Экзамен зачет учебный год 2023 / European Condominium Law
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from the developer, the court would only be likely to award speciÞc performance of the contract if there was a real prospect that the purchaser could afford the cost of completion.49
Italy
Operative rules
Italian law does permit Alex to sell apartments based on building plans. In the event of AlexÕs insolvency, David is entitled to full recovery of the deposit and instalments paid on the basis of a statutory bank guarantee with which developers must provide purchasers. On the sale of an apartment in a building that is still under construction, the developer is bound to deliver to the purchaser (David) a bank guarantee that warrants to the purchaser restitution of the monies paid plus interest thereon at the ofÞcial rate (Legislative Decree on the Protection of Purchasers arts. 2 and 3). The guarantee can be enforced in a socalled Ôcrisis situationÕ, which exists in the following circumstances: (a) where the subject-matter of the sale has been attached in execution; (b) where the developer/building contractor has been declared bankrupt or an administrative compulsory liquidation has been published; (c) where a judge has allowed the building contractor to enter into preliminary creditors arrangement proceedings; or (d) where a declaration of insolvency has been published.
Descriptive formants
The solution to the above problem is not found within the provisions on co-ownership contained in the Italian CC art. 1100 ff. As a consequence of several instances where purchasers of prospective apartments suffered substantial losses on account of the insolvency of the developer or building contractor before completion of the building, the Italian legislature stepped in to guard against this. The Legislative Decree on Protection of Purchasers of 2005, implementing the Law of 2004, is designed to protect prospective buyers from the risk, latu sensu, of building contractor insolvency. The legislation provides for a complicated mechanism whereby the contract of sale of the prospective apartment must include certain compulsory provisions. These include a detailed description of the apartment sold describing its technical
49 Aranbel Ltd v McGivern [2010] IEHC 272.
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features and speciÞcations; the necessary building approval of the municipality concerned in addition to any other necessary consents; details of mortgages or other charges affecting the property; and the bank guarantee discussed above providing for repayment in a Ôcrisis situationÕ. There is also a requirement for the contract to include a graphic description of the project indicating the speciÞcations of the building to be erected and the materials used (art. 6).
A failure to comply with any of these provisions (for example a failure to provide the guarantee) will render the contract voidable at the instance of the purchaser (CC art. 1421). There are further protective measures embodied in the Decree, including (a) a requirement that the guarantee must be issued by a registered bank or insurance company; (b) a default on the payment of the insurance premium cannot be raised against the purchaser; and (c) the guarantee must include a waiver of the beneÞt enjoyed by the guarantor under the CC art. 1944 par 2. As a consequence of this waiver the purchaser may claim repayment of monies advanced directly from the guarantor (Legislative Decree on Protection of Purchasers of 2005, arts. 2 and 3). Alternatively, the purchaser can claim directly from a Solidarity Fund set up and administered by the Department of Economic Affairs and Finance.
Metalegal formants
While the provisions of the Decree undoubtedly offer sound protection in theory, developers are guilty of failing to comply with the requirements in practice. However, due to superÞcial knowledge of the kind of protection provided for by the law, purchasers often sign noncompliant purchase agreements that fail to incorporate the guarantee system discussed above. In a crisis situation, the purchaser therefore has no guarantee to enforce. Moreover, developers tend to give the purchaser the option of either paying a higher price or risking the loss of downpayments in case of developer insolvency with the purchaser almost invariably choosing the latter. The problem is that the legislator has not given teeth to the provisions of the Decree by requiring inclusion of these terms as a mandatory part of the minimum content of the notarial deed to be recorded in the Land Register. By effectively imposing the default sanctions on the notary, compliance with the provisions of the Decree could be ensured without a considerable increase in costs. Furthermore, the public guarantee fund as an additional protective measure provided by the law has proved to lack the necessary funds to solve the problem.
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Finally, from a different perspective, the legal protections that do exist fail to adequately protect the purchaser in the event of a developerÕs insolvency. While it is obviously in the interests of the prospective purchaser to recover the monies paid, there is nothing in the Decree to provide for the transfer of ownership of the apartment to the purchaser when it is eventually completed. The Italian approach, which traditionally equates compensation with speciÞc performance as a remedy, differs from many common-law systems, which would favour the latter.
The Netherlands
Operative rules
Dutch law does not prohibit the sale of apartments based on building plans. Alex is allowed to enter into a contract of sale, which will be executed as soon as the building is completed. It is also possible for Alex notionally to divide the building to be erected into apartments, and to transfer the rights concerning these notional apartments to David. In this case, the answer depends on whether or not Alex has divided the right he has on the building to be constructed into apartment rights pursuant to CC art. 5:107, and subsequently transferred such an apartment right to David. In the latter case, David owns the right to the uncompleted apartment together with co-ownership of the land on which the apartment building is erected.
