Breach of contract?

We are buying an off plan property and our contract states completion will be in the first quarter 2008.  This is clearly not going to happen!  We do have bank guarantees for all the money we have paid to date and understand that in the case of breach of contract we can claim using this guarantees directly from the bank.

We are unsure of what actually consitutes a breach of contract.  We believe that if the developer does not complete the contract with the first licence of occupation and all the facilities of the development in place by the end of the first quarter then he is in breach of contract.  Can anyone tell us if this is correct and if so when should we send a letter to him informing them of their breach of the contract.  Is there a period of time in which this has to be notified as we are under the impression that if we do not contact the developer he can assume we accept the delay by default?

We have noticed in other posts that there seems to be a window of three months that the developer is allowed to go over the contract date.  However in our case there because the contract states completion within the first three months of 2008 then this surely this would be allowed for within this period.  Is this a correct assumption?

We are purchasing a detached villa within a developement of different types of properties and the developer is completing in phases .  The development also consists of various facilities ie communal pools, residents club, sports facilities etc.  When we orginally signed for the villa we were told that these facilities would be completed before our villa was finished as this is not the case, does this also constitute a breach of contract? 

Also we seem to have a unfair clause in our contract regarding breach of contract.  The contract states ' in the event of breach of contract by the buyer the seller shall keep all amounts received from the buyer'.  There is no receiprical clause regarding seller's breach of contract.  Would we have a claim of an equal amount against the seller in the case of his breach ie not completing or does it just void the contract?

When we last visited and spoke with the developer we were assured that our property would be complete and the first licence of occuppation in place in time for completion, however they also stated that the public facilities would be ready in stages over the next 12 - 18 months!  Is our situation affected with relation to the communal facilites due to it being a detatched property on a resort development.?

We have been reading the brilliant posts on this site over several months and made notes of various points and thought we could speak to our lawyer about the situation at least armed with useful informations and questions - she simply shrugged her shoulders and asked did we want the property or not - if we wanted the property then wait!

Any advice offered would be much appreciated.

Thanks

PS sorry this post is so long!

Should also have said a big thank you to all who regularly contribute to this site - there is a wealth of information and for anyone moving/buying in spain it is reassuring to have contact with people who have been there, done that....so as to speak.  Have been quietly watching site but first time contributing.

 

This message was last edited by valeriedixon on 3/17/2008.

Spanishsolicitor: With all my due respects to you, my colleague,  I would like to add:

Regarding the facilities: if they were part of the publicity or any other information they used to sell the house, it has contract value and you can claim against that too. Spanish Judges and the Supreme Court doctrine admit breaches of contract even because of the the lack of just one swiming pool, and the lack of facilities are considered by Major and Minor Case Law in Spain as a breach on the quality which has been contracted.

Regarding automatic extensions: They are forbidden by the Supreme Court and in every case ( even if announced in the contract), they need to be communicated, justified and approved by the purchaser in every case as those extensions are always  agreed under the conditions of " force majeure": they need to be proved and accepted. Automatic extensions are not legal. So,  I would say, in principle , the extensions even if agreed, do not apply unless a force majeure is proved and accepted as said.

I agree with you on that she needs to execute the Bank Guarantee as soon as the completion deadline arrives and the house is not finished.

Thank you both for your answers.

The contract makes no mention of the facilities only the villa.  There is no provision or mention in the contract relating to delay only that completion with the FOL shall be in the first quarter of 2008 and that the escritura must be completed within 30 days of notification that the FOL has been issued. 

We, therefore, assume that they have until March 31st to inform us that the FOL has been obtained - is this correct? 

What happens if they manage to complete the property (unlikely) by 31st March but have not obtained the FOL?

How would we go about calling in the bank guarantee - am assuming you can't just go into bank and say villa not finished can I have my money please?

How long would this take to organise and to get a good result?

