Экзамен зачет учебный год 2023 / European Condominium Law

units concerned. The provision corresponds to what is usually agreed upon by the parties to a contract at armÕs length.

Metalegal formants

The Ministerial Order was introduced partly to protect consumers and partly to make it possible for developers to sell units under construction and allay buyersÕ suspicions caused by press criticism and extensive public debates some years ago.

England

Operative rules

There is no rule in the English legislation requiring that all buildings in the scheme must be structurally Þnished prior to registration of the commonhold. Sales off-plan are thus possible,30 and indeed seem to be considered appropriate. Owing to section 7(3) of the Commonhold and Leasehold Reform Act 2002 (hereafter CLRA 2002), following registration of a commonhold development, it will come into being on the Þrst (completed) transfer of a unit, as to David,31 based on a detailed plan showing the physical extent of his unit.32 Alex may therefore decide to resort to section 9 of the CLRA 2002, which refers to registration of a commonhold with existing unit holders.33 This would permit him to delay registration of the commonhold until he is ready to sell the Þrst and a set of other scheme units Ôoff planÕ. In such a case, Alex must request the Registry that section 9 should apply, and furnish a list of all proposed purchasers of units with details as to each one of the proposed initial unit holders.

If, after the payment of his deposit by David,34 pending completion and registration as the Þrst holder of his designated unit, Alex becomes insolvent, David could presumably Þnd himself liable to pay the purchase price to AlexÕs creditors, as his successors in title. The terms of his

30Clarke, Commonhold – The New Law (2002) p. 26.

31Land Registration Act 2002 s 4(1)a).

32It must accompany the registration application and be in conformity with Model CCS Annex 2; see further Guidance paras 35Ð54.

33Clarke: Commonhold, p. 29; Clarke on Commonhold, 11[9].

34It will be appreciated that English law involves a two stage process in the sale of a unit Ð Þrstly a binding sale contract, with payment of a deposit of, for example, 10 per cent of the agreed purchase price, followed by completion of the transfer and registration.

may be deposited in the account of the notary concerned. A transfer of ownership to David is possible only once Alex has subdivided the land and the building into apartments and the relevant apartment ownership scheme has been registered in the land register. Such entry may occur before the building itself has been completed. In such a case it has been contended that, by analogy with the German law in point, the owner (David) has only an expectant right as long as the building has not been subdivided and the scheme not registered.36

However, in practice the parties will frequently conclude a preliminary contract whereby the seller is obliged to complete the apartment and to conclude the contract and transfer of the apartment to the buyer after the construction works have been completed. Opinions differ concerning the nature of the contract between the parties: the Supreme Court regards it as a contract of sale,37 whereas academic writers prefer to classify it as a mixed contract combining a contract of sale with a contract for services.38 In order to secure a buyerÕs claim for the acquisition of the apartment in the future, it is further possible to enter a pre-notation in the land register (Law on Property ¤ 63). This would prevent the apartment being sold and transferred to a third party but would not protect David in the event of the insolvency of Alex.

If Alex becomes insolvent and cannot complete the building, David may claim the return of money paid in the bankruptcy proceedings. However, he would have no preferent right on the proceeds of a sale in bankruptcy and would rank as an unsecured creditor. If, however, he paid the deposit and instalments into the account of a notary, it would not become part of the insolvent estate of Alex and he would be able to claim return of the money so paid.

Descriptive formants

The answers to the above case are based on the general priniciples embodied in the Law on Contract and the Law on Property. The possibility available to the purchaser to pay the deposit and the future instalments into the account of a notary, and thus to protect such

36Tiivel, Asjao˜igus (2007), pp. 248Ð9.

37Civil Chamber of the Supreme Court: Decision of 28 October 2009 in matter 3-2-1-98- 09, RT III 2009, 49, 360.

38Sein, ÔLeping kinnisvaraarendaja ja kinnisasja omandaja vahel: kas mu¬ u¬ gileping vo÷ i segatu¬ u¬ pi leping?Õ (2010), pp 222Ð5.

money on insolvency of the seller before the apartment can be transferred to the purchaser, is based on the Law on Property. The possibility to register a pre-notation in the Land Register with regard to the transfer of a future apartment is based on the German model.

Metalegal formants

The fact that units in a future apartment ownership scheme may be sold based on building plans and thus before the building is completed encourages investments by developers in the construction of condominiums as it offers the prospects for additional Þnancing from the future apartment owners. It should, however, be considered whether the purchaser is sufÞciently protected with regard to advance payments to the developer in case of the insolvency of the developer before the apartment is registered in the name of the purchaser.

