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Developer unaware works license had been revoked, so no grounds to annul purchase contract

A couple in the La Rioja region of northern Spain who attempted to have a contract for the purchase of an off-plan apartment declared null and void due to delays in completing the apartment have had their appeal to the Supreme Court turned down.

The court heard that the couple had agreed to purchase the off-plan property in August 2005, just as the property boom in Spain was reaching it’s peak, while the contract provided for completion of the apartment by March of 2007, along with the first occupation license and certificate of habitability from the local authority (required to be able to use property).

The contract further provided that, should the apartment not be handed over by the stated date of March 2007, that the purchasers could rescind the contract and obtain the return of any monies paid over to the constructors up to that point, unless, the contract continued, the delay was caused by ‘force majeure’ or reasons other than the construction of the property or the actions of the constructor.

Delays in Obtaining Certificate of Habitability

The construction was in fact completed by October 2006 and the constructor applied for a license of first occupation in February 2007. The property could not be effectively handed over by the March 2007 deadline due to delays in obtaining the certificate of habitability because the works license had been revoked as a result of judicial proceedings. In the end the certificate of habitability was not conceded by the authorities until July 2008, more than a year after the date specified on the contract.

However, the Court of First Instance decided that the contract for the purchase of the property could not be rescinded unless the delay in handing over the completed property, with all of the necessary licenses in place, could be imputed to deceit, negligence or default on the part of the constructor. In the case before it, that could not be said, nor could the delay be said to have been a voluntary act by the constructor nor have been a result of the construction itself.

Constructor Unaware of Court Proceedings

The Court of Appeal agreed with the Court of First Instance that the reasons for the delay could not be imputed to the actions or inaction of the constructor, but rather resulted from the revocation of the works license by the Local Authority in La Rioja in a judgment in 2005. While this decision of the court took place in July 2005 days before the contract was signed, the constructor was not made aware of the decision until, the Court accepted, the works were embargoed by the Court in November 2006, after the works had been completed.

The Supreme Court agreed with both of the lower courts and decided that the fact that the constructor had not been party to the original court proceedings which had decided to revoke the works license back in 2005 was key to the decision. Those proceedings had been initiated by an individual against the Local Authority with a different constructor being implicated. As such, the constructor in the present proceedings could not be considered to have been aware of the problems with the work license until the local authority took steps to make them aware in November 2006, long after the contract had been signed, and indeed the construction had been completed.

Since the delay in obtaining the certificate of habitability was a direct result of the revocation of the license, something that the constructor was unaware of, then the delay could not be attributed to the actions or negligence of the constructor and it was not therefore possible to obtain rescission according to the terms of the contract.

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