Implications of Not Completing

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

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

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.

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

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

Thanks Maria

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

We hear all the bad experiences regarding the purchaser  WHAT ABOUT THE INNOCENT SELLER ?

Are there any in Spain??

Just Dan
You put forward a very good hypothesis. Shame no developer in Spain has completed on schedule to test your theory.
(:-)

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.

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

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. 

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....

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.

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!

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

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)

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........

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

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.

Just Dan,
You misinterpret what I am saying. I am certainly not saying that it's OK for purchasers to abuse the situation, what I am saying is that if there is a contract drawn up by legal representatives that you put your faith in, and the developer was fully aware of abuse within that contract (I can't believe that they wouldn't be aware given the quantity of apartments/dwellings that they are dealing with ) then they should be ultimately accountable no matter what the market conditions. Where human nature comes in is that given a shift in market conditions, then if that abuse existed (which appears to be the case in all too many contracts), a developer cannot pick and choose which way he wants to play it. i.e. if the market is buoyant he chooses to repay the deposit and make a quick profit in the process by inflating the price to the next purchaser, or if the market is down then refuses to comply with return of deposits. It's a nonsense. I repeat the bottom line should be a legal contract devoid of any abuse..... and wherever abuse existed then the purchaser should retain the right to be recompensed.

What you fail to take on board is that many Brits have put their faith in Spanish legal representatives and developers and that faith has been consistently and  cynically abused, which is beyond defending. In Spain (whether you love it or not)  it now appears that they are in transition, getting their legal system in order (please God) but in the interim all these people are suffering as a consequence.
Surely this abuse is not in the interests of either the purchaser or seller............the difference being that it's only now that the seller is suddenly becoming aware of the sting in the tail.
Of course I feel for that developer you spoke of, but I also feel equally for the purchaser who has lost perhaps their life savings, and their dream to own a place in the sun.
Please to goodness this mess gets sorted ASAP and then the likes of you and I ( and hundreds, if not thousands of others) will not have to debate such issues and can focus our attention on regaining trust in the very country that you espouse to love so dearly.We should all be working together to make that happen, not working against one another.

Too much detail to even read all the comments on this thread. How about lightening up a touch?

Just Dan, I, like you, are a victim of developers, but you need to move on.

I will send you an invite to my next anger management class. You need to relax, have a beer, and remember that the whole world isn't really against you. The last be may not be true, but you've gotta believe it anyway!

Hi ad
Thank you very much for your reply . The sooner they do sort out this total farce of legal system the better and I happened to believe thats its agreements that stand in princible and in law. Fear that this may take along time as there indeed many Spanish that corruption is the way of live sadly this is quite a large sector (But not all )

Double J .Also thankyou for your responce and in the end the sooner this total farce is sorted then people may one day be able to trust the Spanish again.
Sectors of the market which we all know about have much to be ashamed of which has instilled  a commercially and dark cloud over them which may least for years.
Of course the profile case I mentioned is a ting fraction of the buyers lives that have been ruined and sadly even lives lost through the total stress of it all
The things I have witnessed  by some developers./ estate even to screw familes and freinds . Sadly many of the E.As that screwed their own were Brits in fact most where and they where as if not more guilty than the Spanish as many trusted them .THATS PLAIN SICK.

Fulford
Thank you also for your reply and am sorry that my profile of a situation that lives are being ruined on both sides albeit lots smaller by the seller, the total farce of this legal system really needs shaking at the core.
Move on.  Can assure yo I did that a while back as I can see rightfully so many many posters are so bitter that are trapped both mentally and financially in hell.
I am still alive and in reasonable health so perhaps I have found the foundation to brush meself off and move on.( still worry at times and my case may get to court in the next 10 years or so)
Move on  Thats what I have done and realise that there are two sides and dont use the forums just to show whats happened to poor ole me.
Move on  I use whatever I can salvage to put to use in any way wherever I can to help others that are struggling to cope and to avoid mistakes I and others have made.
Now again if this information we have all posted is to much for you to want to read. THEN DONT RULE ONE IN ANY MANAGEMENT COURSE,
1   IF SOMEONE PISSES YOU OFF THEN IGNORE THEM

Will have that beer lunchtime and off walking the dog on a lovely day.
Thanks for the offer of the management classes,hope you have made it to the end without falling asleep

Thanks All

Just Dan

At least its only my money they took, not my health. That's why I've tried to move on, I don't want one to cause the other. I know which is the most important.
......................................that doesn't mean I don't want revenge........................