France

Operative rules

Since 1967, French law has dealt with the sales of units from building plans by means of a special type of contract, known as a sale of a building to be constructed (vente d’immeuble a` construire). The relevant provisions can be found in the Law on the Sale of Immovables to be Constructed etc. of 1967 (art. L. 261-1 ff.). This particular contract is deÞned in CC art. 1601-1.

There are two types of such a sale, namely, a sale on credit (vente a` terme), which is seldom used in practice, and a sale on the state of future progress (vente en l’e´tat futur d’ache`vement), which is very common. In these circumstances David and Alex most probably concluded the latter type of contract. The relevant rules are very detailed and must be carefully followed if the relevant contract is agreed upon between a professional and someone who is not a professional (as where a private individual purchases an apartment as a residence). The main aim of the law is to protect the purchaser. In the case put, David will have to pay an initial sum of money to the developer followed by successive payments as the building proceeds. David will then become the owner of the building in phases, as the work proceeds, and is protected by law should the building not be completed.

First, David will have to sign a preliminary contract (contrat pre´liminaire), which gives him a personal right pertaining to the apartment.

He must pay a deposit (the amount is limited by the Law of 1967 art. R. 261-28), placed in a special bank account. Once the developer has signed a sufÞcient number of preliminary contracts, he ordinarily will decide to proceed with the construction of the building. Alex and David will then conclude the Þnal contract (contrat definitif), which contains the obligations of the developer to construct the building within a certain period of time and to transfer the property progressively to the purchaser, as well as guaranteeing that the apartment will be free from certain potential defects. If the Þnal contract is not concluded, or if it is different from the preliminary contract, the purchaser can recover his deposit.

Under the Þnal contract, the purchaser must pay certain Þxed instalments as the work proceeds (arts. L. 261-12 and R. 261-14). However, he has the beneÞt of either a completion guarantee (garantie d’ache`vement) (art. R. 261-17) or a repayment guarantee (garantie de remboursement) (art. R. 261-22), furnished by a bank which applies if the building is not in fact completed. Should the developer become insolvent before the unit is completed, the purchaser can rely on the completion guarantee to call upon the bank as guarantor (cautionnement), which will oblige the bank to credit the developerÕs account. This money should sufÞce for the completion of the building project. The developer can also decide not to give a completion guarantee but instead to give a repayment guarantee (garantie de remboursement). In the latter case, he must furnish the purchaser with a bank guarantee or surety bond which entitles the purchaser to demand that the bank must repay all the advances made to the developer if the contract is cancelled because the building was never completed.

Usually, developers opt for the completion guarantee, but can change their mind at any time during the contract period if this is provided for in the Þnal contract. If he does change his mind, he must notify the purchaser (art. R. 261-23). Both guarantees are useful and also sufÞcient protective measures for purchasers, such as David, if the developer becomes insolvent.

Descriptive formants

The possibility to enter into contracts for the sale of apartments to be constructed, as well as the protection of moneys advanced by purchasers of units in the future condominium, is based on the provisions of the Law on the Sale of Immovables to be Constructed etc. of 1967.

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Metalegal formants

The reason why developers are allowed to receive a deposit and instalments from purchasers before the building is completed is to ensure that developers are in a position to Þnance the construction of the building. They can borrow more easily from Þnancial institutions and they can then pay building contractors with the money progressively advanced by the purchasers. Should a developer later encounter Þnancial difÞculties and be unable to complete the building(s), purchasers are protected and do not run the risk of losing their deposit and any instalments paid.

Germany

Operative rules

According to the German Law on Apartment Ownership, apartments or commercial units may be established in a building that has yet to be erected (¤¤ 3 and 8). It is therefore possible to register a property right over an apartment in the apartment ownership register even before construction has begun. The assets thus established in the form of the registered property can then be offered as security for bank loans and the like. This remains the case, even though there is some academic discussion as to whether the property in the unit in question only arises as the construction proceeds.39

Provisions protecting the buyer of a unit that has yet to be constructed are not found in the German Law on Apartment Ownership, but are included in the Regulation on Real Estate Agents and Developers of 1990. These provisions attach importance to the fact that the buyer formally becomes the legal owner of the unit only once it has been duly registered in the land register (CC ¤ 873).The main aim of these provisions is to prohibit developers from collecting the purchase price before the purchaserÕs interest in the property is adequately protected.

As all real estate transactions need to be formally drawn up, a notary will draft a contract for the purchase of apartments or units that have yet to be built. In order to make sure that the buyer will become owner

39See Ba¬ rmann, Armbru¬ ster, et al., WEG Kommentar (2010), ¤ 2 no. 37 on the one and Staudinger and Rapp, J von Staudinger – Kommentar zum BGB (2005), ¤ 5 no. 49 on the other hand.

