Off-Plan Contracts: The Gullibility of Those Desperate to Cancel
I was surprised to receive last week three letters from one firm in Fuengirola requesting that we passed the files of three clients who had purchased at Altos de Alcaucin. After talking to another client I found out that this particular firm was encouraging them to sue the developer in Court to obtain a refund of 80% of the deposit paid so far due to a extremely twisted interpretation given to a clause inserted in the contract.
Unfortunately for many purchasers, the development was finished on time and in accordance to planning permission granted, receiving therefore the first occupation license equally in a timely fashion. Yet some buyers have chosen to attempt to cancel the contract on the basis of a particular interpretation given to clause 5th, which stipulates that the default in the payment of any installment will be cause of contractual cancelation, pursuant to article 1504 of the civil code, the developer having to return 80% of the deposit and keeping the balance as compensation.
According to the interpretation of the firm a buyer would be entitled to cancel the contract at any time by simply not paying an installment (or completion balance) and would then request that 80% was returned to him. We understand quite the opposite: that the right to cancel is a prerogative of the seller/developer should they chose to, in application of article 1504 of the Civil Code, which would in turn trigger the obligation to return 80% of the deposit.
Having advised our clients that we consider that there is little or no chance of persuading a judge that the clause can be interpreted inversely, in particular when the building has been finished correctly and on time, thus kindly declining a request to represent them in Court (and in agreement with many other colleagues), some have decided that we are seemingly acting suspiciously and have managed to find a lawyer who will agree and endorse the interpretation they wish to hear.
And here comes the danger as Spanish courts, notorious for upholding the validity of contracts, will almost certainly rule in favour of the developer and will award costs against the losing party (the buyers) who will be back to square one, but carrying a legal bill of around €15k plus interest for late completion.
We have never been against contract cancellation, quite the contrary: we have successfully represented clients against many property developers who we considered had trespassed the line of breach of contract, having previously warned our clients of the implications. I’m afraid however that the legal representation offered to our former clients lacks the understanding of the consequences on the side of the buyers and has been offered as a mere business: you pay me and I will sue on your behalf! I wish them every success.
There really is no pleasing some people is there! If the purchaser really is that crazy to think that a developer would have a clause in a contract that would allow them to cancel by fact of non payment, the purchaser really should take another look at how they do business.
The market is hard work at the best of times, without the hassle of so-called “investors” thinking they are being smart and trying to back out because of likely negative equity and their poor judgement. Well done to the developer completing on time!