If David has not yet acquired a separate right in an apartment, he may claim the deposit and the instalments he has paid from Alex. In the event that Alex is insolvent, his claim will only be based on breach of contract, and will have to be taken into account by the administrator of the insolvent estate of Alex. In that case, David is, in principle, in no better a position than other concurrent creditors and will rank alongside them (paritas creditorum).
In any case, a contract for the sale of an apartment to be constructed must be made in writing (CC article 7: 2). The contract is usually combined with a contract of letting and hiring of work to be done, namely, construction of the building (CC article 7:750 ff.)
Descriptive formants
The above answers are based on the Dutch legislation on apartment rights, as included in the Dutch Civil Code (Book 5 on rights in rem), as
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well as on the provisions on sale, exchange and the contract of letting and hiring of work included in the Civil Code (Book 7 on speciÞc contracts).
Metalegal formants
The provision of CC article 5:107 stating that a building that has not yet been erected may be divided notionally into apartments, upon which apartment rights are created, is important for the apartment rights real estate industry. It enables the developer to transfer the notional rights in an apartment to the purchaser, who can mortgage such right as security for a loan to Þnance the purchase price of the apartment right. The price is usually paid in instalments in step with the construction of the building, which provides a source of Þnance for developers for construction of the building. This system works quite well in practice, because banks usually only advance the loan in instalments concurrently with progress in the construction of the building. The possibility to transfer the apartment right Ôon paperÕ when the building has yet to be erected, is considered to provide sufÞcient protection because, in practice, these transfers are fortiÞed by simultaneous standard construction agreements, which often also includes an insurance guarantee in case of bankruptcy of the developer.
If the construction comes to a standstill on insolvency of the developer, the purchasers of the rights in the apartments are obliged to complete the building in accordance with the deed of subdivision and the subdivision plan (CC article 5:108 par. 1).
Norway
Operative rules
If David is a consumer and Alex a business enterprise such as a real estate developer, David is protected by the consumer protection provisions of the Law on Construction of New Dwellings of 1997. Alex, as the developer, is not allowed to receive any payment prior to transfer of title in the unit by registration in the Land Register unless advance payment is secured with a guarantee by a Þnancial institution (a security right in the property is not sufÞcient). The parties may agree on payment of instalments subsequent to registration in the name of the purchaser, which may occur while the building is still under construction, but only to the extent that instalments are proportionate
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to the value of the unit in the process of construction at any time. Contract terms contrary to these rules are not binding on the purchaser (s. 47). If David has nonetheless paid unsecured instalments, he will only be a concurrent (unsecured) creditor in AlexÕs insolvent estate if the transfer of title has not been registered when the insolvency proceedings are initiated.
Subdivision of the building into owned units may take place as soon as the developer has obtained a building licence from the local authority, and as from that time transfer of registered title in future units is, in principle, possible. In practice, however, Alex would never transfer title to buyers until the building was more or less completed. Managing and completing a building project in the process of construction with several registered owners is a rather complicated process.
Alex and David may conclude a valid sale of a unit at any time, regardless of whether the units are not yet built or not yet completed. This follows from general rules of law and is assumed, inter alia, in the Law on Construction of New Dwellings of 1997.
The scope of the prohibition in the Law on unsecured advance deposits (s. 17) is disputed. The Ministry of Justice stated in an opinion that the prohibition on advanced unsecured deposits at least would not apply in cases where deposits of reasonable amounts are held in trust, for example, by a real estate agent, and no part of the money is available to the seller. This view has been criticised.50
Descriptive formants
Restrictions regarding unsecured advance payments are an integral part of consumer protection rules. This particular rule exists precisely to prevent consumers from taking the risk of losing their money if a seller becomes insolvent. Payment against transfer of registered title corresponds to common practice in property transactions, and also applies to contracts between professionals.
In a consumer contract concerning a building under construction, the developer is obliged to provide a general Þnancial guarantee securing the consumerÕs possible claims under the contract (Law Construction of New Dwellings of 1997 s. 12). This guarantee would, however, in some circumstances be too small to cover all advance payments completely.
50 Lilleholt, Avtale om ny bustad (2001), p. 184.
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Metalegal formants
The efÞcacy of the consumer protection rules of the Law on Construction of New Dwellings of 1997 was tested in the years leading up to the real estate market slump in 2008. For example, many investor companies bought apartments and houses based on building plans in order to resell them to consumers, contending that the Law did not apply to resale contracts. The legislation was amended in 2010 in order to clarify the rules and to strengthen the issue of mandatory guarantees.51 This seems to have abated the unfortunate contract practices.
