Gaspar Lino issues threat of legal action to ALL purchasers to bully them into completion

This is a copy of an email being sent out by Gaspar Lino today to purchasers of Medina Elvira 23 who have not yet completed. Anybody who is purchasing in a Peninsula development should be fully aware of the level Peninsula are willing to take this in what could well be a desperate attempt to remain in business:

I copied this post to another forum website last night and had some worrying replies. It appears Peninsula could actually do this and this behaviour is starting to become more common now with developers not having a good chance of reselling unsold properties due to buyers pulling out:

http://www.propertycommunity.com/forum/buying-overseas-property/13016-peninsula-threatening-seize-uk-assets-force-purchasers-complete-spain.html

One reply on this did say it is unlikely that a court would force somebody to complete when they clearly did not have the finances to complete, but legal costs or a penalty payment could still be awarded

After doing some digging around this post is also repeated on the public forums on this site, and there is much information here:

http://www.eyeonspain.com/forums/posts-long-7277.aspx

Also of significance, one of the replies on this forum links to the following 10 reasons why it is not a good reason NOT to sue your developer for return of deposits:

http://www.marbella-lawyers.com/articles/showArticle/10-reasons-case-against-spanish-developer-may-be-thrown-out

In the case of Medina Elvira 23, points 2 and 3 in this post are highly relevant. Peninsula have claimed force majeure over their late delivery due to strikes and poor weather, and the habitation of first occupation has been obtained

First of two replies posted on the general forum regarding a post made by Lurker.

Hi,

the threat  you are referring - as it stands - is not only legal, but actual as well.

It is essential to have a look at your purchase contract in order to check the contents and see what the clauses say to be sure, anyway I will try to answer your question in general terms.

In the purchase contract for a property off plan, the purchaser's main obligation is to pay the price and the developer's main obligation is to deliver the property with all the necessary permissions and documents. The delivered property should also be according to the contract in general terms.

Under Spanish Law the party who complies with the contract and fulfils his obligation is entitled to EITHER FORCE COMPLIANCE OR CANCEL THE CONTRACT. It is an OPTION, unless expressly estated in the contract that the developer waives one of these options, both stand. 

In this case, it seems that the Developer has got the First Occupancy Permission and we could also assume that the development is already finished and according to the contract. In this case, we can say that the developer has complied with the contract and therefore he can effectively OPT for the so-called "forced completion", which means that he can sue you at the Spanish courts seeking payment of the outstanding price plus costs, OR to cancel the contract. 

The fact that you are living abroad in the UK poses an additional difficulty because they will very possibly have to notify you the writ abroad in order to ensure the executin of the ruling afterwards, but I would like to warn you that there are effective mechanisms to enable enforcement in your country. It will take a little bit longer for the Developer, and probably they will have to spend their moneys in executing the ruling in the UK through a British law firm, but it is perfectly possible. In fact, did you know that the UK government deparments are chasing through the courts property owned by British people in Spain in order to get debts made in the UK paid? it also works the other way.

The process would be in general terms as follows:

- 1st step, the developer sends you a formal request to complete, with an appointment for completion.

- 2nd step, then the developer goes to the Spanish courts and files a writ, stating that you are in breach of contract and requesting forced compliance.

- 3rd step: the court sends the notification abroad through special mechanisms in order for you to be notified. Since you receive the notifcation, you have 20 working days to appear at the spanish court and defence yourself. IF YOU DO NOT DO IT, YOU WILL BE IN A SPECIAL SITUATION AND CALLED "REBEL", which means that no more notifications shall be sent until the ruling and you won't know what's going on until the end. It goes without saying that THE DEVELOPER WILL VERY PROBABLY ACHIEVE A FAVOURABLE RULING VERY QUICKLY, AS THEIR ALLEGATIONS AND PROOFS WILL BE THE ONLY ONES THEY SHALL TAKE INTO ACCOUNT.  for instance, if they had requested more than they were entitled to, you would not be able to discuss that.

- 4th step:   Once there is a ruling and you have been nofified thereof, then there is a time to appeal; if no appeal is submitted then the ruling is firm and definitive, which means you cannot fight it anymore;

- 5th Step: The developer shall contact a British law firm to have the ruling executed by the UK courts.This may lead to the seize of bank account saldos and other unpleasant consequences.

