Does the bank take on the developer’s liabilities?
Banks have now taken over numerous developments because developers failed to repay their loans.
The bank offers its customers prices well below market value to sell the properties in its portfolio, but is there a catch? Do we know what we are buying? Why is it so cheap?
Let’s set the scene: you have some savings to invest and, of course, now is a very good time to buy. Then a bank offers you a property and would even grant you the mortgage. So far, so good and quite normal.
When you view the home, you notice some damp and cracks in the communal areas and perhaps in the home itself, but the bank’s sales agent plays them down and tells you that, as the bank has taken over the development, they will fix all those defects, which are not important anyway. You believe it: the development is attractive, the home is fine and the price is very appealing.
At the notary’s office, you are presented with a series of clauses which, as they are read out quickly and you have already been told that the bank will fix those defects, you do not pay much attention to, and you sign your deed.
A short while later, it turns out that those defects were not fixed properly, or not fixed at all, and have even worsened, and you consider making a claim.
And it is now, at this point, reading the building’s documentation to see whether a court claim against the developer was possible (in this case, the 3-year guarantee period for claiming against the parties involved in the construction – architect, quantity surveyor and building contractor – has expired), that you find the developer is insolvent and the bank kept the whole development (which you already knew), but now you want to know whether the bank is liable.
Well – or rather, not so well for you – the bank protected itself when drawing up the deed of sale in such a way that it will not now be possible to claim against it for construction defects. The deed contains clauses such as:
“…The buyer states that they have had ample opportunity to inspect the property and are aware of any defects it may have that are visible and perceptible without the need for technical knowledge…
“…the seller shall not be liable to the buyer for the aforementioned defects…” or
“…the parties state that the price agreed for the sale has been set taking into account the condition of the property, and the buyer therefore waives any claim against the seller in this respect…”,
…and other similar clauses.
The upshot of all this is that you will not be able to claim against anyone for those construction defects. It also turns out that the house you bought as a bargain is not such a bargain after all. But let’s be honest: if you bought it, it was because it was a bargain, an opportunity given the condition of the property… and that is why you bought it so cheaply. That’s the way it is.
In short, if you buy from a bank, read the draft deed of sale you are going to sign first and, if you see stipulations or clauses of this kind, consult an expert – whether an architect or a lawyer – and think it over; and if you go ahead with the purchase, do so accepting all the consequences, knowing that you will not be able to claim for the construction defects you saw, or chose not to see, and that you have waived the right to claim for them.
If in doubt, consult www.dpcon.es
Any questions?