Poland
Operative rules
The Law on Unit Ownership of 1994 set out the provisions on the sale of a unit based on building plans (art. 9). The contract for such a unit gives rise to contractual obligations and does not, as such, result in a transfer of ownership. It contains merely a personal obligation to erect a building, create a self-contained unit as part of the building, and ultimately to transfer ownership in the unit concerned to David. The transfer can take place only after the building has been erected and the unit in question has been rendered isolated and self-contained. The parties must then declare their intention to transfer and receive ownership immediately and unconditionally. Both steps must be carried out by a formal notarial deed. Moreover, the validity of the sale is conditional on the following premises: Alex must be the owner of or holder of a perpetual usufruct over the land; Alex must have already obtained building permission; and DavidÕs claim for both the completion and transfer of the unit concerned to him must be duly registered in the land register (art. 9 s. 2).
The registration of DavidÕs claim in the land register connotes that it will be binding on any future owners of the land in question. If the contract is not properly performed, David may demand that the court order the completion of construction by another contractor at both the expense and risk of Alex as landowner (Law on Unit Ownership of 1994 art. 9 s. 3). This relief will bind all future owners, even if they were not parties to the original contract. Alternatively, David may seek restitution of any deposit together with interest, in addition to a claim for any
51 Prop. 130 L (2009Ð2010).
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other Þnancial loss he may have incurred. For example, if the price for similar units in the area has increased, he may claim the difference between the original purchase price and the higher price he must now pay for a similar unit.
Upon AlexÕs insolvency, DavidÕs claim will be dealt with under the Law on Bankruptcy and Reorganisation of 2003. David is required to notify the bankruptcy court of his claim within the time period announced in the declaration of insolvency on pain of losing his claim (art. 51 s. 1 no. 5). If there is a sale in execution of immovable property owned by Alex (the land and the uncompleted building), the proceeds of the sale will be divided among AlexÕs creditors in accordance with the general priority principles established in the Law on Land Registers and Mortgages of 1982. Consequently, DavidÕs chances of recovering the above mentioned claim would be very slight and the chances are that he will lose all his investment in the uncompleted apartment that he purchased.
DavidÕs position will be improved substantially by the new Law on Protection of the Rights of the Purchaser of a Residential Unit and Single Family Homes of 2011, which came into operation on 29 April 2012. This Law introduces a provision that all amounts paid by purchasers of uncompleted residential units or single houses must be paid into a trust account that can only be released to the developer on each successive stage of completion of the building (s. 3). Furthermore, it amends the Law on Bankruptcy and Reorganisation of 2003 in such a manner that not only the amounts in the trust account, but also the land and building under construction, will not be touched by the developerÕs insolvency and can be recovered by the purchasers. Alternatively, the purchasers may decide to continue with the development under the supervision of an appointed administrator on condition that they agree on additional funding to complete the building (Law on Bankruptcy and Reorganisation of 2003, arts. 425-1 Ð 425 -5). These provisions have been criticised on the grounds that the protection is envisaged only for purchasers that are natural persons purchasing residential units and that the intended signiÞcant deviation from the priority rules embodied in the Law on Bankruptcy and Reorganisation are open to constitutional challenge before the Constitutional Tribunal. Moreover, the provisions have not been fully synchronised with other provisions and in practice may be simply impossible to apply. It is debated that these provisions will have to be amended in the near future.
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Descriptive formants
This special contract of sale has been introduced in the Law on Unit Ownership in order to protect purchasers buying units based on mere building plans at the beginning of the construction process. Both steps require notarial execution, placing an obligation on the notary to ensure that the terms of the contract do not violate the relevant formal rules. The notary should, in particular, remove any unfair contract terms, which are treated as being inadmissible in consumer contracts. Under the Law on the Protection of Purchasers of Residential Units and Single Family Homes notaries are obliged to ensure that payments made by purchasers should be paid into the appropriate trust accounts. As the Law only regulates development contracts concluded with natural purchasers of residential units, purchasers of non-residential units as well as juristic persons will continue using old mechanisms, which will only obscure the transparency of the market and of the development contract practice. However, under the new Law natural persons purchasing residential units will be protected by the formal requirements of their development contracts.