Can the developer or the bank contest this action if they complete the property and have applied for the FOL but are waiting for the Town Hall to issue it?

Your input is very much appreciated - thank you

Dear Valeriedixon:

 

Please have answers below in bold green ( same tet of your message):

Thank you both for your answers.

The contract makes no mention of the facilities only the villa.  There is no provision or mention in the contract relating to delay only that completion with the FOL shall be in the first quarter of 2008 and that the escritura must be completed within 30 days of notification that the FOL has been issued. 

We, therefore, assume that they have until March 31st to inform us that the FOL has been obtained - is this correct?  They have got  till 31st in March to request you to complete with full licenses in place, also with licenses of facilities if they were offered in publicity.

What happens if they manage to complete the property (unlikely) by 31st March but have not obtained the FOL? Breach of contract.

How would we go about calling in the bank guarantee - am assuming you can't just go into bank and say villa not finished can I have my money please? Just that is enough.

How long would this take to organise and to get a good result? Difficult to answer: a month I would say.

Can the developer or the bank contest this action if they complete the property and have applied for the FOL but are waiting for the Town Hall to issue it? They can, but Law which regulates Bank Guarantees clearly state that the FOL needs to be in place for the completion deadline.

Your input is very much appreciated - thank you

Our opinion is that the delay of the facilities ( if they were advertised as part of the product) is also a breach of contract for refund. I appreciate and respect Spanishsolicitor´s opinion though.

Thank you so much for your advice.

I am going to fax my lawyer later today to get her reponse to our intention to action the bank guarantees on 31st march.  I will update you once we have heard back from her and let you know how things progress on this situation. 

We have learned so much from evesdropping on this site and no doubt there will be others that can benefit from our experience too.

Take care.

Hello,

Sorry to hi-jack this thread but we are in a similar situation.

Our apartment should have completed in the last trimester of 2007 - obviously this has past. However our contract states that 'the buyer accepts that the vendor will have an additional six months grace in which to deliver the keys." -  does this mean that we will have to wait till June or can we try at the end of March?

This site is so helpful

Thanx in advance

Sue

Hi suziew

 

In my opinion you have to wait till June

 

 

Felix

www.fljordan.com    Spanish Law Firm

In my opinion those clauses are abusive,: illegal: null and void. The Supreme Court has stated that extensions need to be communicated, justified and APPROVED by the buyer.

Do you have a Bank Guarantee? If not, ask for it too.  If you do not have it and are not granted with one after specific request, the non delivery of that would add to your refund claim too.

Thank you so much for your advice.

We have certainly never approved any estension to the completion date - the last email I had from our lawyer seemed to think they would complete after the second week of february - very vague! - They never asked if we approved of this situation.

If this is the case can we action a refund immediately? 

We do have a bank guarantee - but how do we know which bank this is with?

Is this something that you could help us with?

I don't feel that the lawyers we currently use are always working in our best interests - they were recommended by the sales company we bought the property through and seem very uninterested in contact with us.

Regards

Sue

 

again... far away from lawyers recommended by Estate Agents or developers, they are not avoiding a conflict of interests as per our ethical code  required and doing a tremendous damage to the proffession.

Any good independent lawyer witha good knowledge of contract and consumers law is enough for fighting these cases.

Of course, we would be able to help you.

Best of wishes,

Maria

 

Hey folks

Me back again - now worries with anyone 'hyjacking' postings - it's just means we all get more information that we might not otherwise have known.

Anyway I have another question - if we intend to execute the bank guarantee do we have to notify the Developer that we intend to do so?  We have sent numerous e-mails to our Developer requesting various dates and information and have not had any replies!  The closer we have got to completion the quieter the developer has gone!

Thanks

Hi Valerie

 

Yes, you should notify this breach of contract to the developer by a  duly attested summons (requerimiento notarial) before executing the guarantee. It is not compulsory but it is convenient

 

Felix  

www.fljordan.com  Spanish Law Firm

Hi

I assume that the summons has to be issued by our lawyer - how long does this take to arrange usually?

