Экзамен зачет учебный год 2023 / European Condominium Law
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permit for the building in question. However, the seller may only invoke non-compliance with these requirements as a ground for cancellation of the contract when such was the fault of the purchaser (CC art. 410(3)).
After completion of the building, Alex is responsible for requesting that the provisional registration should be converted into a Þnal registration (Decree Law Regulating Certain Aspects of Condominium of 1994 art. 10). He will then be entitled to conclude the contract of sale of the unit, and therefore comply with his promise to transfer the unit to David.
However, because the building is not yet completed on account of the insolvency of Alex, David may rely on breach of the preliminary contract by Alex and may either claim double the amount of the downpayment (CC art. 442(2)), or demand speciÞc performance of the contract (CC arts. 442(3) and 830).55 As the insolvency of Alex has made future completion of the building and transfer of the unit impossible, David would be left with a claim for repayment of double his downpayments.
The crucial question now is how much David would be able to get from the insolvent estate of Alex. Under the Insolvency Code of 2004 a declaration of insolvency causes all the obligations of the insolvent party that are not subject to a condition precedent to become due for settlement and deprive the debtor (Alex) immediately of the power to administer and dispose of the assets in his estate From that moment on, the powers of disposal vest in the insolvency administrator. Any bilateral agreement entered into between the insolvent and a third party, which has not been completely performed at the date of the declaration of the insolvency, will be suspended until the insolvency administrator decides whether or not to comply with such agreement. However, the third party may determine a term within which he will wait for the decision of the administrator. Once this term has elapsed, the agreement is considered annulled. In such a case, any party is entitled to be reinstated to his position before the execution of such agreement (Insolvency Code art. 102). Therefore, in casu, the administrator would decide upon whether it is possible and convenient to comply with the preliminary contract of sale.
If the administrator decides not go ahead with the sale, David would have a claim against the insolvent estate, as mentioned above. The hierarchy of claims against the insolvent are categorised as follows: secured,
55 Almeida Costa, Direito das Obrigac¸o˜es (2000), p. 372.
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preferential, unsecured and subordinated. Portuguese law does not afford preferential treatment for the acquirers of a future unit, so David would have a mere unsecured claim, which ranks below secured and preferential claims. Accordingly, within thirty days after the insolvency is declared, he must apply for his claim to be admitted. Unsecured creditors, whose rights have been acknowledged by the court, will be paid on a pro rata basis, depending on the value of the insolvent assets, after all the secured and preferential claims against the insolvent estate have been satisÞed.
Descriptive formants
The above responses are, Þrst, based on CC art 1418 and 1419; DecreeLaw on Urbanisation and Construction of Buildings (RJUE) art 4; the Notary Code art. 59; and the Law on Land Registration arts. 2, 82, and 92, which deal with the establishment of a condominium. Second, it also addresses the general principle of Portuguese property law that property rights must relate to existing property and that contracts relating to future property, such as the future units in this case, cannot have any real or proprietary effects before the property comes into existence. Developers, however, are not prevented from concluding contracts that grant personal rights over units sold based on building plans. Finally, rules on preliminary contracts (CC arts. 410, 442 and 830) and the Insolvency Code also apply.
Metalegal formants
Although developers are not in a position to sell their units based on building plans before completion of the building, they are allowed to conclude preliminary contracts in respect of future units. This means that they can receive downpayments to improve their cash ßow position. These contracts are, along with bank loans, the main sources of Þnancing for developers of condominiums in Portugal. There is no special protection at all for prospective purchasers in the event of the developer becoming insolvent.
Scotland
Operative rules
It is unlikely David will be able to claim anything other than as an unsecured creditor for a contractual debt (being unable to fulÞl the
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contractual obligation of conveying a ßat), which is obviously next to worthless if Alex goes into bankruptcy.
There is simply no proprietary claim based on real rights under Scots law in such a scenario. The ßat which David thought he was buying is nonexistent. It is an imaginary three-dimensional airspace ßoating on the would-be third ßoor of the would-be building. Because of the principle of Ôseparate tenementÕ such airspace cannot be owned or transferred separately from the land underneath it. The airspace will always be AlexÕs (or his creditorsÕ later on) as long as he is the owner of the land. Only until this space is enclosed by walls, ßoors and ceilings would it become a Ôseparate tenementÕ, capable of being transferred separately, of being registered with its own title and of being burdened by any proprietary claim.
