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Some time ago (late June), Just Dan posted a thread asking if a developer could sue a buyer for not completing on their property. Unfortunately, this never got answered, so in a way I'm asking the same question.
If the developer completes on time (ie. within contract) and the buyer, for whatever reason is unable to complete (financial problems etc), I assume that the buyer's full deposits to that point are retained by the developer - Is this true ?
Also, assuming the above is true, can the developer then pursue the buyer for financial settlement into the buyer's country of residence (ie. potentially accessing a buyer's UK house equity) ?
Or are both of the above dependent on the wording of the specific contracts between developer and buyer.
Some experienced guidence on this would be appreciated.
In earlier times the thought of walking away from a 20 - 30% deposit on a property would have prevented all but the most desperate of people from not completing. Unfortunately, in the current climate, many people will be contemplating losing £50K + rather than taking on further financial uncertainty. However, if by doing this they may potentially lose their UK house as a result, it may alter their decision.
Hoping for some educated advice.
Thanks
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Dear Double J: Answers below in bold green:
Some time ago (late June), Just Dan posted a thread asking if a developer could sue a buyer for not completing on their property. Unfortunately, this never got answered, so in a way I'm asking the same question.
If the developer completes on time (ie. within contract) and the buyer, for whatever reason is unable to complete (financial problems etc), I assume that the buyer's full deposits to that point are retained by the developer - Is this true ? No, it is not. In that situation, the buyer will be either asked to complete or imposed with a penalty clause, which, according to Law should not be higher than the 20% of the deposit ( according to principles such of contract balance and proportionality, and as it is stablished in our Consumers Act). Also now that the impossibility to get financiation is considered to be a " force majeure" reason by Consumers Legal authorities, which, duly proved and alleged should produce the refund of all your deposit back.
Also, assuming the above is true, can the developer then pursue the buyer for financial settlement into the buyer's country of residence (ie. potentially accessing a buyer's UK house equity) ? He can, even not likely at present financial situation of developers in Spain. It is most advisable to answer requests for completion before a Notary with the proved argument of your impossibility to obtain financiation if that is the case.
Or are both of the above dependent on the wording of the specific contracts between developer and buyer. Contract Clauses need to be according to Law, if not, they are deemed null and void.
Some experienced guidence on this would be appreciated.
In earlier times the thought of walking away from a 20 - 30% deposit on a property would have prevented all but the most desperate of people from not completing. Unfortunately, in the current climate, many people will be contemplating losing £50K + rather than taking on further financial uncertainty. However, if by doing this they may potentially lose their UK house as a result, it may alter their decision.
Hoping for some educated advice.
Thanks
_______________________
Maria L. de Castro, JD, MA
Lawyer
Director www.costaluzlawyers.es
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It is difficult to provide an answer without reading a contract and therefore one has to be very cautious when advising on the options.
However, Spanish jurisprudence has consistently upheld the principle that the Courts have the right to determine the right penalty for each case, depending on the circumstances of the case. In your case it is clear that you would stand a good chance to fight for the return of your deposit, or most of it, by virtue of article 1101 and 1106 of the Civil Code (civil/contract law), if you can prove that lenders have refused to provide you finance as a consequence of the credit crunch when in normal circumstances you would have easily qualified for a loan. I would advise that you had a rejection letter from the developer´s bank, which normally is the first choice of lender, and then prepared 1 or even better 2 reports from independent banks to prove this as otherwise your case would be weak (conversely, if the developer finds out and can prove that you have 1 million Euros sitting in the bank the Judge will not be impressed and your case will be thrown out :))
Secondly, the Spanish Civil Code allows the developer to sue for performance of the terms of the contract. This however is unlikely since the cost of it would not make it worth their while, given the difficulties of execution. Even if you had another Spanish property or assets I would not think they would go after you as it is a very impopular measure in this difficult time.
In my opinion you stand a good chance of reducing the penalty for non-completion if you can prove that the current financial situation has affected your case and this should not be difficult.
_______________________ Antonio Flores
Abogado/Lawyer Reg nº4712 (Malaga Bar Association)
...
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Maria / Antonio,
Thank you both very much for your prompt and detailed answers.
Maria: I am still slightly confused. In respect of the first question you seem to indicate that the buyer is only liable for up to 20% of the deposits paid, but on the second point you indicate that the developer could (although unlikely) pursue the buyer for the full amount. Which is true ?
Antonio: You have made the assumption that the buyer cannot meet the financial payments and can prove it. What if the buyer could make the payments, but choses not to because of the significantly increased financial risks as a result of the credit crunch.
I don't want to get into the ethical side of this. I am fully aware that if you have the capacity to pay, in a perfect world you should pay. But the world is a lot less perfect than it was 12 months ago.
Once again, any views are most welcome.
