Guarantees for Spanish Off Plan Developments
Revised version of article Published on EyeonSpain 11/15/2006 1:21:13 PM in Buying Process
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The Aval Bancario (Bank Guarantee) or Insurance Contract were both established by a 1968 Law to protect buyers in off plan developments. The General Building Act passed in 1999, reiterated these rights, establising interests at the legal rate against the fixed 6% of Law 57/68.
Article. 1. - The developer must guarantee the return of the deposited amounts plus 6% of annual interest, through an insurance contract or by bank guarantee, in circumstances where the construction doesn’t start or doesn’t finish in the agreed time.
They also need to open a special bank account for your amounts (different from the general one of the developer) and have it expressly written in the contract.
Banks, under their liability need to verify that guarantees exist for moneys deposited in their accounts by individuals buying off-plan. They also need to take an active role on ensuring money deposited in their accounts for off-plan purchases are used for building purposes.
Article. 2. - In those contracts where the parties agree on anticipated amounts the developer must expressly state:
a) That the developer will give back to the buyer all the advanced amounts plus the 6%, in circumstances where the construction fails to start or end within the agreed deadline, or the certificate of habitation is not granted.
b) Reference to the bank guarantee or insurance contract, this must indicate the name of the Bank or the Insurance Company.
c) Specification of the Bank or financial institution and the account number where the buyer’s money is deposited.
At the signing of the contract, the developer will give the buyer the document that contains the guarantee (the Aval or the Insurance Contract) and the document must have a reference to the amount that is anticipated.
Article 3. – If the deadlines for starting or finishing the development are not met, the buyer can choose between cancelling the contract with the return of advanced amounts plus 6% annual rate, or to concede a time extension, which will be stated in an additional clause in the contract, specifying the new deadline with the date for finishing the construction and completion.
The insurance contract or the bank guarantee together with the document that fully proves that the work has not been started or that the completion deadline has not been met nor complied with, will have executive power as it is stated in the Title XV of Book II of Civil Procedure Law, to demand from the insurance company or the bank, the amounts that the buyer is entitled to, without prejudice of any other given rights also applicable.
If you have a Bank Guarantee/ Insurance Policy and your property has not been delivered on time you can execute your Guarantees for the refund of deposits plus legal interests, if you were not given a Bank Guarantee, you can ask the Bank for liabilities linked to this.
Written by: Maria de Castro
About the author:
Maria de Castro is a Spanish Lawyer and the Director of the Law Firm www.costaluzlawyers.es.
Costa Luz Lawyers are contract and consumer real estate law specialists covering all parts of Spain. You can contact Maria at mldecastro@costaluzlawyers.es
Beach in Tarifa, Cadiz, Costa de la Luz, Spain by DarkBlade at Flickr.com