Spanish Property Deposit Refund

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license of first occupation

Spanish Property Buyer’s Deposit Refunded as no license of first occupation

The Supreme Court in Madrid has refused an appeal by the developer of  La Reserva de Marbella, and confirmed the decision of the Regional High Court in Malaga that the company must refund the buyer’s deposit that they had handed over in 2003 for the purchase of a property to be built on the new complex in Marbella , plus legal interest, due to their failure to provide a license of first occupation.

The problems with the urbanisation arose, as with so many similar new-build urbanisations in the area, as a result of the status of the land on which the building took place, not having been designated in the Municipal Plan as land on which residential properties could be built.

In the Court of First Instance, the court ruled that the failure by the developer to provide a license of first occupation to the purchasers of the property (the application was expressly rejected in 2006 by the Marbella Town Hall as it did not conform to the Area Plan) was a breach of contract that permitted the purchasers to cancel the contract and have the purchase monies returned along with legal interest.

Fundamental Breach

The Regional High Court  agreed with the lower court, stating that there was a fundamental breach of the contract by virtue of the failure by the developer to provide a license of first occupation. The concept of ‘administrative silence’ did not create a license by default as a result of the planning irregularities relating to the area and since administrative license does not make legal that which is illegal. The High Court  did vary one point of the lower court’s decision, being  the date from which legal interest became payable, which was confirmed to be the date that the contract to purchase the property was signed.

The developer appealed to the Supreme Court, alleging that the failure to provide a license of first occupation was not a fundamental breach of the contract and that the purchasers’  earlier refusal to pay the full price to the developer meant that they could not later cancel the contract and in fact rendered the absence of a license as a mere excuse to rescind the contract.


Deprived of the Enjoyment of that which was bought

The Supreme Court agreed with the High Court and rejected the appeal. The Court found that any breach by the seller that is capable of depriving the purchaser of the enjoyment of that which has been bought would be sufficient to give rise to a right to cancellation of the contract. This was the case whether or not the promise to provide the buyer with a license of first occupation was expressly contained in the contract for purchase or not, or even where the circumstances would suggest that the timely delivery of the license would be possible.

The court also dismissed the appeal based on the prior failure to comply with the contract on the part of the purchasers since the argument was based on the notion that the  administrative obstacles would not render the occupation of the property impossible but would nevertheless make it inevitable that the purchasers would find themselves in a situation of uncertainty with no known end date. This uncertainty would in itself be a sufficient motive for cancellation of the contract and the appeal by the developer must therefore fail.

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