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I apologize for being somewhat geeky. But perhaps you may be able to help me.
My wife and I have paid a deposit on a house to be bought off plan in Cadiz province. This happen about three years ago.
The construction of the house was completed about 15 months ago but the construction failed to meet our expectations on several counts.
1. It did not compy with the plan. Things like wardrobes which were shown on the plan are not present in the house.
2. It did not comply with the proposed finishes. Things like the floor tiles to be installed in the entry hall were changed. The contract says white marble, the result is a kind of pale gravy colour.
3. It was not a satisfactory build quality. This is the most extensive group of faults. Retaining walls between our property and our neighbour were cracked because they were not correctly constructed. The house has a cellar which was built as a tank and the house was constructed upon it. There was a fault between the house and the tank which was observed from the first inspection of the house and which has allowed water to penetrate the ceiling of the cellar. The ceiling is now fallen down. -
We know that the house has received a certificate of occupation (maybe I have this term wrongly).
We do not want to pay for the house until it conforms to the contract and is of a satisfactory build quality.
We had made no progress asking the developer to correct these faults. We provided a snagging list more than a year ago. The developer provided a letter stating what work would be done and who would do it. A subsequent inspection showed that nothing had been done. After this visit the developer’s office agreed to our inviting a surveyor to check these problems and propose corrective measures. While the surveyor was going to the inspection the developer’s lawyer declared that no inspection could occur since we had not completed our payments.
We are told that we should pay and the developer will correct what is wrong. But we find that hard to credit on the grounds of natural justice.
We believe that the developer has to provide a house as promised before we pay. Is that correct in Spanish law?
We believe that snagging of minor faults, eg ill fitting wardrobe doors, can be agreed to be performed after payment is completed. But what assurance does the buyer have that this work will be carried out?
We are told that the developer has not paid the builder which is why the builder is failing to carry out work on our (and other) house in the development. Is there any way that we can check on the financial position of the individual firms and their relationships? This insight comes from Spanish friends who work for the firms involved.
Thank you for any help. We definitely need it.
Lost In Spain
Wiltshire, UK -
Hi Lost in Spain
First, don’t feel ‘geeky’ for needing to ask questions. The majority of us here have all been in your shoes re. needing information and/or help at one time or another.
In my view, bearing in mind the construction problems you mention, I would be most surprised if a Licence of First Occupation (LFO) has been granted. This is only granted once a thorough inspection has taken place satisfactorily by the Town Hall, and the building deemed as legally habitable. Do you actually have a copy of the LFO or are you taking your lawyer’s/developer’s word that it exists?
Your developer’s attitude in not allowing your surveyor to make an inspection makes me very suspicious of the whole set up.
Can I ask what your lawyer is saying/doing in all of this?
Are you sure you have a good independent lawyer (not recommended by your estate agent or developer?). -
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I, would not sign until all the works are completed. You will not get responce from the developer once the completion at the notory has taken place,
The courts will allow some tolarence e.g if the developer can prove that the marble stated in the show flat/contract became scare and this would have delayed completion. My understanding is that small devations are accepted by the Courts but from what you say it seams the situation is more than small.
I, sugguest that you ask the surveyour to give you a price of the works needed and withhold that amount. This action on your part should be advised by a registered letter and Notarised.
One, final point. I dont know what distance is your neighbour and what is the state of play with them. You have to keep in mind that any money witheld must allow for possiblity of emanating damage to/from your property during works now or future.
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Charlie
Thank you for your very prompt reply.
We are taking our lawyer’s word for the existence of the LFO. Perhaps I should ask to see a copy.
Our lawyer seems to be saying that the developer has Spanish law on their side. But some of the statements are curious. A brief version to give the flavour.
1. Apparently the developer has reserve of dominium. If I understand correctly that means they can refuse any access until payment has been made in full. Further, they can insist on payment.
It appears that we can respond to a demand for payment by making a demand for inspection. If our surveyor was to judge the property to be fit then we pay on the day of that judgement being published. On the other hand, if it is not fit to live in then the developer has to repair to a standard that satisfies the surveyor and then we pay.
2. It seems we have a problem of definition here. What are the standards for determining ‘fit for habitation’ and ‘not compliant with the contract’. My understanding is that the first group are show stoppers while the second are items on a snagging list.
A further anxiety is that many of the other 47 properties in the development still have not had their snagging lists fixed, some a year after asking. Gossip says this is due to developer cash flow problems.
3. There is also confusion of purpose. We wrote our first list 15 months ago. The developer eventually responded (01/07) with agreement to mend things and a statement by the builder that the work would be done. In 05/07 nothing had been done, the neglect had allowed some faults to get worse, e.g. a retaining wall had bowed outwards, a cracked joint had allowed water into the cellar ceiling part of which has fallen down.
We believe that if they have said that they would complete work it is some kind of assent that that should be done prior to completion of sale. But we do not know the Spanish position.
4. Our lawyer believes that the developer is desperate and will issue a demand for payment shortly. This leads to the advice to put all our ducks in a row so that we can pay if required and then ask for the survey when the demand is made. She understands that they were annoyed that the surveyor was visiting – I had agreed that this would happen with the developer’s office – but although the developer’s lawyer rang the surveyor while he was on his way to the inspection there has been no follow up contact with our lawyer.
This seems to me to be a reasonable (philosophically but perhaps not according to Spanish law) position. Is that feeling correct?