Consequently, it would be wise to consider that the developer can actually do this. Another question is if he is really interested in doing it or not, or if they have money to do it or not - it could be a bluff!. Please note that court action implies paying money in advance to start the process, and if this is applied to many purchasers the initial costs are going to be high. As an alternative, it is possible to approach the developer and try to reach a friendly agreement which would settle this situation.

Finally, the threats are considered  illegal under Spanish law when they refer to harms that they will cause in things like the phisical integrity, the honor, etc, such us "if you do not complete we're gonna kill you" and that sort of things. Reading the letter, I personally think that it is a warning of what could happen - and from what you have seen, it is for real - and also a reminder of obligations, and as such it is perfectly legal. Consumers laws shall not protect you to this extent.     

I hope the above helps. My suggestion would be to check the contract and your personal situation and decide then if there is a chance to reach an agreement with the developer. For that, we stay at your disposal.

2nd reply:-

This is a very real threat lurker of which few off plan purchasers are aware. This is yet another reason on why a Licence of First Occupation is so important.

We've gone over the matter of forced completion on this thread.

As from the time a developer attains the Licence of First Occupation as per art 1504 of the Spanish Civil Code he will communicate with the purchaser by means of a registered letter to inform him of a day and time of completion before a certain Notary public.

Failure to comply may result in the developer either witholding part or all the stage payments or else filing a lawsuit against the off plan purchaser demanding contractual fulfilment i.e. that he closes on the property. The latter would be a forced completion. 

As highlighted in our article on 10 reasons why your court case against a Spanish developer may be thrown out of Court, it is not recommendable at all to sue a developer once the LFO has been attained by them as the chances in general are very slim.

Which is why a LFO is a major milestone in the conveyance procedure and often marks the inflection point. A LFO means the property has been delivered legally according to our national laws.

As our colleague Fairway lawyers rightly points out Spanish judges are unsympathetic with speculators whove got their fingers burnt (property flippers). Which is why a lawyer will always try to portray his client as a consumer subject to Consumer Law protection. i.e. is unable to complete because of the change in financial circumstances brought about by the credit crunch and cannot raise a mortgage loan any longer or not enough to cover completion.

As the developer rightly points out, this matter is to be taken very seriously and there's little point in ducking one's head into the sand hoping the problem will go away by itself. Some developers may sue you, some won't; that's a gamble you take if you decide to remain silent.

A Private Purchase Contract binds both parties. This is a delicate issue on which one should take professional advice from a Spanish lawyer.

This was also on the thread as well from an unhappy customer -

"Amazing!  Peninsula promoted El Balcon Alcaucin - we put down a deposit in Sept 05, nothing built and having to go to court.   Peninsula cut all contact with the builder and they made no contact, ignored many emails and were silent!!!!! Oh tell a lie one letter received in Dec 08 and a Christmas card. They offered no options and washed hands of everybody.

Taste of own medicine does not seem to Mr lino's liking."

Please let's not wash our dirty linen in public but rather tell us the good news about rental incomes from those who have completed in August - by now they should be seeing some return as it was well over 6 months ago.

The way I see it this is a mess for both sides. Peninsula obviously can't resell these properties if the purchasers pull out and can't afford the loans on them, and the purchasers are in a position where they can't afford to complete and take on the mortgages

Taking people to court isn't going to get Peninsula anywhere unless the investors have the money to complete and just refuse to spend it. I very much doubt any of the purchasers that haven't completed have this money, so no court can force them to complete with money they haven't got

Simple maths. The result of the housing crash, credit crunch and recession. Nobody wins and we all lose. Blowing money on lengthy drawn out legal action won't solve it

I agree absolutely with your points - I seem to have read soemwhere recently that Santander (I think) are involved in a scheme that re-negotiates contracts (mainly through price reduction) which enables purchasers to complete and gives the developer a reasonable return in what is a difficult time for them as well. 

This may be difficult to swallow for the developer but at the moment they are facing the prospect of lenghty and costly legal battles that may damage their reputations.  Moreover during this time period, there will be very little cash-flow and I very much doubt that any third party funding will be available to see them through.  Many people may in the meantime declare themselves bankrupt, transfer assets etc to avoid the disasterous consequences outlined below.

