Tag Archives: Property

LEY 57/68 (ENGLISH)

Article One – The legal and natural persons who promote the construction of homes, that are not of official protection, designed as a home for domicile or family residence with a permanent character or a seasonal residence, accidental or incidental and which seek to obtain deliveries of purchasers money before starting or during construction, must meet the following conditions: First – To ensure the return of the payments made plus six percent annual interest, by means of Contract of Insurance granted with an Insurance Entity inscribed and authorized in the Record of the General Sub-department of Insurers or by means of a Bank Guarantee issued by an Entity inscribed in the Record of Banks and Bankers or Savings Banks, if the construction does not commence or complete for any reason by the agreed deadline. Second – Receiving the sums advanced by purchasers through a Bank or Savings Bank, which must be deposited in a Special Account, with separation from any other funds belonging to the promoter, which may only contain funds deposited for the construction of dwellings. For the opening of these accounts or deposits the Banking institution or Savings bank, under its responsibility, will demand the guarantee to which the previous condition refers.

Article Two – Contracts for the sale of the homes, referred to in the first article of this Law, which involve the payment of deposit funds to the Promoter must be expressly state: a) The transferor is obliged to refund to the assignee of the sums received on account plus the six percent annual interest if construction is not commenced or completed within the agreed timeframe to be determined in the contract or if the Certificate of Habitability (Licence of First Occupation) is not granted. b) Reference to the guarantee or insurance contract specified in the first condition of the previous article, with indication of the name of the guarantor or insurer. c) Name of the Banking Institution or Savings Bank and details of the account where the deposit funds will be held as a result of the celebrated contract.
At the time of issuing the contract the grantor will issue to the grantee the above mentioned Guarantee Document which must cover all amounts paid towards the total price.

Article Three – Upon expiration of the period allowed if the construction and delivery of the dwelling has not taken place, the assignee may choose between the dissolution of the contract with repayment of the amounts paid in advance, plus the six percent annual interest, or give the assignor extended time and this period must be stated in an annex to the contract awarded, specifying the new period with the date of completion of construction and delivery of housing. In insurance contract or an endorsement attached to the authentic evidence which did not credit the initiation of construction or delivery of housing will be enforceable for the purposes provided in Title XV of Book II of the Civil Procedure Act to require the insurer or guarantor delivery quantities to the assignee’s right, in accordance with the provisions of this Act

Article Four – Once the Certificate of Occupancy is issued by the Provincial Delegation of the Ministry of Housing and given by the promoter of the housing to the buyer the rights guaranteed by the insurer or guarantor will be cancelled. Article Five – It is a prerequisite that any propaganda and publicity material issued by the promoter for the sale of housing containing information on the levying of amounts on account prior to the initiation of construction or during construction must meet the requirements of this Act, and make explicit reference to the guarantor, as well as the Bank or Savings Bank Special Account in which they will deposit the amounts advanced. The above mentioned must be specified in the text of the advertising that takes place.

Article Six – Failure by the promoter to comply with the provisions of this Act will result in being fined per violation, which will be imposed under the rules laid down in LEY 49, 30th July 1959, subject to the jurisdiction of the Courts of Justice. Failure of the developer to return to the purchaser all sums advanced, will result in violation of the provisions of Article I of this Act and shall consist of misconduct or crime punishable under articles 587, number three, and 535 of the current Penal Code, respectively, and will result in the imposition of the penalties of section 528 in its maximum degree.

Article Seven – The rights that the present Law grants to the grantees will be of an indisputable nature. FINAL PROVISIONS First – The Government is authorized to make a proposal to the Minister of Housing, and by decree, to identify the bodies of official character that are able provide sufficient guarantees and are exempt from the application of these rules. Second – It authorizes the Ministers of Justice and Housing to dictate the supplementary provisions as they deem necessary for the development of this Law, which took effect the day following its publication in the Boletin Oficial del Estado. ADDITIONAL PROVISION The Government is authorized to make by decree, and within six months against the entry into force of this Act, adapt the same principles that may be of application to the communities and housing associations.

CONTROVERSY

Quite a number of law firms have tried to apply law 57/68 in respect of properties in Morocco. With some developers, specially, those who did not furnish their clients with bank guarantees, it has been specially difficult to obtain and prove the link between the Spanish and Moroccan arms of the operation, not because these links do not exist, but because to obtain any detailed official documents is practically impossible to those who are not on the ground. With one developer in particular, it has taken us over three years to obtain that proof, all with considerable expense. Obviously, these documents are worth their weight in gold and will be presented to the court for the matrix case in Spain. A favourable resolution here will lead to all hope for the subsequent presentation of individual cases, this time with an extremely high percentage of success.