Descriptive formants
This position reßects some deÞning characteristics of Scottish property law. First, it is a ÔunititularÕ system where there can be only one title to any property. Until that title is legally transferred (normally by completion of registration in the case of apartments and land), a purchaser has no right in rem, only right in personam. There is no transitional stage or interest tolerated by Scots law, as most scholarly explained by Lord Hope in the House of Lords.56 In the eyes of property law, a purchaser either gets everything (the ßat), or nothing (personal claim for breach of contract only).
A second interesting aspect of this scenario results from the principle of Ôseparate tenementÕ which holds that the purchaser gets nothing in property law, because the ÔthingÕ is not ready to be transferred. You cannot register the title to airspace that would become a ßat in six monthsÕ time. You can only register it once the ßat materialises.
With the combination of these two powerful legal doctrines at work, the prospect of any purchase based merely on building plans in Scotland is most unappealing.
Metalegal formants
However, such an inconvenient position may be the result rather than cause of the reality that apartments are not often bought based on
56Burnett’s Trustee v. Grainger 2004 SC (HL) 19. This case cleared away any doubt created by Sharp v. Thomson 1997 SC (HL) 66, which in one way or another gave some form of protection to a purchaser who failed to register in time before the sellerÕs creditors raised their claims. The latter is now limited to scenarios involving ßoating charges.
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building plans in Scotland. Unlike many other parts of Europe or the world, Scotland is not really under massive pressure for housing development. The population remains at a similar level as it was in the 1970s and 1980s.57 In major cities, such as Glasgow, Edinburgh and Aberdeen, many tenement buildings were built in the early part of the twentieth century or even late nineteenth century. Although there are new developments, their importance and inßuence cannot match those existing buildings. This is also an important reason why the Scottish law reform adopted a rather relaxed scheme for all existing buildings (Tenement Management Scheme) before creating a separate, more advanced version (Development Management Scheme) for newer and larger ones. It may be many years before the DMS takes ßight due to the sheer lack of number of large scale new buildings.
Slovenia
Operative rules
Under Slovenian law a distinction must be drawn between the contract of sale of an apartment and the transfer of ownership of the apartment in question. The sale can, in principle, be concluded at any time, even if the object of sale does not yet exist. Thus the sale of future apartments is permitted. This type of contract does not provide the buyer with any right in rem, but gives him only a right to demand that the seller will transfer ownership to him in future once the building is completed. The ownership of an apartment in a condominium scheme can, however, only be transferred after a condominium scheme has been established, that is, registered in the Land Register. Registration is possible before construction has been completed, but only if the building in question as well as all of its external parts have been registered in the Cadastre of Buildings. It is possible to apply for registration when the building is completed to such an extent that the measurements of the ßoor areas of all the units can be taken.
However, so as to combat several cases of abuse by developers, a special Law on the Protection of Buyers of Apartments and Single Houses was enacted in 2004.58 This legislation allows the sale of apartments based on building plans only if certain strict requirements are
575.19 million in June 2009, which was the highest since 1979.
58OfÞcial Gazette 18/2004.
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met. Moreover, the buyer does not have to pay any part of the purchase price unless the seller provides either a bank guarantee or insurance covering against the potential situation in which the seller would be unable to comply with his obligations. Such protection will ensure that the seller is able to reimburse the buyer the part of the purchase price already paid. Alternatively, the parties may agree that the buyer makes payments into a trust account held by a notary who will then act as a trustee for the buyers.59
David may thus claim the deposit and the instalments he has paid from Alex. As a result of the insolvency of the latter, the claim may only be based on breach of contract, and will have to be taken into account by the insolvency administrator of Alex. David is in the position of an unsecured creditor against AlexÕs insolvent estate. However, if the sale was concluded in accordance with the aforementioned Law on the Protection of Buyers of Apartments and Single Houses, David is protected in that he is entitled, as the case may be, either to claim against the bank guarantee or to claim the payment in question from the sellerÕs insurance company or from the notary. Money deposited in the trust account of a notary does not form part of AlexÕs insolvent estate.
Descriptive formants
The above answers are based on the Slovenian Code on Obligations, the Property Code and the special Law on the Protection of Buyers of Apartments and Single Houses.
