Faq

The law 57/1968, of 27th July, regulating the receipt of previous payments on the construction and sale of homes, states that any individual or company involved in the development of a construction of homes, must fulfil two conditions: - Guarantee the return of any monies advanced, plus the legal interest on the amount up to the moment it is returned, through an insurance contract with an insurance company or a guaranteed loan through a bank or savings society.- Receive any advanced payment by purchasers through a bank or savings society, and deposit them in a special account totally separate from any other funds the developer may possess, and which may only be touched to cover the costs implied in the construction of the homes.The law covers the amounts paid in advance for the purchase of a home, but if, in the project or in a new construction, the garage goes together with the home, it will also be necessary to guarantee amounts advanced in this concept.In the sales deeds for the home, the law obliges express mention of the following:- The return of all amounts received (whether in cash or any other form), plus the legal interest accrued on the money, in the case that construction never begins or is not completed within the terms of the contract, or if no permit for first occupation is forthcoming.- Reference to the guarantor or insurance contract indicating the guarantor or company involved.- Naming of the bank or savings society with the account number where advanced payment is to be made by the purchaser based on the sales contract signed by both parties.The law establishes that, once the contract has been formalised, the developer will hand over to the purchaser the necessary document accrediting the guarantee. In practice this is not possible, as the insurance company requires a copy of the contract to be able to produce the individual policy. The usual procedure is the following: - After obtaining the building permit, the different units may be contracted with the purchasers. In order to do this, the policy has to have been contracted. The insurance company demands a series of financial information from the developer as well as from the development, not to mention the building permit and the deeds to the lot. The amount of the global policy tends to be the quantity that, according to the from of payment foreseen, is expected to be paid by customers before they receive the property, plus a small percentage corresponding to the legal interest on the money. - With this, the insurance company is now willing to calculate the value of the policy. It will extend a collective policy, containing the general conditions of an endorsement, which has no value until the individual policies have been extended.- In order to get the individual policies, it will be necessary to hand over a series of other documents among which must be the ten-year policy. Once handed in or, at least, justified, as customers start making their advanced payments and signing their contracts, the developer will pass on the necessary data to the insurance company on each particular operation. - The insurance company sends three copies of the individual guarantee: the first for the contractor (the developer), a second for the insured customer and a third for the insurance company, to be returned once signed both by the developer and the customer.To cancel the outstanding risk it is necessary to present the permit for first occupation or, if this is not available, the sales deeds. If cancelling the risk, one way or another, does not coincide with the exact date of the end of the guarantee, in the case of some insurance companies, the cost will have to be regulated, them paying the difference. If the cancellation is after the guarantee has expired, or the insurance company has taken on the cost of the corresponding time elapsed, the opposite will be the case. The assumptions for executing the guarantee are:a) If the developer disappears (enters in receivership, bankruptcy, etc.).b) If the developer never starts the construction work.c) If the homes are not ready by the stated date. Although the guarantee has a date on which it expires that coincides with that of when the customer should take possession as pacted in the contract, the customer still has two years in which to reclaim his rights over the above mentioned and, thus, execute the guarantee.  

Law 57/1968, of 27th July