 

 

LEGAL PROCEDURES

The procedure is divided in two stages:

  • A potential favourable ruling on the link between the S.A.R.L and the S.L (A general matrix ruling)

  • Individual case by case (Each client individually).

MATRIX RULING:

What is a Matrix Ruling: (In this particular case) It is a case won by the accusers at the first instance court that will create a precedent, Law 57/68 is one of those pieces of Spanish legislation that admits precedent. Spain is a civil law country and not Common Law, as for example the UK. However, in some instances the civil code admits precedent which in Spanish is called “jurisdicción” (jurisdiction has a different meaning under, say, English Law). What are we trying to achieve with this? – Very simply… We are trying to prove that the S.A.R.L (Morocco) and the S.L (Spain) companies are one and the same. If that ruling comes through, it will be taken into consideration by a judge when the time comes to take to court each individual case. According to my legal sources, if this is established there is an 80 to 90 percent chance that the defendant will win each individual case. The Matrix case will take less than a year to come through.

INDIVIDUAL CASES:

Armed with precedent, each individual client will take “their” bank to court in order to claim the deposits originally transferred and to win a compensation package.  This is the second stage.

 DOCUMENARY REQUIREMENTS:

For the Matrix Case there is no need to send any personal documents, we will only require a signed mandate form and a Power of Attorney. Both documents we will prepare.

For each individual case: If you are an existing NHI client, we will have all the information on how you paid the developer. Eventually, you will need to notarise and apostille the following documents:

  • Sales Contract (French Version Only)

  • Proof of Payment (Very Important)

  • Power of Attorney (Spanish Version Only)

  • Copies of Passports (No need to Notarise nor Apostille this)

FINANCIAL CRISIS (2008)

Spain was one of the hardest hit countries during these years and specially it’s house market. Although the country was not officially “rescued” by the EU, a lot of money had to be injected into the banking sector, namely what were called “Cajas de Ahorros” or Savings Banks. These were usually public or semi-public sector institutions with a marked regional implantation and whose spirit was in theory to serve the public, in the sense of promoting social campaigns, and developing their, usually, rural environment.

Because of the consequences of the financial crisis, and the resulting and repeated failings of developers to deliver, the formerly forgotten law was revived with hundreds of people benefiting from it.

To be continued

COMPOSITION OF THE LAW

It is composed of very few articles, seven in all, but has the moral superiority of legal precedent behind it.

It established certain responsibilities for developers and builders who sold off plan, one of these responsibilities was the opening of separate bank accounts to receive customer deposits only, keeping this well apart from day to day transactions. Disposal of funds only had one aim, the progressive funding of construction.

Another interesting disposition, specially, for the time, was the necessity for (the developer) client’s funds held at the developer’s bank, to be fully protected by an insurance policy and/or a bank guarantee. It, therefore, created a responsibility upon the bank or insurance company who were now responsible for reimbursing the deposits to the buyer should there have been a breach of contract on the part of the developer.

This new burden for the bank or the insurance company made it harder for the developer to obtain finance as conditions were hardened. It meant that only the most reliable / reputable developers managed to obtain funding as the bank would in turn ask for guarantees or collateral.

This naturally and accidently lead to the bank or insurance company to be extra zealous when it came to be supervising the application of funds by their developer clients.

As things settled into place and the house market consolidated, this supervision was somewhat relaxed and there was a time during the various boom years that nobody gave this law any thought at all, although banks and insurance companies were still required by law to issue guarantees to individual buyers.

To be continued

BACKGROUND

Spanish Law 57/68 has been talked about a lot recently but there is a big mystery about this piece of legislation. It has been, and it will continue to be, the great unknown.

Law 57/68 goes back to the sixties and it’s one of the very few pieces of legislation from the day that remains in place. It came at of time of great demand for property and the lack of supply in the market, directing people to buy off-plan. Those were the days of the so called Spanish Economic Miracle, when millions of country folk flooded the cities looking for new prospects. As can be imagined some of these people were targets for the “ever present” unscrupulous developer, a “tradition” that has lived on almost everywhere. Something was to be done to protect the victim.

To be continued

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