Thanks
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Dear Double J:
As an answer to your questions, please have comments below in bold green:
Maria: I am still slightly confused. In respect of the first question you seem to indicate that the buyer is only liable for up to 20% of the deposits paid, but on the second point you indicate that the developer could (although unlikely) pursue the buyer for the full amount. Which is true ?
Most of the contracts have the clause by which the developer can either: cancel the contarct, imposing a penalty clause on you
asking you to complete ( they will first ask you in an amicably way, then through the Courts)
In practice: They are doing nothing at the present situation of financial and real estate markets.
If they asked you to complete and you lack financiation means, you could legally oppose that argument as a " force majeure" reason which, admitted by the Judge, will produce rights for cancellation of the contract and refund of deposits paid.
Hope I explained better this time.
Best wishes,
Maria
_______________________
Maria L. de Castro, JD, MA
Lawyer
Director www.costaluzlawyers.es
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Hi.
Please forgive me for being thick.
Surely the line that you cant get credit could be a sham and all you would do is give a hard luck or fail to disclose income and not get the loan on purpose.
STILL MY QUESTION
You enter into a contract to buy a property at 500,000 Euros and would have been happy to complete if the prices had increased.
Now because the property may only be worth say 200,000 you now say that you dont want to play anymore and sod you I am off and you the contactor take the loss.
Its not his fault the credit crunch has come along and the exchange rate has made the deal unactrative. YOU AGREED THE DEAL
Now no doupt many will have used every excuse why they will not complete on the specified date and this developer has had to pay the mortgage payments and managemenyt fees because you the purchasers have broken a legal contract to buy
Surely a legal agreement between a buyer and sellers is just that He builds what you have ordered and at an agreed price ,He fulfills the agreement and you dont buy.
,If it were me I would sue.
Surely those that dont complete and in turn the developer suffer financial loss through no fault of himself why should he be made to suffer and could send him into bankrupcy YOU ARE WALKING AWAY FROM A LEGAL OBLIGATION, Are you not,?
Surely it cant be all one way, Can IT ?
Surely these developers will have firms chasing for breach of contract on say a no win no fee basis.
We hear all the bad experiences regarding the purchaser WHAT ABOUT THE INNOCENT SELLER ?
Just Dan
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We hear all the bad experiences regarding the purchaser WHAT ABOUT THE INNOCENT SELLER ?
Are there any in Spain??
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Just Dan
You put forward a very good hypothesis. Shame no developer in Spain has completed on schedule to test your theory.
(:-)
_______________________
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Totally agree with Just Dan. These people who try and wriggle out of their obligations when it suits THEM make me sick. They gamble and then don't have the stomach for the loss. They think nothing of the consequences of their selfish actions affecting those with whom they made the contract. I see more and more of these type of "pleading sympathy for the plight of our (self made) undoing" on many Spanish property forums. They are no better than common thieves. Let them burn.
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Hi
We hear about the innocent buyer everyday on possibly every development thread at some point.
Yes there are many good developers in Spain and do what they sign up for in the contract alonside the buyer.(Good Lawyers and Judges for that matter)
WHY IS THEN THAT THE BUYER CAN WALK AWAY AND LEAVE THE DEVELOPER AS THE BIGGEST LOOSER
He is not the one that broke the legal agreement .
SURELY. A DEAL IS A DEAL and A LEGAL AGREEMENT IS WHAT IT SAYS
ITS TAKES TWO TO MAKE ANY DEAL and NO ONE CAN SURELY DISAGREE WITH THAT FACT . If everyone was allowed to change rules around the world then what would be the point of having deals or legal agreements in the first place
The developer should be accountable if he fails in his contract obligations and so should the buyer.OR PAY THE PRICE.
Just Dan
Better get the tin hat out
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Many of those who move to Spain needed to sell their property back home first. Have they already forgotten all the worry and waiting, all the viewings and roller coaster of emotions when attempting to sell. How pissed they were if someone gave a vaguely positive response to the viewing only to pull out later. And that's not even at contract stage. And now, here are those same people, who have made contracts, behaving so selfishly, without a thought of others. Brings something to mind about beds being made and then slept on.
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Just Dan & Headless,
Very harsh but a lot of truths in there,probably could have come across a bit softer but i think you have posted what a lot have been thinking.....
Anyway,your gonna kop it at some point so.....hold onto to your hats.....
There are of course always 2 sides to everything unless you are a octagon of course....
_______________________ www.taylorlandandpropertygroup.co.uk
still here after all these years!
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I have to say, given the scale of corruption in Spain, these posts do not warrant a response, they are soooo stupid!! Dan, I really think you will post anything to get responses. You would be termed a turncoat, traitor, in a battle. You just cannot change tack and expect to be taken seriously. You disappoint me.
