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10 reasons why your case against a developer may be thrown out of court in Spain

A lawyer will previously endeavour to reach a satisfactory settlement with the other party, resorting to litigation only as last option. Having reached a point in time whereby it is apparent that the only path left is to litigate, one should consider a number of cases in which it is inadvisable to sue on certain grounds as the ruling will most likely turn against the plaintiff – you.

By Raymundo Larraín Nesbitt
Lawyer – Abogado
8th of September 2012

This article should not be construed as a defence of developer’s interests, but rather as a cautionary tale to dissuade potential plaintiffs from engaging reckless litigation which may leave them seriously out-of-pocket.

The following points are by no means to be taken in any particular order or even as a closed list.

1. Suing close to the scheduled delivery date of an off-plan property

If you sue too close to the scheduled delivery date of the property your case may be dismissed. Some people mistakenly think that they can sue a developer as soon as he fails to comply with the obligation of delivering a property within a certain stipulated deadline worded in their Private Purchase Contracts (henceforth PPC). A reasonable timeline for litigation, as a general rule, would be 6 months after the deadline set in the PPC to deliver the property but cases differ depending upon different circumstances. There may be automatic extensions in the PPC granting a developer a grace period of, for example, three months. These must be expressly accepted by the purchaser. If you do accept them then the delivery date is pulled back accordingly so they must be taken on board on calculating the amended delivery date. It does not suffice that you receive a letter informing you of the grace period – you must accept it.

EDIT May 2015: Spain’s Supreme Court has changed this and allows it on suing on off-plan properties relating to bank guarantees. Please read my article (Spain’s) Supreme Court Rulings on Bank Guarantees for more details.

2. Suing when a Force Majeure has taken place

This second point is related to the above. If you happen to sue a developer who can allege a cause of Force Majeure such as hard rain, general strikes, adverse or extreme meteorological conditions etc. If the developer can successfully prove in court that a Force Majeure took place during the construction period then he will be allowed legally to offset the lost days on calculating the delivery date which will be pulled backward.

3. Suing when a LFO has already been granted

A First Occupancy Licence (LFO) is a licence which is issued by the town hall where the property is located and which verifies the development fully complies with the original Building Licence (BL) granted by said town hall as well as complying fully with all Planning laws. Upon the granting of a LFO by the town hall the dwelling is regarded as legal and fully fit for human dwelling. It is considered as already too late to pull out and litigate once the LFO has been granted as under law the developer is regarded as having complied fully with his main obligation of handing over the property. Additionally if a judge considers that a development has been granted validly the administrative Licence of First Occupancy by means of a special administrative procedure known as Administrative Silence Rule (ASR) from the town hall or there is a general consensus on this point then it is not wise to sue. If a LFO is obtained through the ASR it is just as valid as a normal one obtained expressly through a town hall under Spanish Administrative Law. It is pointless to challenge an ASR licence as it is perfectly legal in our legal system, providing it wasn’t obtained breaching any planning laws.

4. Suing for breach of contract when you are likewise at fault

If you sue a developer for breach of contract when you in turn have not been complying with the fundamental obligation of paying him regular instalments or stage payments as set forth in the PPC. The judge will consider that you cannot allege the developer being in a breach of contract when you have previously breached the PPC yourself. In fact, you are the one at fault as your main obligation as a purchaser is to always pay in time according to the contracts’ clauses.

5. Suing on non-essential grounds

If the reason why you file a law suit is not deemed as ‘essential’ by a judge i.e.

– You sue a developer because on doing the snagging list you realise that the promised ‘commanding view over the sea’ is not so and all you have from your terrace is a flimsy view of your neighbour’s back garden brick wall.

-The infinity swimming pool and state-of-the-art sport facilities have not been built to the promised standards – or even worse, not built at all.

This lawsuit will most likely fail if you are trying to pull out and claim back on your full stage payments only because of this. Only if the PPC included a specific clause by which the sea views were regarded as essential to you would you be allowed to pull out and claim for a full refund successfully without being penalised. A different matter altogether would be if you sue post completion seeking compensation on the lost view. The question would be really if it’s worthwhile to pursue litigation in such a case. Perhaps it would be wiser to negotiate and agree on a suitable compensation such as free installation of a/c or even negotiate a reasonable price reduction upon completion.

6. Suing on grounds of a lack of a Bank Guarantee

If you feel tempted to sue a developer because he has not provided you with the mandatory Bank Guarantee on buying an off-plan you will most likely lose. One cannot cancel a contract and demand full payment of your stage payments on such grounds.

EDIT May 2015: Spain’s Supreme Court has changed this and allows it on suing on off-plan properties relating to bank guarantees. Please read my article (Spain’s) Supreme Court Rulings on Bank Guarantees for more details.

7. Suing without being regarded as a consumer

It is important to take notice than when you buy a significant amount of off-plan properties, i.e. three, you may no longer be regarded by the judge as a consumer but rather as a shrewd professional businessman or businesswoman. This is important because it will mean you will no longer be under the protection of Spain’s’ favourable Consumer laws. Consumer laws are an effective tool at times to mount pressure on developers.

8. Suing on excessive compensation grounds

On suing in Spain one must bear in mind that the legal system is very different from that of Case Law which exists in English-speaking countries. One of the major differences regards claiming on compensation. Unlike the United Kingdom or the U.S. whereby a judge may award you a huge compensation, this is very unlikely in Spain. A lawyer ought to be cautious on suing as being overambitious may be counterproductive. This may imply that for example if the lawyer over requests compensation the judge can actually sentence that the plaintiff has to share in the legal expenses of the court procedure despite having won the hearing. Whereas if the plaintiff had in fact been less ambitious it would have not backfired on him and the judge may have sentenced that it is the defendant who actually has to pay for all the plaintiff’s legal expenses (both lawyer and procurador). Spanish judges have a wide margin of subjectivity to construe when it comes to establishing capital appreciation or depreciation of a dwelling or on claiming moral damages or damages in a broad sense.

9. Suing lacking the necessary documents to prove your petition

It is necessary the plaintiff gathers a sufficient amount of documents prior to litigating. The documents which the plaintiff should have available are namely a copy of the original Private Purchase Contract and all original invoices of the stage payments or bank statements including the initial reservation fee. The invoices of bank statements proving the transfer of funds are of paramount importance as in fact the whole law suit will hinge on them.

10. Suing using the wrong legal procedure

This occurs when you sue a developer following a Criminal procedure when you should have followed instead a Civil on. In this case you will have wasted considerable time and money following a wrong venue.

In Conclusion

As a drawing conclusion, it is not advisable in general to sue a developer which has no assets under his name as the funds spent in a lawsuit would be a complete waste of both money & time. In short it would be putting good money after bad. That is why on suing it is the advisable your litigation lawyer locates and secures assets lodged under the developers’ name and requests from a judge, if needed be, to place a provisional charge on them (embargo) on suing. This will effectively avoid the developer selling off these assets as they now have a legal hold placed on them. This encumbrance will ensure your financial interests depending on the ruling’s outcome.

Litigation should never be taken light-heartedly and it is necessary that a lawyer expert in litigation analyses your legal situation to determine if litigation is really a worthwhile option for you. Professional lawyers will always layout clearly your legal options and let you decide which one to take.

“Pleitos tengas y los ganes” – Gipsy curse.

Loosely translated as “May you find yourself in many (legal) problems and win (but at a great cost to you)”.

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