Metalegal formants
The possibility to sell apartments in buildings that are still under construction is an important engine of the real estate industry. It enables developers to Þnance their projects wholly or partly with the funds received in advance from apartment buyers. Unfortunately, unscrupulous developers have abused this possibility, as evidenced by many instances where developers sold the apartments based on their building plans and received the whole or part of the purchase price, but failed to complete the construction. Another potential if not actual abuse on the part of some developers is that the buildings and apartments as eventually constructed do not conform to the speciÞcations
59 Tratnik and Vrenčur, Zemljisˇkoknjizˇno pravo v teoriji in praksi (2008), pp. 190Ð204.
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of the apartment sales contracts. This caused the legislator to enact the Law on the Protection of Buyers of Apartments and Single Houses. The strictness of this statute has the effect that developers prefer to complete or at least substantially complete the construction before they offer the apartments for sale.60
South Africa
Operative rules
The South African Sectional Titles Act does not prohibit the sale of future sectional title units from building plans. Such sales are enforceable on condition that the units are adequately described in the contract of sale.61 However, ownership in the units can only be recorded in the land registry once a sectional plan has been registered and a sectional title register has been opened with regard to the particular sectional title scheme. A sectional plan must be drawn up from actual measurements (s. 6(1)), and this cannot be done before the building has been erected. The result is that a purchaser who buys from building plans would not be able to obtain a registered real right with regard to his or her unit, but only a personal right to compel the developer to register the unit in his or her name after the building has been completed and the sectional title register opened.
However, a purchaser, such as Alex, who buys a unit off building plans is protected by the Alienation of Land Act of 1981, which prohibits a developer from receiving any consideration under a contract of sale of land or a sectional title unit (which is deÞned as ÔlandÕ under s. 1 of the Act), unless that land or unit is capable of being registered (s. 26), which can only happen once a sectional title register has been opened for that particular sectional title scheme (s. 26(1)(a)). Consideration includes the purchase price and interest thereon, but excludes rent or occupational interest constituting a reasonable compensation
60Note that about 80 per cent of homes in Slovenia are owned (the bulk of
which are in large blocks of apartments in the cities) and only 20 per cent of homes are leased.
61Van der Merwe, Sectional Titles, Share Blocks and Time-sharing Volume 1: Sectional Titles (1995Ð2012), 7Ð12(2)Ð7Ð14; Erf 441 Robertsville Property CC & another v New Market Developments (Pty) Ltd 2007 2 SA 179(W); Rasmussen & another v Clear Mandate Properties CC & others 2008 3 SA 147 (W); Du Plessis NO & another v Goldco Motor & Cycle Supplies (Pty) Ltd
2009 6 SA 617 (SCA).
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for the use of the unit by the purchaser. This prohibition on the receipt of money does not apply in two instances, namely, (a) where the money has been paid into the bank account of an attorney (solicitor) or estate agent to be held in trust for the beneÞt of the seller and
(b) where the developer furnishes the purchaser with an irrevocable and unconditional guarantee by a recognised Þnancial institution that guarantees repayment of the deposit made by the purchaser if the unit is not capable of being registered within a period speciÞed in the guarantee. If the developer becomes insolvent before the unit becomes capable of being registered, the amount held in trust or payable under the guarantee immediately becomes payable by the attorney, estate agent or Þnancial institution concerned. This consumer protection measure would adequately protect a purchaser such as Alex, enabling him to recover all deposits paid if the building is never completed.
Descriptive formants
The above answers are based on contractual provisions on future sales and on the consumer protection measures contained in the Alienation of Land Act of 1981. This legislation was introduced in 1981 after huge losses suffered by purchasers on the insolvency of developers because they bought parcels of land which never become registrable.
Metalegal formants
The development of sectional schemes would be impeded if there was a complete ban on the sale of units before a sectional title register had been opened. The purpose of the consumer protection prohibition on the receipt of deposits is to ensure that developers are in a position to transfer the units they sell before they are entitled to receive any portion of the purchase price. Should a developer encounter Þnancial difÞculties and be unable to complete the building purchasers are protected and do not run the risk of losing their deposits. However, purchasers would lose the opportunity to acquire the apartment for which they had bargained. Although sales based on building plans do not improve the cash ßow position of the developer because of the prohibition, the fact that he can show a stream of future sales from building plans would encourage Þnancial institutions to Þnance a particular scheme.
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Spain
Operative rules
Under the Spanish Law on Mortgages both the building and the units that are part of the building are capable of registration before construction has been completed (art. 8.4 and 5). The Law provides that the construction must at least have commenced, although it need not be completed, which would have enabled David to grant a mortgage over the unÞnished unit. However, this will not change his position in relation to Alex.