5. The developer is Arquam based in Medina Sidonia, Cadiz.
6. This process has taken so long that our lawyer is about to have her second child while it has been happening. In the next week. This means that she is understandably occupied with other thoughts.
We have known and liked her for these three years. She is natively bi lingual. I am unclear about whether or not she should be being more aggressive. Having been a project based worker for much of my life I am uncomfortable with the lack of clarity in how the plan pans out, particularly since there seems to be risk of financial penalty for me in the murky future. Can I reduce the risk? Should I be aggressive or patient?
Having occupancy of the property is not something which we must have. It is tying up some funds but that is not too much of a problem.
Once more thank you for the prompt help.
Once again thanks for the prompt and helpful response.
Shakeel
Thank you, too, for your response which arrived as I am writing.
1. We had thought to use an escrow account to hold the funds until the work was done. Is that permitted in Spain?
2. The surveyor cannot give a value for the work since he has yet to inspect but I take your comment to mean that once he had visited, after their demand for payment, the value he put upon the work should be witheld from the final payment. That sounds a good idea and, I guess, we should include a contingency sum.
3. Not signing till all is complete is our plan – but the advice seems to be that that may not be an option under Spanish law.Thanks again.
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@lost_in_spain wrote:
We are taking our lawyer’s word for the existence of the LFO. Perhaps I should ask to see a copy.
I have heard of more than a dozen cases where a lawyer says there is a LFO when in fact there isn’t one. The same goes for the Bank Guarantee(BG) – do you have one of those? You should do, by law.
Suggest the following:
Step 1. Definitely request a copy of the LFO (and BG if you haven’t got that either) to be sent to you.
Step 2. If neither are forthcoming, you really need to find yourself a new lawyer.Reading your comments re. your lawyer, personally I think you need a new one anyway. Was she agent and/or developer recommended?
And most important of all: Do you really want to complete on a development where walls are falling down and the developer has cash flow problems?
The fact that 47 other properties have still not had their snagging lists fixed, even after a year, says it all.
Am sending you a pm. -
Charlie
Thank you
We will ask for the LFO.
Not sure that I understand what a BG is. We have a document from the bank – Unicaja – to the developer underwriting the development of our property. The plan is to take over this loan with a mortgage at Unicaja.
My translation of the document suggests that this funding is now time expired. We do not know if the bank has extended it or the developer is supporting it. Either way, were I the developer, it would make me spring into action.
Our lawyer was recommended to us by a Spanish friend in the area who had been in commercial property with Savilles. Both the developer and the estate agent were unhappy with the choice. The chap who recommended her has recently been speaking of her lack of aggressiveness.
I simply want effectiveness, and a decent plan.
What I am proposing is that we get a surveyor involved when we receive a demand. The surveyor should provide an estimate of the cost of the work. We pay the sum requested minus the cost and a contingency with a condition that the remedial work is completed by an agreed date. If they fail to meet that deadline then we commission the work. I would use something like an escrow account although I do not know if they exist in Spanish. I guess they must do.
What do you think about the principle?
It is difficult when you have problems in evaluating performance (how well does the lawyer do relative to other Spanish lawyers?) and have no knowledge of the standard (how high should the lawyer be able to jump?)
But your advice is a great help, thanks.
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Aggresiveness does not all ways pay as the Spanish can turn into a bull mentality ( stubborn ) irrespective of the rights or the wrong. You are challanging a latin mans Bravado ?
If as you say the builders has cash flow problems than anything you pay to them will go it and will certainly not be spent in sorting out you property.
If, I was you I would be prepared to go to Courts and take the cost etc and put it down to experience. For reasons
1) The builder needs cash and the Court can take years.
2) To many english/non Spainards in the past have not taken the builders to Court for a quite life and the builders know and exploits the situation to the greif of thousands others .
3) After speaking to your lawyers, with her advise you can also place the witheld amount with the Notary office.
4) Most guarantees are time related. Check if the guarantee is still valid. I have a feeling that this has not been renewed, as it cost money to do so.
5) If the developers are not allowing you/Surveyour access to the premises. Explain to him the works and ask him for an expected generous cost and state to your lawyer that this was based as access to correctly value the cost was denied.
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@lost_in_spain wrote:
Not sure that I understand what a BG is. We have a document from the bank – Unicaja – to the developer underwriting the development of our property. The plan is to take over this loan with a mortgage at Unicaja.
My translation of the document suggests that this funding is now time expired. We do not know if the bank has extended it or the developer is supporting it.
A Bank Guarantee is a document, issued by a bank, that guarantees your monies paid upfront for an off-plan property. Developers are obliged by law to provide each purchaser with a BG.
This document should say ‘Avala’ at the top, and it should be between the bank and you, stating your name, address, passport number,the amount you have paid as deposit etc. There will also be an expiry date.
From the info. you give, it looks like you are possibly holding an agreement between the bank and your developer, and possibly a mortgage/loan document. If it is, it looks like your developer not only had your money, but took a loan against your property as well. The property would be the bank’s collateral for the loan.
This means if your developer-with-possible-cash flow problems goes bust for whatever reason, or he fails to maintain the mortgage payments, the money you have already paid is not protected and you would be left holding nothing as the bank would then take the property.
While requesting a copy of the LFO, you must also confirm with your lawyer whether you have a Bank Guarantee (in your name) or not. Hopefully she has an ‘Avala’ (BG) from the bank made out to you. Otherwise you are very financially exposed and at risk.
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