Meanwhile the reorts themselves will be deserted and there will be major issues concerning community fees etc.  These are extraordinary times and everyone is hurting.  I guess the developers cannot make these type of moves themselves and it does needs institutions such as Santander to step in.

Just a few thoughts - everone is worried, as it stands there will not be any winners from this present situation.  I know there are lots of holes in my argument (I'm in a bit of a rush) but it may be interesting to hear views.

The recent posts showing the measures that Peninsula are will to take are worrying, not just for those who cannot complete, but for those who have or wish to complete. There are a number of themes that seem to be appearing and none of them are good.

Very interesting points - I'm also concerned that the infrastructure (ie shopping centre, hotel, sports faciltities) are being built by another developer who have no intention of completing them until there are enough apartments built.  A sensible solution / some sort of arbitration is needed surely?

The more I have thought about this the more worried I have become about this situation - the original letter quotes

"Spanish courts are favouring developers, especially ones with a clean history and who have fulfilled their obligations. They do not regard very highly investors, who were mere speculators and do not want to fulfil their contractual obligations."

I have now begun to question the "clean history" of Peninsula -

"My son was purchasing an appartment on Terrazas de Alcaucin, originally through H2O, the developer is Peninsula, he was told the developer will not be finishing the properties, so the lawyer suggested he tries to get his money back, but now some time later, the lawyer has responded to say Peninsula have disappeared and are not responding, he suggests taking the developer to court, but will not do so unless we pay up front, is this usual, my son has already loosing euro 23K, not a lot to some, but everything to him

A very worried mother"

Have a look at this development on this website and you will note that there seems to be a call for court action against the developer.

http://www.altosdealcaucin.com/index.htm

 El Balcon de Alcaucin is another phase of the same development - once again more unhappy customers are apparent on the EOS forum.
http://www.peninsulapm.com/ingles/projects.aspx

http://www.peninsulauk.com/about.html

 Please would Sharon or someone again post a further message on here to reassure us that all is well and that Peninsula do indeed have a clean history when it comes to the above builds.

One of the contributors also suggests that you google "Alcaucin arrests".

I also find it hard to stomach that courts may not favour investors.  Why allow resorts to be marketed on guaranteed rental incomes where no personal use is allowed?

I've had a good think about this and taken (and am still taking) legal advice and the whole thing appers to be very silly

Let’s think this through logically. What are Peninsula's options?

1) They dissolve our contracts, keep our very substantial deposits, and find another buyer. This may have been easy to do 3 years ago but most likely now they will be stuck with them for a very long time even after discounting them to the level where they only just break even on each unit. They still have to pay the 66% mortgage they have with Cajamar on each unit whilst they try to sell it

2) They forget selling the apartments at all, keep them as assets and rent the apartments through Royal Peninsula. According to a purchaser in ME23 who has recently completed, Royal Peninsula expect that a major tour operator wants 400 units for exclusive use more or less 52 weeks per year. So a realistic rental income results in costs covered in year one and moves to profit in years 2 and beyond. After 2-3 years, the property market will have picked up, facilities will be fully completed, the resort will be established as a viable holiday destination and the apartments can be redecorated and sold on with great ease with a proven rental income

3) But instead, they want to take all the purchasers who don't complete to court to sue them for the full amount outstanding. They file initial proceedings with significant court fees payable up front. The more brave of us will counter with our own legal action and sue for return of deposits. After many months this all goes to court and Peninsula may win some and may lose some depending on the particulars of each case. Any cases they win will go to appeal, and cases they lose will cost them up to 20% on each unit plus legal fees, unless they also take these to appeal. After many more months they may finally win the cases that go to appeal or have to pay for the cases they lost. Any damages awarded to Peninsula will be minimal because its highly likely the purchasers that lost their cases did not have enough money to complete in the first place and there is little point in the courts awarding penalties that will bankrupt people as they will just go bankrupt and won't pay the penalties

This doesn't add up. The obvious thing to do is rent the properties, pay the mortgages, bank our deposits, then try to fend off any legal action that gets initiated against them, NOT initiate their own legal action against us. Either they haven't considered the rental thing or I am missing some fundamental point here that prevents them from renting the properties. I thought maybe they are on the verge of bankruptcy but even this doesn't add up because the court case route will result in the least financial gain for them out of their 3 options in the short term and could tip them over the edge into bankruptcy before any cases are completed