We frequently receive calls to our office in which buyers of new-build properties ask us whether or not they can terminate the contract with the developer, because their circumstances have changed since the time of signing the contract. To resolve these doubts, we have written this post.
The purchase of a property, whether new or not, is always one of the largest investments that we will make in our lives, which is why it is especially important that before taking any step, we analyse well what our obligations and rights will be and what we should know if we are going to buy a property off plan.
Our advice is to always contact a specialised lawyer who will assist the buyer throughout the whole buying and selling process because it is he/she who will not only be able to ensure the rights of the buyer in the purchase contract and in the mortgage loan, but also explain what obligations are being assumed.
That said in regard to the question of whether or not a buyer of a newly built property can terminate the purchase contract, the answer is: it depends on each case. Why?
In principle, the buyer of a newly built property cannot terminate the purchase contract merely because his personal circumstances have changed. Reasons such as I have lost my job, my partner has not been granted the mortgage loan, I have to move to another city, etc. These are situations that, as a general rule, do not exempt the buyer of a newly built property from fulfilling his contractual obligations.
However, when in long-term contracts such as those for the purchase and sale of a newly-built home, once the contract has been signed, extremely serious circumstances occur, not foreseen by either of the parties or by the legislator itself, and these circumstances also lead to a breach of the contractual equilibrium, it is possible to request a review of the contract and, if this is not possible, its termination.
Let us take a practical case to illustrate this better. In 2004, a married couple decides to buy a newly built house for which they pay amounts of money in advance. The property is expected to be delivered in 2010, but four years after signing the contract, the buyers want to terminate the contract with the developer because the husband has lost his job as a result of a redundancy programme in his company. With the new circumstances, the couple no longer have enough financial means to afford the purchase.
In principle, losing one’s job would not be a reason to terminate the contract with the developer. But if we take a closer look, we can see that:
1. It is a long-term contract.
2.The purchase was made in 2004 when nothing warned of the devastating economic crisis that would hit the country four years later.
3.The economic crisis is an extremely serious circumstance which, moreover, has come about unexpectedly without the parties or the legislator having been able to foresee it.
4. And it also causes a clear contractual imbalance because it is not what hinders the fulfilment of the contract by the couple, but rather the things that makes it impossible.
In this specific case, in our opinion, the married couple of purchasers of a newly built home could first request a review of the contract and, if this were not possible, the termination of the contract.
In order to reach this conclusion, we have used the rebus sic stantibus clause which, although it is not regulated as such in Spanish law, has been regulated by the courts through case law.
If you have any doubts about your rights and obligations in the contract of sale of your newly built property, please do not hesitate to contact us via the web, by e-mail at firstname.lastname@example.org or on 954 536 038 and we will offer you our opinion without any obligation.
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