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Hi Georgia,
We do all cop it at some time! And in the past I have as well. But, as they say, one has to learn to roll with the punches. And yes, I am rather blunt...that one reason why I like to live in Spain!
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Tish
Ditto . To get a balanced veiw I look at both sides
If I were a respectable developer in Spain and had everything on the line building properties that were ordered in a legal contract and someone decided not to complete purely because the market conditions change and it cost me everything then I would feel as desperate as those that have been conned buying.
Any system must protect both the buyer and the seller.
Tish as well you know I dont post what people want to hear sometimes I post as to that facts as I see them and am sorry if you done agree.
Just Dan
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Dan can you give a list of spanish developers who are not crooked and the councils that are not crooked.
i can then look at them.
it will be a very short list, written in invisible ink
every single spanish developer is like a british MP, totally corrupt (some are exposed at moment - some are not)
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Just Dan,
Although I too can see both sides to the argument....weren't those builders that you are defending the same builders who were more than happy to return deposits when time constraints re build were not adhered to in the past, and then made a quick buck in the process by taking advantage of the market back then and hiking the price to a replacement purchaser. Total hypocrisy. You can't have your cake and eat it surely.
Bottom line - a contract is a contract and if time constraints written into a contract have not been met, or abuse exists within the contract as Maria has identified (very common) then the developer should be made accountable, no matter what the economic situation is. It's naive not to recognise that developers took advantage when an upward shift in the market occured, so why should you be so critical of purchasers doing likewise when the market shift is downward? Human nature........
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alamred
Not taliking about politicians Not Talking about councils I am talikng about what should represent a legal agreement that should protect the buyer and the seller
If it dosnt do that then the agreement is crap
Sorry dont agree with you view that every single builder in Spain is corrupt and its like saying that every solicitor and judge is corrupt as they to have been a very intregral part on the dreadful situation many find ourselves in. Next you will be saying that everyone in Spain is corrupt and think your statement is an insult
ads Totally agree with evrything you are saying apart from me being critical.
Yep those were many of those developers that got on that band wagon,probably human nature Yeh
I am critical of anyone who signs a legally binding agreement and one party fullfils his part and the other dosent .
Human nature dose not come into it thats why legal agreements should prevent us from developers,solicitors,E/As from the total devastation of thousands of peoples lives .I happen to know a couple of highly respectable good builders that would have nothing to do with corruption,completed on time with the full spec and the buyers pulled out of the agreement as the market had turned .He has lost everything and rents an apartment ,lost his wife and family and tried to committ suicide.
The legally signed agreement should have protected him as much as that agreement should have protected the buyer if he broke it .( No difference)
To say this is just human nature that its .O.K if the buyer pulls out and ruins lives is O.K what you are saying is thats no better than the developers screwing you .
Look > I think you are getting this in the wrong contex . I am involved with a dreadful abuse of the legal system/banks.developers for the last 5 years on property I signed up for. I may never get justice with the corruption as it is.A legally binding agreement should have protected me and thousands of others.
That has formed part of my worry everyday but i refuse to let my bitterness to blanket that there is good ,.Spain is a fantastic country there are honest Spanish people that are as sick as we are regarding corruption in Spain.as we are in this country.
At times the Brits are so self rightious and feel that the world owes them. We are at times totally ignorant when we go to other peoples countries.dont even try to speak the language then we go about telling them whats wrong with their country and their legal system etc
No one made anyone buy . If you got caught then like me alongside the abuse of the legal system may be I am honest enough to admit that I didnt do my homework well enough and thats includes the abuse of the law thats been going on since day one.
I dont post to get a reaction,I post because I love Spain . I post as there are two sides and and I post both sides.others run away when the abuse starts just because It dosent form part of the look at what THEY have done to us mass. I DONT POST just to agree what most want to hear.
If anyone dosnt like that and gets offended or considers them stupid to warrent a responce it very simple (Its in yer right hand on the right call ed mouse and when you see me post then dont press click on my posting then there will be no reason to reply in such a manner)
Just Dan
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Wow,
Didn't realise that such a simple question would initiate such a heated debate. As I said at the outset, I wasn't interested in the ethical issues around this, just the legal position. How an individual conducts themselves morally is purely down to the individual and the relationship they have with their conscience. Whilst I may agree or disagree vehemently with a persons position, I really don't feel able to judge them without knowing all the facts.
For those of us who are investing our lives into the Spanish culture rather than trying to make a financial profit, the thought of casually reneging on a deal (formal or otherwise) is not something that is even considered. However, we should also not bury our heads and view our contracts with a rose tinted hue. My particular contract is full of invalid (and illegal) stipulations, placed there by the developer, agreed by my soliciter, and signed by myself when I was far more naive. Obviously, these will be challenged when the time comes, but the fundamental agreement still stands, I want to buy a property and the developer wants to sell one.
Thanks to everyone for their honest opinions and views.
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