Metalegal formants
In practice, the types of contract described above are very rare. In order to speed up and to render the contracting process cheaper and perhaps, to avoid the involvement of a notary in any case where a clause is allegedly invalid, most developers enter into preliminary contracts for the future sale of a unit. These contracts are concluded in writing, but not in the form of a notarial deed. They contain an obligation on the parties to enter into a contract of the sale for a unit once its construction is completed. If the preliminary contract is not in the form of a notarial deed, then should the developer fail to fulÞl the contract the other party may as a rule only claim compensation for loss incurred as a result of expecting to conclude the sale contract (PCC art. 390). This applies regardless of whether the developer simply refuses to enter into the contract, for example, because he found a more attractive purchaser, or whether the developer is unable to fulÞl the contract as a result of being unable to complete construction. Naturally, if the developer is in breach of the contract owing to Þnancial problems, the prospects of recovering damages will not be very great, particularly since in execution proceedings there are usually other creditors who have higher priority in respect of any assets held by the developer.
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The perturbing aspect of this state of affairs is that, under the preliminary contract, the potential unit owner is liable to pay instalments (sometimes called a downpayment or a reservation fee), which are aimed at covering the future purchase price. Often, these instalments will amount to the whole purchase price of a unit, although the actual contract of sale containing the obligation to pay the purchase price does not yet exist and indeed may never come into existence. Consequently, the risk and potential loss of the potential unit buyer is signiÞcant and this is precisely the reason why the legislator envisaged the conclusion not of preliminary contracts, but rather of special statutory contracts of sale, with any claims disclosed in the land register and the actual conveyance only taking place once the unit has been completed. The courts have, however, held that such contracts are not invalid even though the formal requirements of the Law on Unit Ownership of 1994 art. 9 have not been met, because they are innominate contracts and as such permissible under the principle of freedom of contract (art. 353-1 PCC).52 This line of judgements has perpetuated the existence of these contracts, which may have short term beneÞts for the unit buyer, but in the long term can be (and already has proven to be) very dangerous. Developers have more or less been left free to devise various kinds of innominate contracts and to collect deposits from future unit buyers. As the relevant advance payments need not be kept in special escrow accounts, a means of committing breaches of contracts more or less with impunity has been opened up. Obviously, the risks are smaller in the case of reputable development companies, but even a Þnancially solid developer may run into Þnancial trouble at some stage.
The Law on the Protection of Purchasers of Residential Units and Single Family Homes reduces these risks considerably because deposits and instalments are paid into a trust account without reach of the developer (art. 4). The more detailed provisions with regard to the contents of the development contract, especially the provision that prospective purchasers must be provided with a prospectus, should also improve the purchaserÕs position. The distinction made between natural and juristic purchasers may potentially cause confusion, and force such purchasers to enter into the innominate contract discussed above.
52Court of Appeal in Białystock judgement of 22.IV. 2010 (I Aca 140/10); Court of Appeal in Poznań judgement of 20.IV.2006 (IAca 1282/05); Supreme Court judgement of 30. VI.2004 (IV cK 521/03)
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Portugal
Operative rules
If Alex wants to establish a condominium, he is Þrst required to have the building plans approved and a building permit issued by the municipal authorities concerned (Law on Urbanisation and Construction of Buildings of 1999 arts. 4 and 26). Next, he must request a notary to prepare the constitutive title of the condominium in a public deed (Notary Code art. 59(2)), which must specify the subdivision of the building into units (CC art. 1418). As the units must, in terms of CC art 1415, be autonomous and have independent means of access to common parts or the street,53 the developer must present to the Public OfÞcial or the notary, the scheme design and a project brief, with the certiÞed approval of the competent public authority, in order to get the title approved. The title must then be registered in the Land Register (Law on Land Registration art. (2)(1)(a)), where a general description of the building and a unit description of all the units in the building will be opened (Law on Land Registration art. 82). This registration is deemed to be only provisional until the completion of the building (art. 92(b)). Alex is then entitled to conclude contracts over the units (Notary Code art. 62 (1)).
As real rights in Portugal can only be registered over existing parcels of land or units and not over future parcels or units, Alex is only entitled to create contractual rights with regard to individual units before the construction of the building is completed. If Alex sells apartments based on the building plans, the contract of sale is not void, but transfer of ownership of the unit to David, will take place only after the building is completed (CC arts. 408(2) and 880).
Normally, Alex and David would conclude a preliminary contract (contrato promessa),54 which sets out the exact conditions of the sale and is likely to impose obligations on both the seller and the buyer. When the contract is signed, the purchaser usually makes a downpayment, of around 10 per cent of the purchase price. As the future contract is for the transfer of a unit, the public ofÞcial or the notary concerned must certify the signatures of the parties and the existence of a construction
53Passinhas, A Assembleia de Condo´minos e o Administrador na Propriedade Horizontal (2002), p. 20.
54This contract is normally drawn up by the lawyer or the real estate agent who is negotiating the sale.