Do we have to be present in spain when the summons is served and is it adequate to present it to the local representative office in the resort to their management team or does it have to be served to their registered head office?

Do we have to physically go into the bank to execute the bank guarantee or can this be done by our lawyer submitting it to the bank on our behalf?

In other words can all this be done on our behalf by our lawyer?

Thanking you in anticipation.

Hi Valerie

 

If your lawyer has POA, he or she could do everything. The "requerimiento notarial" take usually a couple of days

 

Felix 

Thank you - will post update soon.

Hi Valerie,

Having had the experience of going through this process with others you need to be aware that getting your money back from Bankers or Developers for Breach of Contract for delays etc in the current climate can prove very difficult in reality?

Maria, I understand is a very knowledgeable solicitor and not only understands all aspects of Spanish Property law but can express it in excellent English too!

My advice Valerie would be to wait until the end of the 3 month extention period before claiming against the Bank Guarantee? I would suggest it would be very easy for the Developers Architect to justify an extension on any number of grounds and Banks are well aware of this ploy and may use it to reject any claim! In the meantime have your Contract and Guarantee scrutinised in fine detail by an independant lawyer experienced in successfully recovering Investors deposits particularly in the past year or so! If you have a copy of your purchase contract in English check the detailed clauses about what is and isn't stated about: Completion Dates - When development facilities will be completed, Extension periods and Penalty Clauses. Do the same with your Bank Guarantee and check the cessation date which should be in line with any completion date. Its crucial that you have the best advice at the beginning of any procedure and if you don't have confidence in the ability or commitment of your existing lawyers that get rid of them asap and take time to find the right one as close as possible to where your development is?

Our urbanizacion (marketed thorugh Parador) was meant to have all sorts of facilities in phase 3. These included another pool, tennis courts, restaurant, bowling alley. These facilities were shown on plans of the development in the marketing brochure. 6 years later phase 3 hasn't even started and the developer is no longer developing, not bankrupt just no longer in construction. Phase 1 & 2 are all sold,  (although whether we have FLO is a bit dubious, still tryhing to establish this) do we have a case against the developer for not completing the development as advertised? 

Many thanks

Dear Poppyseed:

Yes you do have a case against dvelopers for not handing advertised facilities.

Best,

Maria

Poppyseed,

If you havn't completed yet? and the FLO hasn't been issued correctly with fairly long delays and other facilities are missing, then  I think you would have a good case? If your grounds are soley based on promised facilities then I wouldn't suggest going alone with any legal procedure! If there is an off plan development forum in Eye on Spain, I would try to engage with other investors to see how they feel about the development too?

Legal costs can be very expensive in Spain with no Guarantee of success, regardless of how strong your case is? Working with others can result in lower costs and a stronger action against your developer!

Thank you Maria & Mike. We have completed, 4 years ago when we still thought phase 3 would be built. I know there have been murmours about taking legal action, I was wondering if this was viable. The majority of owners are Spanish and they are really fed up with what the developer hasn't done. Apart from the lack of phase 3 the pavements they built are all now subsiding, cracks have appeared in some apartment walls (not  on our villa yet, touch wood) and the developer kept ownership of the 2 pools and charges the community 44,000+ euros pa for maintenance.......one is only a kiddies pool open for 3 months a year......

So there are quite a few people who would like to saee some action taken against him!

Thanks again

Hi Poppyseed,

Yes, I'm afraid you would need to get together with other owners and find a good lawyer capable of taking them on? If a few of you can work together locally and work on the Spanish owners you may begin to make some progress? Of course any major construction issues should be dealt with through the Developers 10 year guarantee? A good start would be to build up a fighting fund and appoint an experienced lawyer who you feel you can trust? Putting together a simple web site for the development  where other owners can register their interest acn be a useful way of finding others, not forgetting to have one written in Spanish too!

