The economic boom is well and truly over and we are now faced with hard times. Let me remind you of Spencer Johnson’s book “Who has stolen my cheese?”
Each of us has our own interpretation of what that “cheese” is, and thinks that getting it will bring them happiness. Once you get it, then you inevitably become attached to it. It therefore follows that losing it or having it taken from you can be traumatic. Unfortunately, few people prepare themselves for the eventuality of losing their cheese, not least of which are builders, property developers and purchasers, who are finding it increasingly difficult to get a mortgage in order to complete the acquisition of a property bought two or three years ago, at the prices current at that time. These are the people that this article is intended to help.
In most purchase contracts the deposits are not usually endorsed by a bank guarantee, which represents a failure to comply with article 3 of the Law 57/68. Likewise, almost all stipulate a delivery time which is rarely adhered to. However ALL the contracts state that the promoter reserves the right to dissolve the contract, should the purchaser not comply with the payment terms. Rarely is this right outlined to the purchaser; a gross misconduct on the promoter’s behalf and one which has legal recourse (Under the 1/2007 Legislative Decree of the 16th of November, approved in the General Law for Defending Consumer Rights and other complimentary laws).
Should there really be a delay in the promoter delivering the property, then this represents a failure on the promoter’s behalf to fulfil the terms of the contract and, as such, the purchaser would be within their rights to demand that the contract be dissolved and the deposits returned to their bank account.
Art. 1124 of the Civil Code (paragraphs 1º and 2º) establishes that:
“The faculty to dissolve obligations is reciprocally implicit, in the case in which one of the parties fails to fulfil the terms of the agreement.
The damaged party has the right to insist upon fulfilment or dissolution of the obligation, with the re-imbursement of costs and application of interests in both cases. They may also insist upon dissolution of the contract even having demanded that the terms of the contract be met, when the latter were impossible.
On this matter the Provincial High Court of Alicante and Murcia pronounced:
“…failure to comply with the agreed delivery dates “per se” inconveniences the other party, unless this delay in handing over the property and signing the title deeds has been tacitly agreed by both parties and new terms set…”
Therefore, in accordance with the above, should the reader consider that the terms of their purchase contract have not been met in so far as:
· Provision, by the promoter, of a bank guarantee for the amounts deposited.
· A delay in handing over the property
· Or, as is less frequently the case, the property fails to comply with the description in the contract (size of the plot, terraces etc)
Article 5.5 of the Royal Decree 515/1898 establishes that “In the case of a property or common areas or access that have not yet been built the date of delivery must be clearly set out for each building phase at every stage of development” The omission of a concrete date is sufficient cause for dissolution of the contract.
Many contracts read as follows: “the property will be delivered within an X month period of the concession of a first occupation license”; “the property will be delivered within X months of the start of building”. Sometimes there is not even mention of a delivery date (this is most often the case). In such cases the fulfilment of the promoter’s obligations (to deliver the property) is accompanied by a condition that depends solely on them (Annex C of the 1993/13c CEE Directive of the 5th April 1993) superseding the principle of good faith and a fair equilibrium perceived in article 10 of the 1984/27 Law amongst others. This provides sufficient motive for the dissolution of the contract and the return of corresponding deposits.
A delay in the delivery of a property where a concrete date has been stipulated is another matter entirely. These correspond to a failure to fulfil Article 1124 of the Civil Code. This implies that should one party fail to comply with the terms of the contract, then the other is within their right to dissolve the said contract. The injured party can choose whether to insist that the other party meet the terms of the contract or to dissolve the contract and to claim damages and any interests accrued. Having opted for the fulfilment of the contract, should this later prove impossible, the injured party may then choose to dissolve it.
We must clarify at this point that the various Law Courts are passing different sentences dependent upon whether the property to be acquired is for a home or for an investment.
Here are some examples of sentences passed by different courts:
Así hemos encontrado, entre otros, los siguientes pronunciamientos:
-STS 07/06/2005, allowed that a delay of 5 months did not constitute a failure to fulfil the contract.
-SAP MADRID 27/06/2008, A delay of 6 months or more constituted a failure to fulfil the contract.
-SAP MADRID 19/03/2008: A delay of 12 months constituted a failure to fulfil the contract.
-SAP MALAGA 28/06/07: A delay of 16 months constituted a failure to fulfil the contract
When passing sentence in one case on the 26th of June 2007, the Alicante High Court confirmed that the failure to meet the delivery date stipulated in the contract constituted a breach of contract and furthermore ruled that a clause related to possible delays was not valid, as it was not sufficiently clear and explicit, in accordance with requirements. As the purchasers were also obliged to reside in another property during the delay, the High Court awarded them 700? per month in damages and 9,100? compensation for the delay in delivering their property.
We would advise you to request that the promoter dissolve the contract and return the deposits paid, plus any interest accrued on the latter.