Contractual breach in real estate sales in Spain can manifest itself in various ways, whether by the breaching party, the type of breach, or the severity of the violation.
Given the introductory and practical nature of this article, we will limit the discussion of breaches to the most common scenarios:
Pre-contractual Phase Breach
In deposit contracts, failure to fulfil the obligation to buy or sell the property within the agreed deadlines.
Non-compliance with Property Conditions and Circumstances
Failure to meet the conditions and circumstances under which the property is to be transferred and/or both parties must meet.
Delivery of Property Not Conforming to Agreed Terms
Delivery of a property that does not correspond to what was agreed upon by the parties.
Breach in the Pre-contractual Phase
Regarding breaches in the pre-contractual phase, it is worth noting the usefulness of entering into deposit contracts (of any of the three types: penalty, forfeit, and confirmatory) between the parties. These contracts establish a framework of rights and obligations for the potential sale of real estate.
A well-balanced deposit money contract serves as a double-edged sword, setting clear penalties for both the breaching parties: the seller, who fails to sell and transfer the property as agreed, and the buyer, who fails to purchase and acquire the property as agreed.
The consequences of such breaches are not limited to the penalties stipulated in the Civil Code. Depending on the type of deposit money contract, these consequences usually involve the forfeit of earnest money by the breaching buyer and the obligation of the breaching seller to return double the earnest money to the buyer. However, some real estate purchase contracts with earnest money expressly obligate the seller to sell the property to the buyer.
Non-compliance with Agreed Conditions and Fulfillment
Regarding non-compliance with the conditions and circumstances of the property, this case is often intertwined with the previous scenario, as the parties may have agreed, for example, in a deposit contract or a private sales agreement with suspensive or resolutive conditions, on a series of requirements that, depending on the circumstances, could lead to a contractual breach.
A clear example of this scenario is real estate transactions where, after signing a deposit contract, the parties agree to a period to investigate the property and verify that it will be sold and transferred under the agreed conditions. If, after these investigations, the property does not meet the agreed conditions, the deposit contract typically stipulates the rights and powers of the parties, allowing the buyer to demand the return of the entire earnest money or double the amount. In these cases, the seller typically wants to sell the property, and the buyer must substantiate the circumstances used to terminate the contract.
Property Not Conforming to Agreed Terms
This scenario concerns the transfer of a property that is different from or does not conform to what was agreed upon. This case could be considered a subtype of the previous scenario. Examples include the sale of properties off-plan that, once completed, do not match the agreed specifications; the sale of a different property than initially agreed upon without prior agreement (for example, a different apartment in the same building); or the delivery of a property in a substantially different condition than it was at the time the contract was finalized.
In these cases, in addition to the consequences stipulated by the parties in the respective contracts, the compliant party may choose to compel the non-compliant party to fulfil their contractual obligations (if still possible), seek contract termination (while also claiming damages and interest), or seek compensation for breach of contract.
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