Buying a property from a developer in Spain
Buying property in Spain from a developer is somewhat easier and safer that buying property in Spain from a private seller. Developers are restricted by several laws to what, when and how the offer of their product is put across to the prospective purchaser.
Likewise, and given the fat deposits these entities sometimes demand from the purchaser prior to completion when buying property in Spain, the government under Franco´s ruling enacted a law whereby all downpayments made before the property was completed have to be secured either by bank guarantees or insurance policies.
Likewise, and given the fat deposits these entities sometimes demand from the purchaser prior to completion when buying property in Spain, the government under Franco´s ruling enacted a law whereby all downpayments made before the property was completed have to be secured either by bank guarantees or insurance policies.
This assurance that somebody who buys property in Spain will retrieve his invested capital from the developer should the project stall or fail is not available for resales unless it is specificly provided for.
The subject of how these laws apply to the offer made by the developer, the contents of the contract and the remedies of the purchaser is an interesting one, and therefore merits a deeper analysis before buying property in Spain.
Following a normal schedule of events, a purchaser, after taking the decision of what and wher e to buy, is normally requested to put down a small deposit ranging from 2.000 to 5.000 Sterling Pounds.
Automatically, several protection of consumers acts are applicable to what you have signed and will very much determine the legal position of the parties, regardless of whether you have waived the mandatory protection granted by the law. According to the Supreme Court in Spain, a reservation deposit document, deposit slip, offer and deposit receipt, have to be construed as either being a true purchase-sale agreement or a promise to buy or sell.
Normally, a promise to either buy or sell both parties agree that upon the realisation of certain future events any of the parties will be entitled to compell the other to sign a proper purchase sale contract. Basically, it sets out the lines of the future purchase-sale contract which the parties do not want to commit themselves to. This might be the case where the developer has not obtained the building license or is pending authorisation by regional authorities. Likewise, the buyer might be in the process of raising funding or realising a credit due inminently. Once these events occur, the parties are in are bound to enter into a contractual agreement, i.e. purchase-sale contract. Vendor and buyer can compel the other party to sign a proper purchase-sale contract.
It can also be the case that the developer words the promise to buy/sell document to his interest, by for example making the validity of the contract subject to either the granting of a building licence or a certain time limit, whichever happens first, in which case the deposit is refunded without penalty. The Supreme Court draws a very fine line between these two contracts, regarding a promise to buy or sell as a true purchase-sale agreement where the price and the object of the transaction are clearly set out. The difference is important, since a potential buyer might want to buy that property he chose and arrange accordingly his affairs regardless of any future events or vicissitudes.
Every contract is different, as well as the true intentions of the parties, but fortunately developers stand on a very difficult position since Consumers laws are very restrictive regarding contractual terms on promises to buy or sell, and indeed any contract used by developers. In fact, the undersigned is sure that at least 80% of all contracts signed between developers and private purchasers are viced will clauses that are automatically null and void and others which are so confusing that can only benefit the purchaser. The same high court also defines the true nature of these contract regardless of the title given to that contract, since more often than not project developers have poor legal advice and name these contracts with a varied number of erroneous titles.
In summary, a promise to buy and sell, reservation deposit contract, reservation fee, pre-contract, etc. is to be construed as being a true purchase-sale agreement, totally enforceable in a Court of law where such document describes the property and its price, and according to the latest jurisprudence, even where the document, although not including price and property, enables these two elements to be fixed in a future document. The remedies of a purchaser in case of default by the developer are a suit to compel the latter to grant public deed of purchase sale before a notary public and or claim damages.
Protection granted by the consumers laws in respect of purchase of buying property in Spain from a developer
We can divide the requirements to be met by a standard purchase/sale contract in the following:
General requirements as per the Consumer´s protection Act 1984. (Ley 26/1984 de 19 de Julio General para la defensa de los Consumidores y Usuarios), and General requirements as per the General Contractual Conditions Act 1998. (Ley 7/1998, de 13 de Abril, sobre Condiciones Generales de la Contratación).
Specific requirements as per Royal Decree 515/1989, of 21 April.
Miscellaneous requirements as per other laws.
