Antonio Flores’ Blog

In Spanish, ‘La Verdad’ means ‘The Truth’. But it is also the name of a local newspaper in the Murcia region that interviewed, back in 2006, a young and confident looking José Luis Pérez Carrión, Marketing Manager for Calidona. In this interview he extolled the virtues of the Corvera Golf  and Country Club grand project and its impressive facilities, including the PGA Olazabal-designed Golf Course (Ryder´s Cup contestant) and a 5 star De Vere-run hotel, with Spa and so many more luxuries you would expect from a hotel of this stature. Quoting Perez Carrión:

“We offer a different life-style, close to nature and the beach with a view to practice sports within an unbeatable environment and with all the facilities that the client may need. Also, owing to an agreement between the prestigious hotel chain De Vere, specialists in golf accommodation, we will be able to offer the services of a luxury hotel and a Spa.”

It´s February 2010 and la verdad is that there is no hotel, just as much as there is no equestrian centre, sports facilities, swimming pools, tennis club, private gym, commercial centre and a number of other amenities that were the primary reason for a couple of hundred people to buy in this development.

We took an interest in this case after being contacted by a few persons who had bought in Corvera Golf and Country Club, and after agreeing to take up their cases, a lawyer of the firm and a sort of specialist forensic valuer went over to draw up a report on the resort and it’s (lacking) facilities, and indeed it appears that many of them never left Corvera architect’s drawing boards, and are therefore just that, “un sueño” (a dream), as it reads on the bottom left part of the original promotional plan embedded in this post.

This is conclusive that a degree of contractual default has taken place, which will entitle buyers to file for cancellation of the contracts on the basis of misrepresentation. It is then up to the lawyers to argue the case successfully, with as much ammunition as possible (contracts, brochures, articles, witnesses, including Olazabal if required), and propel it to a successful conclusion for our clients, judge permitting.

In a similar claim we filed against Manilva Costa and Ocean View Properties, the judge of First Instance in Estepona granted contractual rescission as he found that the developer “misrepresented and misled buyers by promising, through marketing literature, facilities such as top restaurants, shops, a health and leisure club, tennis courts, Turkish baths, sauna, Jacuzzi, fully equipped gymnasium, heated pool and kindergarten service, and it is clear that none of those have been built”. He then added that “from the documents submitted to this Court, it has been established beyond doubt that the publicizing of these facilities in brochures was a fundamental element in the buyer’s decision to buy, as collectively they had induced him to proceed with the purchase of a property which was located in a relatively isolated development and distant from similar facilities.”

With respect to buyers in Corvera Golf and Country Club Phase IV, the above can be irrelevant because their properties have not even been built and therefore contractual default will come from delayed completion. The rest of phases seem to have been built more or less on time, that is, within 18 months from the date of issue of planning permission (such is the delivery date on the contract) so we are reluctant to base the case on this argument.

As with many other Court cases, we will play the devil’s advocate so as to test the quality of our legal arguments and identify weaknesses in its structure and content since Corvera will fight this case to the end. But still, the De Vere 5 star hotel is just not there!

Our case is due to be filed within days. We will keep anyone with an interest in this development posted through this blog.

– Update March, 03 – 2010: Photos taken last week of the unfinished facilities have been added below:

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My previous post on the matter (Part 1) would have not been complete if no mention was made to contracts with developers and bank guarantees so below are a list of classic legal fairy tales on the subject.

On Courts/Litigation

1. Court costs are very high in Spain. Not at all, there are no Court costs because court proceedings are free (it’s called “justicia gratuita”) except if you decide to go the Supreme Court (these magistrates are a bunch of snobs and so may request you pay a deposit). It is the lawyers who will charge you the money together with the procurators (who inexplicably have yet not been eliminated as they are totally superfluous and have the habit of falling asleep in Court hearings). But if you have a good case and you win it is likely that legal fees will be awarded on the losing party and therefore you will be reimbursed. Obviously the contrary may happen if you lose in which case fees can double.
2. You will lose if you litigate against a Spaniard or a Spanish company because the system protects them: TOTAL RUBBISH. Yes, I can see the black continent from my terrace but this does not mean that we live in a banana African republic (not yet though). Never have I heard, been told or read any complaints from anyone to the effect of denouncing the judiciary system for judging on patriotic grounds.
3. Never litigate in Spain, it will take 10 years: yes, if you decide to go all the way to the Supreme Court. But the average for a Court of First Instance ruling is 14 months and we all know that time flies…

