Legal tip 1327. NEW! Supreme Court further protection of off plan buyers with no Bank guarantees
Thursday, October 1, 2015 @ 1:12 PM
Translation into English of main parts of recent, most relevant Supreme Court decision on Law 57/68 and lack of individual guarantee
Law 57/1968 General Guarantee to ensure the repayment of amounts paid on account. Failure to issue individual certificates.
According to (1) the protective spirit of the Law, recently highlighted by the Chamber, which requires assurance or guarantee of the amounts paid in advance, and
(2) the fact that a collective guarantee has been agreed to cover any repayment obligations of the developer in regards to the advanced amounts perceived from buyers, a copy of which has been delivered along with contracts of sale,
it is clear that the risk is directly covered, without the need of issuance of an individual guarantee in respect of which the buyer has no responsibility. -
Cassation Appeal BBVA and SGRCV
8. Paragraph Five: It is jurisprudence of this Court that article. 1 of Law 57/1968 allows the buyer to act jointly and severally against the developer and its insurer or guarantor to demand repayment of the advanced, when "construction does not timely start or does not reach good end" . [Judgments 476/2013, of July 3; 218/2014 of 7 May and 218/2015, of April 22]. This same law also allows the buyer to claim just against the guarantor or insurer without having to sue the developer for breach of contract.
This Court has also stated that the guarantee covers all amounts paid on account of the price, even if the insurance policy sets a lower maximum amount because otherwise art. 2 of Law 57/1968 and Art. 68 of the Insurance Act would be violated [Sentences 476/2013 of 3 July and 779/2014 of 13 January 2015].
11. Paragraphs Third, Fourth and Fifth: Provisions 1, 2 and 3 of Law 57/6 can be violated under the guise of the existence of a general guarantee as the buyer does not have to know that he should still receive an individualized endorsement. In that scenario, the buyer is at the mercy of the degree of diligence of the developer, depending on if he requests the certificate of guarantee or not.
According to (1) the protective spirit of the Law, recently highlighted by the Chamber, which requires assurance or guarantee of the amounts paid in advance, and
(2) the fact that a collective guarantee has been agreed to cover any repayment obligations of the developer in regards to the advanced amounts perceived from buyers, a copy of which has been delivered along with contracts of sale,
it is clear that the risk is directly covered, without the need of issuance of an individual guarantee in respect of which the buyer has no responsibility. -
The buyer who has paid advanced amounts should not weigh on the gross negligence or willful misconduct of the developer who fails to require certificates or individual guarantees.
In conclusion:
i) Guarantor, once General Guarantee is signed and premiums are perceived, needs to cover the guaranteed event, which is to refund the amounts received, together with interest as provided in the legal standard, in regards to the development the guarantee is linked to.
ii) the issuance of the certificates or individual guarantees, by the insurer or guarantor, for each of the buyers, legitimizes these to enforce them, according to art. 3 Law 57/1968; AND
iii) the absence of the corresponding individual guarantees does not preclude the obligation to repay the advanced amounts, with interest, is covered for buyers who have entered into a purchase agreement and delivered these advance payments, under the existence of the General Guarantee.