I also notice you are from Manchester. I once drove with friends from M/cr to Peniscola in the early 80's! Also went again when I was on a trip around Spain on Public Transport. Pretty Hairy at the time! Loved the place then but I guess it has been "found" by all the developers since!! I also remember a tiny fishing harbour close by at Benicarlo, had one of my many mishaps there at the Local Banqueting House!! Nothing smutty but hilarious at the time!!
Wish you lots of luck with your claim

Hi folks - me back again to update you.

Today was the day we were supposed to complete by.  As we had not heard from the Developer to inform us that completion would take place we contacted our lawyer instructing her that we wished to withdraw from the purchase due to the Developer's breach of the contract completion date and that we wished to execute our rights to call in the bank guarantees.

Our lawyer informed us that the court dictates that the breach of contract of the Developer has to be serious and that this means that the delay on completion has a grace period of no fixed amount but can be approximately 3 months. Also that if we issue a Requerimiento Notarial to the Developer now it will be pointless as there is not a serious delay. 

Bearing in mind that our contract states a completion date of first quarter 2008 with no provision for delay.  We believe that the property will not be completed with the FOL for several months and even then the facilities will not be ready including adequate site security and the property will be in the middle of an incomplete building site rather than a pleasant resort.

We have now replied stating we do not wish to wait we wish to cancel the contract and execute the bank guarantees immediately.

Help...............................have we done the right thing!!!!!

You have done the right thing according to Law 57/68 and General Building Act of 1999.

Thanks Maria - as always you are such a strong support to everyone on the forum - please don't go on holiday for the next few days we might need you!!!!!!

Have not heard anything back from our Lawyer - will probably be tomorrow now.  Have a feeling our Lawyer won't want to push this matter and will be resistant to carrying out our instructions.

Many thanks

Valerie, You certainly have no legal requirement to complete without the FLO being formally issued.

The problem is that although you appear to have the right to claim against your Bank Guarantee, you will need to impress this point on your Solicitor about her duty to follow your instructions. If she dosn't support your claim then change lawyers asap has the Banks are just as bad as the developers when it comes to avoiding their responsibilities!! In fact from the tone of your comments about her I'd suggest you move on quickly? BUT there will no doubt be costs involved, so do your homework and find one who has successfully claimed against a guarantee before you commit to anything?

Best of Luck

Thanks Mike

Had not thought to ask what she would charge!!  Will await her reply and then take it from there  - have no idea of costs involved and have already paid money on account just to carry out normal purchase stuff.

Thanks for your input - yes we have considered she may not be the person to handle this for us.

Just about to open the red wine - feeling just a little bit stressed!!!! 

Hi Valerie, firstly thank you for your good wishes posted on the other thread.  As I said, I do consider myself to be one the lucky ones.  My situation was different to yours, as I managed to claim my refund because of a clause in my contract that said a refund could be requested if the building licence hadn't been granted by a certain date-which it wasn't.  I had to send my bank guarantee to the lawyers and one tip, (which I'm sure you have thought of ) is to take a copy of the guarantee and also to post it recorded delivery, so it has to signed for.  This at least means the lawyers can't say it has been lost in the post!

In terms of time, once my developer had agreed to refund my deposit I posted the guarantee, the lawyer met with the developer, exchanged guarantee for a cheque, paid the cheque into their account and then made an electronic transfer into my account..  Whole process took 8 days!

Keep emailing the lawyers.  I really do feel that my polite but insistent emails made the lawyers realise that I wasn't going to let go.  Develop a terrier mentality!

Really hope it works out for you.  Please keep posting.

Ann

Ok so heard from our lawyer - says will send the bank and the developer a burofax but cannot send a Requeirmento Notario without power of attorney until we go to Spain.  (Sorry spelling is probably wrong) Is this going to suffice for the time being as we cannot get to Spain for at least the next week or so?

Thanks