If Alex is formally declared insolvent, David will become one of the concurrent creditors of the insolvent estate (concurso de acreedores). He will not have a privileged position as in the case of mortgagees or any other secured creditors. Unit purchasers such as David further do not feature in the list of privileged creditors mentioned in the Law on Insolvency of 2003 (arts. 89-91) or in the Spanish CC (arts. 1923 ff.). However, the Law on Insolvency contains special provisions as to contracts which create reciprocal obligations for both parties (as in this case). It provides that the insolvency declaration by itself does not affect these obligations (art. 61.2), and that in the case of breach of contract, the prejudiced party may seek cancellation of the contract by court proceedings (art. 62). Consequently, if Alex fails to Þnish the building and to give David his apartment, David is entitled to seek the cancellation of the contract in question.
Descriptive formants
Under Spanish law there is no problem in selling an apartment before the building is completed, or even before construction has started; it is a typical case of selling a future object (compraventa de cosa futura). The Law on Mortgages also allow registration of the building and its units as soon as construction is underway (art. 8.4). Some authors submit that registration is possible as soon as the building plans of the project have been drawn up and approved by the competent local authorities, without the construction of the building having started yet.62 This is conÞrmed by the Resolution of the General Directorate of Land Registries and Notaries of 5 November 1982.
62Lacruz Berdejo et al., Elementos de Derecho civil (2004), pp. 407Ð8; Echeverrõ«a Summers, ÔComment on article 5Õ (2010), pp. 145Ð6.
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The buyer of a condominium apartment does not feature in the list of creditors with special privileges (art. 90) and creditors with ordinary privileges (art. 91) contained in the Law on Insolvency. On account of difÞculties encountered with the performance of contracts creating reciprocal obligations on insolvency, the Law on Insolvency provides that these contracts are not dissolved automatically but that the party who suffers prejudice must request the cancellation of the contract (art. 61).
Metalegal formants
In Spain, the Þnancial needs of developers (linked to the construction boom) have led to the possibility of registering a building as soon as the project has been approved. Consequently, there are many cases in which buyers registered their properties even before the building was completed or even begun. In this way, developers are able to obtain additional funds so as to Þnance continuous construction.
Spanish legislation on insolvency has been amended fairly recently (in 2003), and probably the most important change was to the effect that the insolvency of traders and that of non-traders is governed by the same statute (before this Law was passed, tradersÕ insolvency was dealt with in the Commercial Code, while that of non-traders by the Civil Code). In addition, various procedural rules are included in the new Act. The idea was to modernise the insolvency rules, and further to establish a less strict regime affecting the insolvent party so as to allow him or her to continue with business activities so as to obtain sufÞcient funds to pay off as many debts as possible.
Sweden
Operative rules
The only apartments that can be sold under Swedish law are the apartments that form part of a real estate cooperative (bostadsra¨tt) or privately owned apartments (a¨garla¨genhet) that form part of a condominium. According to Swedish legislation, a cooperative association ((bostadsra¨ttsfo¨rening)) must Þrst be founded before the apartment building is constructed. In the process of forming such an association, the law stipulates that certain criteria have to be fulÞlled, namely, that there must be a management board and that the board must have drawn up a Þnancial plan for the project. The validity and soundness
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of this plan has to be conÞrmed by independent experts. If the plan is not approved and the project is therefore cancelled, the association is given the opportunity to alter the project and the plan in order to achieve more Þnancial stability. The purpose of the regulation is to guard against unsound projects that could lead to apartment owners suffering economic loss on account of not obtaining a residence. From the above it is clear that the scope for a scenario as described in this Case is virtually non-existent. If Alex was able to go ahead with the sale despite an unsound Þnancial plan, this would probably only be possible if the numbers and facts in the plan are false or some important facts were omitted. That being the case, there is no doubt that David, under Swedish law, will have a legitimate claim for the return of his deposit and his other abortive expenses.
Descriptive formants
The system works well and is not subject to misconduct as far as we know.
Metalegal formants
The system allows the same person, in this case Alex, to act both as a developer of the buildings and the person who establishes the cooperative association and the management board. This might lead to conßicts of interest in relation to the future members of the association.
In recent times, developers at an early stage of marketing have required a deposit from persons interested in buying shares in the cooperative. If the potential purchaser eventually buys into the cooperative, the price is reduced by the amount of the deposit. However, the deposit is not paid back if a purchase is not concluded. This scenario is not regulated by law, and presently the Swedish Consumer Agency is investigating this allegedly illegal behaviour.