On Contracts with Developers and Bank Guarantees

Lately, a very popular topic on legal-gossip websites:

1. I have a contract with a developer, don’t want to proceed and I have been advised by someone with a zillion posts on an expat website forum that a particular lawyer will succeed because he/she is an expert in Consumer Protection Law: run away, would not touch it with a barge pole! The reason is simple: no decent lawyer will want this type publicity because it is immoral. Lawyers should never give sweeping legal advice on a particular subject without reading a contract and analyzing all elements. Those who fail to follow this principle are regarded as ambulance chasers.
2. I have a bank guarantee/insurance policy and therefore can just cash it and walk away: NO, this would defeat the purpose of the bank guarantee which is to protect the investor from a failed property investment and not serve as a getaway facility. You can however cancel and try to execute, directly or through the Courts, where notoriously a delay has taken place. Results are varied, from banks/insurers paying happily to refusing point bank, with similar results when going to Courts (recently Banesto has accepted to pay 80% of 11 deposits they were guaranteeing in a Court case we filed against them and their client, Promaga).
3. Statutory Force majeure and Acts of God are not applicable in Spanish law: WHY NOT? Article 1.105 of the Spanish Civil Code, in force since the 19th century, says the contrary. Developers can excuse themselves for not completing on time if they can prove that the delay was caused by events catalogued as any of the two.
4. The developer has delivered my property one month late and therefore they are at default and have to return my money, by law: NO judge will accept this unless specifically written into the contract and no developer is stupid enough to have done that. The exact amount of days or months of delay will depend on the wording of the contract, the reasons for the delay, the judge ruling the case (some say that 3 months is enough and others say that 9 months does not defeat the economical purpose of the contract and so it is insufficient).
5. I bought a new property, I could not complete, the developer delivered on time and summoned me for completion, after which they cancelled. I have lost my deposit and cannot do anything. Not always. It is quite possible that the contract was a one-sided agreement because it was entered with the developer at a time when they had (limited) precious properties for seemingly endless numbers of keen property investors (i.e., property boom) and so it was a case of take-it-or-leave sort of agreement. The consequence of this is that clauses which can be considered as unequal, could not be negotiated at the time of buying, are not reciprocal and are not proportioned are null and void. This includes the clause where the buyer loses the deposit if he does not complete if the developer does not include one where he will refund twice the deposit if he too fails.
6. I have bought a property from a developer and therefore I am a consumer, which gives me the right to cancel the contract if I wish: No, careful! Being a consumer does not mean that you have every right, if you wish to pull out, to cancel your contract and demand your monies back. There are times where developers have fully complied with the contract and there is little hope in successfully winning a case for contractual default, in fact they are open to enforce completion of the transaction, both in Spain and in your own country if they deem it appropriate.
7. I wish to cancel my off-plan contract and I’ve been told I have a “Solid Case”. You may well have one, a very strong one in fact, in which case cashing that bank guarantee is a plausible option and alternatively a Court case. But once again be cautious: there are some pseudo-legal website forums where you are told pretty much that no matter what you have done and/or the developer has done you always always have a ’strong case’. To put a comparison it’s like a doctor telling a moribund terminally ill patient that no matter how serious the ailing is they will make a quick recovery (I could not find a less graphic comparison but it is how I see it). Examples of this are for example fallacies such as the one that says if you don’t get a mortgage you can pull out in any case, or that one whereby if the developer is late by 1 month you can pull out.

This list is by far comprehensive so if you come across anymore do let us know!

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Some 12 months ago we were dumped by a client who was buying an off-plan unit in the development known as Bahía de las Rocas. It was no surprise that the newly acting “scavenging” lawyer, was operating from the expat-legal-gossip omnibus portal known as Eye On Spain (www.eyeonspain.com), wherefrom she had lured our client and probably told her how deep was our tie with the introducing agent, how horrible the developer was and how biased we were as a firm.

Our advice had been consistent throughout the transaction, advising the client that we could see no grounds for pulling out. She had tried to convince us in turn that, according to what the agents had told her, the property should have had a certain orientation, with views to a certain place. We spoke to the developer to verify this but could not find indications of any contractual infringement from where to successfully launch a claim.

