Expiration dates of Bank Guarantees. Please read article 4 below.
The Aval Bancario (Bank Guarantee) or Insurance Contract were both established by a 1968 Law to protect buyers in off plan developments.
Art. 1. - The developer must guarantee the devolution of the deposited amounts plus 6% of annual interests rates, through an insurance contract or by bank guarantee, for the cases when 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.
Art. 2.- In those contracts where the parties agree on anticipated mounts the developer must expressly state:
a) That the developer will give back to the buyer all the advanced mounts plus the 6%, in cases where the construction fails to tart or end within the agreed deadline, or the certificate of habitability is not granted.
b) Reference to the bank guarantee or insurance contract, indicating 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.
Art. 3. - If the deadlines for starting or finishing are not met, the buyer can choose between cancelling the contract with the devolution of advanced amounts plus legal annual interests, 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, 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.
Art. 4. Once the Habitation License is issued and the developer proves the delivery of the house to the buyer, the Guarantees granted by Insurance company or guarantoor will be cancelled.
The First Additional Provision of the General Building Act ( 1999) states:
The receipt of amounts of money on account when building is done by promoters or managers will be covered by an insurance that will compensate the breaching of the contract in an analogous way as what is stated in Law 57/1968 , of the 27th in July, about the receipt of advanced amounts when building and selling houses.That Law, and its complemantary provisions, will be enforced when building houses, with the following modifications:
a. The expressed Law will be enforced for the promotion of every kind of houses, even those made under the regime of community of owners or cooperative association.
b. The guarantee which is stated in the aforementioned Law 57/1968 will be extended to any amount handed in cash or by any effects, which payment will be paid by standing order in the special account which is stated in the refered Law.
c. The guaranteed devolution will include the advanced amounts plus the legal interests of money which are in force till devolution is made.
d. Fines for breaching what is stated in the first paragraph of of the provision number 6 of the mentioned Law, will be imposed by the Autonomous Communities, the fine amount will be , for every contravention, of up to the 25% of the amounts which devolution must be secured or according to whatever is stated in the own regulations of the Autonomous Communities.
By Maria L. de Castro
web@costaluzlawyers.es
www.costaluzlawyers.es
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