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What is the best course of action if I discover the developer does not own the land on top of which he is building?

Property Law

Antonio Flores Vila

3rd of March 2004

Q. I am in the process of purchasing an off plan property in Mar de Cristal, Costa Calida and would like to ask your advice regarding my situation.

The property was initially presented to us as a Golf Invest property. It has transpired now, since paying the E3000 deposit and just prior to putting down another 50% of the total asking price that Golf Invest do not actually own the land the property is being built upon, it is owned by a company called Convasa, from whom Golf Invest are in the process of buying the land.

We have asked to see a copy of the private contract between Golf Invest and Convasa to prove that they indeed will be the owners of the land soon.

However we were supplied only with the first page of the contract, which listed names of the 2 parties involved separately and the details of the land that is in question. However there was nothing written which said that the land was to be sold by Convasa to Golf Invest. Golf Invest are saying that they cannot show us anymore of this contract due to it containing financial information which they do not want to reveal, and are claiming that a sale between the 2 companies is inferred on the page of the contract they have supplied.

Can you advise what the best course of action would be, we are loathe to let go of the deal and are considering taking out a 100% bank guarantee so that if everything goes wrong, we will get our money back. However we have been told that Golf Invest are a very reputable company and the chances of anything going wrong are minimal.

Stefan
London

    A. The story you have detailed is rare but not new, and is typical of developers with a cash flow pathology, who are not able to pay for the land upfront and resort to these manoeuvres, legal yet irregular, especially where consumers are involved.

    Secondly, the attitude displayed by the developer is extremely suspicious, to say the least, when not offering you a copy of the contract but only the first two pages. It denotes a non-professional background in property development and as mentioned above is clearly the result of shortage of cash.

    If you wish to proceed I would suggest you seek legal advice, apply for a bank guarantee from the developer to be granted to you simultaneously with the payment of the 50% part payment, and verify that the main legal points are covered in your contract with them.


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