Some months after we received the standard fax from the above lawyer asking for all the documents, and soon after the developer’s lawyer summoned us to Court to give witness statement. Out of curiosity we picked the phone up and called the developer, to find out that they had been sued not for the property having the wrong views but for, and here we go… delayed completion!!

But something was not right in all of this because, according to some simple calculations made with our desktop Casio calculator, the delay was of…cero days!!! Our curiosity went even further and, when reading the claimant’s petition, we noticed that it looked like a copy and paste piece of work because it made no sense whatsoever. How could any lawyer in his right mind consider NO delay as a fundamental breach of contract? What advice did this lawyer give to the client when offering her legal services? How could this lawyer, when cross examining us, ask us questions which answers directly exposed the entire satisfaction of the client with the property? But the funniest thing of all was that our client admitted in Court that she had been at all times informed and updated by us of the course of the works, without her manifesting any dissent.

The outcome was as predictable as clockwork: The judge ruled in favour of the developer, and sentenced the claimant to pay the legal bill. (An ‘anonymized’ copy of the ruling is available upon request.)

The legal conclusions of this botched attempt to trick the judges can be summarized as follows:

1. Contractual extensions on property transactions are legal.
2. Force majeure and Acts of God grounds for opposition are valid under Spanish law in case of non-performance.
3. Lawyers should do a minimum pre-hearing preparation before entering the Court room if only to avoid, when cross-examining the previous lawyers, look very silly.
4. Lawyers should tell their clients that they can, and sometimes should, lie in Court when being cross-examined, because the other party will most certainly lie too! (there is no such thing as perjury in Spain).
5. Generally, lawyers should make their clients sign a disclaimer when persuading a client to start a Court case with no options whatsoever of winning a case.

From an economic point of view losing this case will mean a legal bill of between €20K, and nothing achieved. Too bad for reckless litigators!

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Mr. Jorge Montull Urquijo, working from his Marbella Court Two desk,  has just produced a surprising ruling in favour of developer Brismar Cuatro SL, responsible for Las Palmeras de Calahonda development, which seemed guilty on at least two “counts”, only to discover that thus was not the case:

1. Delay in delivery of the apartment: According to Mr. Montull, and contrary to what was considered enough, a 6 month delay in the delivery of the apartment cannot be considered a serious and grave breach of contract. He supports his opinion on abundant case law from the Supreme Court and determines that “a 6 month delay does not impede the economic objective of the contract and is therefore not a contractual default but a mere delay”.
2. Absence of a bank guarantee: In the same manner as above, but less surprising, the judge considers that not giving a bank guarantee is no reason to cancel a contract. He contends that the plaintiffs did not prove the developer put them at risk by not giving them a bank guarantee. Additionally, he argues that the plaintiffs did not make a formal request for the guarantee and concludes that “providing a bank guarantee is not an essential but an accessory obligation and dependant on the principal one, this being the delivery of the property” (he then goes on to support his conclusion with Supreme Court case law).

The above will no doubt make many wonder where do the laws stand in Spain in respect of the consumer and more importantly will give an insight as to how some judges think. It also serves as a reality reminder to some colleagues writing in forums who always seem to find legal loopholes in contracts to convince desperate investors to drag them into Court, of course after a credit card swipe to put them in funds (and thank you very much Mr. Client!).

Always remember that judges are not machines to whom you can apply a formula to obtain a result: after all, law is anything but an exact science in the hands of (imperfect) human beings.

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More often than is desirable some of my colleagues tend to overindulge in optimism when providing a legal opinion on a soon-to-be litigation matter. You can often hear and read on online forums the words “You have a strong case!“. This sort of a ‘closer’ phrase when selling services can bring about nasty surprises, especially if the judge thinks otherwise.

So I tend not to use this language when dealing with my clients, and will, on the contrary, give them a more elaborate opinion which will invariably include playing the devil’s advocate and exclude encouraging clients to file a case. Let’s not forget that the opposing party will also be assisted by expert legal advice who knows the law, case law and how certain judges perceive different types of disputes.

In my opinion any lawyer needs to be very frank and open about the possibilities of obtaining a favourable ruling and should provide a per cent ratio of success, which even in the most blatantly clear case should not exceed 75% (so run away from the 95% success rate claims, and do it quickly!).

Litigation is a double-edged sword that can turn out to be very expensive for our clients, especially if a case is lost and therefore we (lawyers) should contemplate all -legally- available options prior to dragging our clients into courtroom, with their best interests as the main motivation and the legal fee bill as the last!

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