I am thinking of purchasing a dwelling that is starting to be built now. The development company has informed me that the construction work will be completed in one year, however, I am required to pay part of the price in advance. What happens if the development company delivers the dwelling at a date later than the date promised or if the construction of the dwelling is not completed? How will I be able to obtain a refund of the amounts I have paid?
Making payments in advance presents the inconvenience that, owing to the vicissitudes of the construction, the envisaged aim is thwarted, with the ensuing risk of losing any payments made. To cover said risk, the Law requires that the following rules are complied with:
- Property developers of housing not covered by the special state protection system and that aim to obtain money from the future purchasers prior to the commencement of the construction work or during the construction work, are required to guarantee the refund of any amounts paid, plus the annual legal interest, by means of an insurance contract granted by an insurance company or a joint and several guarantee furnished by a bank or savings bank, in the event that the construction work does not commence or does not reach successful completion for whatever reason, within the specified time limit.
- Contracts concluded with the development company in which it is agreed to deliver amounts in advance to the development company, must expressly state, amongst other circumstances, the obligation of the development company to return to the future purchasers any amounts received from them plus the annual legal interest in the event that the construction work does not commence or conclude in accordance with the time limits agreed to in the contract, or in the event that the licence of first occupancy is not obtained. The contacts shall refer especially to the guarantee or insurance contract specified above and indicating the guarantor or insurance company.
- At the time of signing the contracts and paying the amounts in advance, the development company shall deliver to the future purchasers the guarantee or insurance contract specified above and individualized in respect of said amounts.
- If the commencement of the construction work or the delivery of the dwelling does not take place within the time limits agreed to, the future purchasers may opt to terminate the contract and enforce the guarantee or grant an extension to the development company, specifying the new period with the conclusion date of the construction work and the delivery date of the dwelling.
- The guarantees furnished by the insurance company or guarantor are cancelled once the licence of first occupancy is issued and the delivery of the dwelling to the purchaser is executed before a notary public by means of the execution of a public deed and the handing over of key.