Abusive Clauses in Off-plan Contracts

Abusive clauses in off-plan contracts

At Costaluz Lawyers, we are now seeing the same situation as before the property bubble in the mid-2000s. Developers and real estate agents are putting pressure on buyers to buy with contracts literally stuffed full with abusive clauses. Furthermore, these contracts seek to reduce consumer rights by removing all opportunities for negotiation even when a clause is clearly abusive and illegal. This article lists some (but not all) abusive clauses that you may find in an off-plan contract in Spain.

The top tip

But first a word of warning and one we never tire of repeating: take independent legal advice from the very beginning.

Even before you start your search for a property and definitely before you sign any sort of contract or pay any money. A qualified lawyer will ensure that you don’t start the process by losing thousands of euros.

Did you know? Costaluz Lawyers have years of experience in helping buyers sign fair and reasonable off-plan contracts in Spain. Get in touch to find out how we can help you.

What is an abusive clause?

These clauses are as bad as they sound and, in a nutshell, they give one party an unfair advantage over the other.

In legal terms, their definition is as follows: “Abusive clauses are all those that are not individually negotiated”. In addition, “they include all stipulations that are not expressly agreed to and that prejudice the consumer by causing an imbalance of the rights and obligations between the parties to the contract”.

Read more about off-plan contracts in Spain.

What are the most common abusive clauses that off-plan buyers need to watch out for

What are the most common abusive clauses that off-plan buyers need to watch out for?

In the following list, you’ll find some of the most common clauses that clearly give the developer an unfair advantage over you, the buyer.

Non-mutual penalty for ending the contract

Common clauses in a contract are those that set a penalty for the buyer should they decide to end the contract or in certain circumstances. However, these clauses rarely fix the same penalty for the developer.

Obligatory payment of Plus Valía Tax

This tax, known as the Impuesto sobre el Incremento de Valor de los Terrenos de Naturaleza Urbana and Plus Valía for short, corresponds to the seller of a property, not the buyer.

Buying a property in Spain? Read our free guide first.

Forcing the buyer to take on the developer-seller’s mortgage

Buyers can choose between taking on the developer’s mortgage or getting a loan from another lender offering better conditions. If they go for the latter option, they are not in any way obliged to pay cancellation costs for the developer’s mortgage or any penalty for not taking on the mortgage.

Setting an undetermined date for completion

The contract should start the quarter and year for completion (the last day of the quarter is the final date). The practice of giving automatic extensions to the completion date, through which the buyer gains little or nothing, is abusive.

The developer is a professional in the construction sector and therefore when setting a date for completion in the off-plan contract should bear in mind all possible obstacles in the building process, including the time it takes to get a first occupation license.

Legislation is crystal clear on this point and does not allow the developer to pass the business risk to the buyer. On the contrary, Spanish law obliges developers to compensate buyers for any damages or inconvenience caused by the delay.

About to sign an off-plan contract? Get expert legal advice first and save time, money and stress.

Imposing the choice of notary on the buyer for the signing of title deeds

The buyer has the right to choose any notary for any reason for completion of the purchase.

Changing the conditions, distribution, materials, or other circumstances of property

Everything about the property that is stated in the fittings and finishes document or the building project forms part of the purchase contract. If the developer wishes to include the possibility of making modifications, there should be a clause stating that technical aspects may have to adapt to current legislation so that the first occupation license can be given.

Waiving the developer of his responsibilities for construction defects

The National Building Regulations Law (Ley de Ordenación de la Edificación/ LOE in Spanish) clearly establishes a series of guarantees for construction defects. These guarantees are for one, three and ten years from completion, depending on nature of the defect. Any clause exonerating the developer from his legal responsibility is null and void and as if it didn’t exist.

Possibility of changing the price during the construction period

The price forms the backbone of a purchase contract and as such, the seller cannot change it as they see fit. The only possibility of changing the price is if the reason is perfectly justified and objective. And only if the buyer has the opportunity to end the purchase contract with no penalty because of this circumstance.

Non-approval of loan

If the developer-seller signs a clause committing to obtain a mortgage for the buyer and this finally does not happen leaving the buyer with no loan, this means, in practice, that the seller has not fulfilled the contractual obligations. The buyer may therefore end the contract and is not be obliged to pay the final sum due at completion (which was going to be financed by a mortgage).

Final top tip

This list is by no means complete – there are many more abusive clauses that turn up time and time again in off-plan purchase contracts.

A fair and just contract is always possible, but only if you have expert independent legal advice on your side. Contact us now to find out how to get yours.

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