this time affecting the Spanish Civil Code.
Ministers of Justice and Foreign Affairs, Alberto Ruiz Gallardón and José Manuel García – Margallo, announced yesterday that descendants of the Sephardic community, who were expelled from the Iberian Peninsula back in 1492, will now be able to acquire Spanish citizenship automatically, without having to reside in Spain. This is an important modification of the Spanish Civil code, which since its last modification in 1982, stated a requirement of a minimum of 2 years of residence in Spain for acquiring Spanish citizenship.
This reform will affect those who are able to prove their Sephardic condition, whether it is via surnames, language, descendants or links to Spanish culture and Spanish customs regardless of their place of residence. For this purpose a certificate of the Jewish Community Federations will be required.
According to Gallardón, a few years ago it was understood that around 250,000 people spoke Judeo-Spanish but this estimation could be too conservative. It is thought that this reform could benefit up to 3 million people.
Marta Flores Vila.
This is an interesting ruling for it only relates to interest, and not the principal, since the latter item was no longer in dispute.
However, unlike the prior ruling that was mentioned in this section (http://www.lawbird.com/wordpress/tag/residencial-calas-del-pinar/), the Judge deemed that interest was to be paid from the very time the deposit check was paid to the developer, and not when legal action was formally instigated.
The legal ground invoked here is that interest is deemed to be of a “compensatory or remunerative” nature, and not one of mere delay in performing an obligation, since one party (Peinsa 97 s.L.) was in total breach. He also added that monies paid some years back had less value than now and thus, it was fully justified for the buyer to be entitled to interest since day 1.
Hundreds of property buyers seem to be stuck in complex and impenetrable CAVs (Company Voluntary Arrangements) affecting Promociones Eurohouse S.L., Ochando S.A. and San Jose Inversiones y Proyectos Urbanisticos, SA.
Strangely, only a minority of purchasers ever had the luck of putting their hands on a bank guarantee that would have ensured, almost certainly, a quick refund. Much discussion has been had sorrounding their mere existence but not less importantly, other points of law. There is a disparity of opinion relating to the above subject on occasion of the possible legal representation of a potentially large number of property buyers that may have had access to a valid one but did not, and whether this was because the developer refused to ask for it from the bank, or it was granted but expired, or a general one was in place but individual ones were never issued.
The case law below has covered some of these legal uncertainties in the following rulings:
Court of First Instance case against SGR, Lawbird acting as claimants.
“The fact that the developer did not deliver an individual bank guarantee to a property purchaser cannot leave this person outside the guarantee contracted since the rights stemming from the 57/1968 Act are unwaiverable.” The lack an individual bank guarantee could affect, at the most, to the type of proceedings to be filed but not the right of the buyer to enforce the guarantee.” (executive as opposed to ordinary proceedings).
Provincial Audience of Alicante (SAP Alicante 331/2010).
“The allegation that the down payments were not paid into the special account does not prevent a buyer from claiming on a bank guarantee. The same applies to a supposed limitation on the extent of a guarantee alluded to by the bank: it is an allegation immune to the privileged position of the consumer”.
Provincial Audience of Teruel (SAP Teruel 2/2010).
“It has evidenced that the buyer paid, on account of 2 off-plan properties, the sum of €61,000. The guarantee to refund this payment to future property purchasers, with interest, granted as a general purpose loan by the defendant, must cover the full amount without possible exoneration of this obligation on grounds that part of them were not paid into the bank for, in conclusion, this is a matter that belongs to the scope of the relationship between the developer and the bank and not opposable to a buyer that complied with his obligations, fully.”
Provincial Audience of Cantabria (SAP 758/2009)
“ The date of expiration of the bank guarantee cannot be the one fixed between the developer and the bank without the consumer’s intervention, but the one envisaged by law, given the mandatory nature of the 1968 Act which, according to article 4, is the date of the license of occupancy issued by the Town Hall. In the particular case, the defendants invoked a date different from that enshrined in the Consumer Protection 1968 Act, cannot be upheld as it manifestly infringes law of mandatory application.” “The individual bank guarantee stipulated that €16k would be covered. The contract, on the contrary, states that the sum of €31k was to be paid and proof of payment is duly documented. The relationship between Caja Cantabria and the buyers does not derive from the bank guarantee, but from the law. The law requires Caja Cantabria to guarantee all amounts paid through the special account, of which use the savings bank has to be especially vigilant, so that all sums are paid through this account and also, that they are used for the purpose of the construction, solely, without being misused. When the bank guarantee does not cover all sums paid, the deal is contrary to law. Caja Cantabria should have known the business conducted by the developer and demand a precise report of each one of the buyers and the sums paid by them, in such a way that when providing the bank guarantee it did not carry out the job in contravention to the laws.
Provincial Audience in Burgos. (SAP Burgos 349/2011 rec. 69/2011).
The delivery of the individual bank guarantee by Caja de Ahorros de Burgos was subject to the developer handing over copies of private purchase contracts, and payment of the deposits in the special account opened to that effect. This obviously was not fulfilled by the developer. Consumers however should not be burdened with additional obligations in respect to those pertaining to the policy holder (developer) and obligations pertaining to the guarantor (bank), to the extent that failure by the bank to deliver an individual bank guarantee to the purchaser/consumer cannot be invoked as an impediment to demand responsibility from the bank.
It is important to remember that the 1968 Act is imbued with special protective functions, in respect of the rights and interests of the buyers of property that pay all or part of the purchase price, upfront, and as such the precepts therein included need to be interpreted in the most favourable way to consumers, who cannot be damaged by non-fulfilments or failure to observe obligations and mandates that banks, insurers and developers are under and in whose hands is, specifically, the obligation to comply with the cited norm.
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.
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.
- 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.
- 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.
- 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…!
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:
- 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.
- 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.
- 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.
- 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.