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granted access to the market only because it is possible to sell apartments or units to be erected in the future. The existence of such smaller developers increases supply of credit, thus preventing the formation of a cartel of a few economically powerful developers.

Greece

Operative rules

If the building to be placed under a condominium regime is still to be erected, it should be noted that the speciÞcations of the building (including size, division into units and common property) must be clearly set out in the condominium plan prepared by an architect, which forms part of the constitutive instrument by which a condominium regime is established.40 This is the prevailing view in terms of Greek legal theory and case-law based on the Law on Ownership of Storeys of 1929 (art. 10 ¤ 2), the Law on the ModiÞcation of Articles of the Code of Civil Procedure etc. of 1985 art. 1 ff.) and case law on the option to acquire ownership of future objects.41 The view that the condominium cannot be established over building which does not yet exist has not found any support in legal theory or case law.42 Consequently, the sale and transfer of condominium units based on building plans is legally recognised provided that the speciÞcity principle is satisÞed.

David would have a contractual claim against Alex for the return of the deposit and instalments paid if Alex does not comply with his obligation to convey the apartment David bought. If the purchaser (David) had not safeguarded his position by means of a special right

40Spyridakis, Law of Condominium (1996), pp. 86 and 145 ff.; Court of First Instance of Ioannina 1539/1998, NoV 47, 289

41See Spyridakis, Code of Horizontal and Vertical Ownership: Text, Commentary, Cases (2007), 51.2-5.1.7.2; Zepos, Horizontal ownership (1931), p. 66; Bournias, ÔConstitution and possession of horizontal ownership under condition and time-limit and the same in

condominium being under constructionÕ (1974), p. 301; Livanis, Floor Ownership (1973), p. 65; Patsouraskos, The Horizontal ownership (1979), p. 30; Balis, Land Law (1961),

pars. 121 and 126; Georgiades, Land Law (2010), p. 830; Georgiades, ÔConstitution and termination of horizontal ownership to a building being under constructionÕ (1984), p. 465; Areios Pagos 559/1967, NoV 16, 163; Areios Pagos 1646/1987 EPD 1988, 182; Athens Court of Appeals 1440/1968 NoV 17. 148; Athens Court of Appeals 8227/1990, EllDik 1991, 1057; Athens Court of Appeals 9817/1990 EllDik 1991, 1665.

42However, cf Matos, ÔConstitution of ßoor ownership on a future to be constructed part of the buildingÕ (1959), p. 216; Floros, ÔIntroduction, art. 1Ð71 CCÕ (1963), p. 54 no. 8.

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developer and the ownerÕs management company to enter into a contract in which, inter alia, the arrangements for completion on common areas are set out, there is no provision as to retention by the OMC of any funds pending completion, and no safeguard against failure to complete as a result of developer insolvency or some other cause,44 although the contract between the OMC and Alex may provide for retention of some of the purchase money pending completion. This will be of no comfort to David, as his deposit will be lost, unless the OMC completes the development out of its own funds, if any.45

Descriptive formants

The above is based on common law rules and the Multi-Unit Developments Act 2011.

Metalegal formants

The practice of developers selling units based on building plans cannot realistically be outlawed, at least where demand outstrips supply. There is no rule that the scheme building must be erected before any units can be sold in the scheme, and no limit on the number of units that can be sold based on building plans,46 and no requirement that developers must supply potential purchasers with lists of prices of units, so that they can see if these are what the market will stand. If a developer becomes insolvent before the scheme is Þnished there is some protection for off-plan purchasers in the form of security bonds from developers taken by local authorities to secure against failure to complete (although the sum secured by the bond can evidently fall short of what is required).47 Another problem has been that following the recent collapse in the Irish property market, some developers have failed to complete, leaving unit owners with little choice but to try to pay themselves, through their OMC, for completion costs.48 A further recent problem is where, thanks to the implosion of the Irish property market, a unit purchaser cannot any longer afford to pay the agreed price of their unit. Although they may face a claim for loss of bargain

44The Law Reform Commission Final Report Multi-Unit Developments (2008) para 4.40 recommended retention of 5 per cent of the total sum payable for each unit on trust for the developer, pending the issue of a completion certiÞcate.

45McCartney, ÔThe Multi-Unit Developments Act 2011Õ (2011), p. 8.

46Goo, ÔRegulation of Off-the-Plan PropertyÕ (2010), p. 129.

47Law Reform Commission Multi-Unit Developments Consultation Paper (2006) par. 2.32.

48McCartney ÔMulti-Unit Developments ActÕ, p. 8.