Fulton
Thats better  Thats the concrete basis to work from

Trust me. I will never ever give up in fighting for what I am due.
Now agreeing to buy an X property and ending up with something thats nothing like it makes me SOooooo mad
However my resolve dosent let me at least try to take a peep over the wall.

Regards to you Thanks

Just Dan

Hi

I have noticed that advice given to buyers that are not completing is starting to vary even to issues regarding L.F.Os
Now many solicitors have been advising clients in many cases to complete and wait for the licence or risk loosing the deposit for years.
Now as we know and has been stated many times  this is madness as no one can be made to or should complete without the paper work even if they have no Bank Guarantee.
Now as developers are starting to and will continue going into bankruptcy consumer groups are now starting say depending on the case completing on a completed property may be the prefered option so at least you have something tangible.
Now should someone complete on such a property and it was refused the licence and demolished then I assume compensation would be avaiable where those that have not completed and in particular without a guarantee would get nothing.
As we know L.F.Os in a massive amount of cases will be issued and I have noticed that even if you do have this licence it can be revoked and property can be demolished anyway.
Also it must be a dreadful sitution to find youself in if your are making stage payments and the builder is not building where I have read that you have to keep paying or you are in breach of contract and loose monies paid to date.
JUST WHO ARE WE TO LISTEN TOO? as the only ones that are not loosing are the Solicitors whoes advice seems to abide by laws but reality in many cases is that you are clearly going to loose.

Just Dan

Why can't all those  purchasers affected come together in some way to put pressure on the government (via the EU??) to sort this mess out once and for all? It would be interesting to know from a legal perspective if this is an abuse of rights on a massive scale. But no-one appears to be brave enough  or dynamic enough to give us any answers on this score.....
If purchasers give into pressure by completing on valid cases of breach of contract (or without the offer of realistic compensation where appropriate) they are doing no-one, including themselves any favours. The abuse will just continue.
The other large scale abuse affecting purchaser's rights is the timescale taken before cases come to court (and even then the abuse continues by the developer going to appeal, which is a cynical ploy to extend the process even longer.) Estepona is particularly bad  and we have been led to believe that Estepona has the shameful record of being one of the slowest (if not the slowest) administration of justice in Spain. Why can't they be made accountable for this malpractice? WE NEED TO NAME AND SHAME! Ironically It appears to be causing as much frustration for certain lawyers who are diligently trying to go about their business. Again this does no favours for the Spanish economy as purchasers are understandably turning their backs on a beautiful country that is seen to be far too slow to put their house in order.
If good  lawyers are equally frustrated by this mal administration then we should throw down the gauntlet to them and say " DO SOMETHING ABOUT IT..... FIND WAYS (AT THE HIGHEST POSSIBLE LEVEL) OF GETTING YOUR LEGAL SYSTEM SORTED FOR EVERYONE'S SAKE"....... Surely the best legal minds in the country should be able to sort out this cancer within the Spanish legal system. Change should come from within  but unfortunately all too often the little change that does occur (for instance the recent suggestion for persuading developers to offer compensation)  is only a quick fix, and doesn't appear to be solving the route cause of abuse.
I say, DON'T JUST TAMPER WITH IT........... WE NEED SOMETHING RADICAL ACROSS THE BOARD..........AND QUICKLY. THE LONGER YOU DELAY ON THIS, THE MORE PAINFUL IT WILL BE FOR YOUR OWN ECONOMY.

Sorry for the rant folks.........

ads
Totally agree and there are of course many wonderful  solicitors and judges who depair with the whole sorry affair
I feel you are correct that some sort of E.U intervention is the answer then the desperate options in my last post would not be necassary.

Just Dan

Dear Ads:

We have commenced initiatives in a couple of occassions so people can send to us their experiences in order to bring them to the National Council of Lawyers and Ministry of Justice.

We are still gathering forms and need to say... not many have been sent to us.

Is it mayb ethgat we prefer complaining than acting?

Best Monday!

Maria

Well done Maria......can you repeat then where people can get these forms from and where to send them to, and is it obvious from these forms what information you require?
Could Justin post something on a separate thread to highlight this and explain this to EOS members so that purchasers can know about this action please and how relevant it is to them?
Is there an end date when you need to collate this information together?
Maybe members don't realise how important this is to action some reform of the legal system. Maybe they think that there is a hidden agenda here or there is little hope, when in reality you are genuinely looking for their feedback to pass on to the National Council of Lawyers and the Ministry of Justice.
The profile of this really needs to be lifted and brought to the attention to all of those who are in the nightmare process of major delays and/or those suffering abuse within the Spanish legal system.

Thanks again.