JUNE 2012 |
www.opp.org.uk WORDS | Stefano Lucatello
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Developer profi lePROBLEM PAGE | 65 What’s your problem?
Here is the fi rst edition of OPP’s problem page, where we ask an overseas property expert’s advice on to deal with problems that can arise in the industry. This month, lawyer Stefano Lucatello considers what an agent can do if a Cape Verde developer isn’t performing as promised…
The Problem: I sold three apartments in Sal (Cape Verde) to a client. They were due to be delivered in July 2011. Two of them have not even started construc- tion. One is about half built. My client has had many telephone calls and emails with the developer. They keep on promising progress but nothing ever happens. He now wants to cancel the contract but they refuse to allow him to do so and say that the delays are all beyond their control. He has invested about €180,000 so far, with another €75,000 due on delivery. He has also paid €30,000 for three furniture packs, despite the properties not being finished. He is not at all happy and now says that this is my fault as I should never have sold him this property. What can he do? What can I do?
I
t is very important to consider local/ national laws and regulations, together with the taxation applicable to such a purchase beforehand. In this case, Cape Verdean property law is based on Portuguese law and follows similar principles. In Civil Law countries, mainly
those in Europe, the terms regulating property purchases are contained in a “Promissory Contract of Purchase and Sale”, signed by the seller and the buyer. This document sets out the terms agreed by the parties for the purchase, and identifi es the parties, property, purchase price, payment schedule and the date of completion or the method by which completion will occur.
As a rule, no other document will have precedence over the promissory contract, nor will any other document be read in conjunction with the contract, so it is most important to have all your conditions set out clearly in this document, so that in the case of a dispute with the developer, the buyer can refer to the contract to defend his claim.
All promissory contracts require payment of an initial deposit, ranging from 10% to 30% of the purchase price. With a purchase from a developer
in an off-plan purchase such as this one, if the buyer fails to complete the transaction (due to his own fault) the civil code provides for initial deposit to be retained by the seller.
The code also provides that if the failure to complete is the seller’s fault, then the buyer will receive twice the deposit paid. The penalties enshrined in the code can’t be excluded. Before entering into any binding agreement, a proposed purchaser must carry out a series of checks, searches, and investigations, as well as obtain assurances to protect himself. This is called carrying out due-diligence. This includes requesting a copy of the Land Registry certifi cate for the land or the property from the Conservatória de Registo Predial.
This will reveal the land ownership and it’s location and whether there are
any matters registered against the owner of the land or the land itself. It is highly advisable to verify the existence of a habitation licence if the property has been completed or in the case of “rural land” or land in the countryside or designated as agricultural, whether it has been assigned the local authority’s consent to build on it if the same has building licence. Failure to check may mean you are unable to occupy the property and connect to utilities and in the second case demolition of the property without
“Your client
should write to the developer setting out why he thinks he is in breach ”
compensation.
On completion, ownership is transferred at a local Notary’s offi ce, where the property is located. The Notary is a state-appointed offi cial (a lawyer by training) who sees that all the completion formalities are completed. He/she is also the collector of taxes for the Government. The following response assumes the following; 1. The applicable law is Cape Verdean and that all remedies available are to be sought within Cape Verde.
2.The buyer has fully complied with the terms of the contract and all payments have been made in accordance with the contract terms. In off-plan purchases, construction and delivery maybe delayed for different reasons; (i) the seller’s fault not associated to an act of “force majeure” (Unforeseeable circumstances that prevent someone from fulfi lling a contract) or (ii) by force majeure. When the non-compliance, by the developer, with the terms of the contract is not linked to an act of force majeure, that’s to say something which is not “out of his control”, the buyer is entitled to be fully refunded, together with penalty damages, as set out in the
civil code.
Developers often set out their own compensation or termination provisions in the contract, however these cannot exclude the civil code provisions. So we would have to check the contract. For example, the ability of the buyer to (i) terminate the contract and receive back all monies so far paid (ii) terminate the contract and receive twice the sums paid (iii) receive a compensation, based on the number of days delay, subject to a maximum and on a formula set out in the contract. Your client should take the following action: 1. Write to the developer at the address set out for service of documents in the contract, setting out why he thinks the developer is in breach. 2. Give the developer 14/21 days to respond fully, as to why he cannot complete the build and handover (Or follow the complaint procedure set out in the contract). 3.If he responds with his reasons, consider whether the reasons are “out of his control” or “force majeure” or whether they are solely down to him for other reasons. 4. If he asserts “force majeure” then the contract will surely give him 180 calendar days beyond the completion date, by which to complete the build and handover. If this is the case you can’t do anymore during that period, so sit back, wait and monitor any progress. 5. If the delay isn’t down to “force majeure”, then does the contract provide for any compensation, how is it calculated, for how long and when does it start? 6. If so write back setting out what you think you are entitled to and give him 14 days to respond (Again subject to what the contract may say). 7. If the contract doesn’t provide such a mechanism, then you have the option to terminate the contract and receive back all monies paid, plus interest and damages. 8. Advise him that unless he responds and satisfi es your claim, that you will issue proceedings in the Cape Verdean courts or commence Arbitration
proceedings, dependent on what the contract provides. 9. You must ask for the return of the monies used for furniture packs independent of anything else. 10. Once all reasonable avenues have been exhausted and dialogue comes to a “stop”, issue proceedings, for whatever remedy you decide to go for, using a specialist lawyer, like ourselves, sit back and wait patiently for the law process to move forward. 11. Litigation is expensive in any country. Check whether the client has legal expenses insurance on his home insurance policy or whether he can obtain “after the event insurance”. As regards what you can do as an agent, keep the pressure on the developer to complete the build and keep the client fully appraised. In other words, be professional.If the developer is a member of AIPP, report him to AIPP, which has a disciplinary code. It is worth noting that English
courts are now more sympathetic to clients’ claims against agents here in England and Wales and that agents are now being made liable for misrepresenting the development,or any matter considered by the Courts to be fundamental to your client entering into the contract, such as a high yield, guaranteed returns, the position or location, the proposed amenities etc. Don’t over-egg the pudding just to get a sale. It may come back to haunt you.
Please note that the above advice provides general information and does not constitute specific legal advice. Kobalt Law LLP accepts no liability for incorrect content or ad- vice and reliance upon any part of the above response by any reader. For further information or advice, please contact Francesca Pecego or Stefano Lucatello at Kobalt Law LLP on +44 02077391 700 or email
francescap@kobaltlaw.co.uk or
stefanol@kobaltlaw.co.uk .
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