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LEY 57/1968 - AN
LEY 57/1968 is
a short but very important Law which was implemented in the Public
27 July 1968
specifically to safeguard purchasers deposits paid in good faith to developers
for off-plan properties.
The preamble of the Law explains clearly the reasons
for its implementation.
The preamble states that there was justified public alarm at the fact that
repeated abuses had been taking place
with regards to off-plan deposits. It says the abuses which were
obvious criminal acts had a serious
disruption of social life, constituted a serious alteration of the
social coexistence and caused irreparable
damage to trust and good faith. It says LEY 57/68 was being
introduced in the Public Interest to create
general preventative standards to ensure the real and effective
protection of funds paid in advance by
purchasers and to ensure they received a refund in the event that the
house building did not take effect.
It appears that 40 years after LEY 57/68 was implemented we are
experiencing the same 'repeated abuses'
and 'obvious criminal acts' We now have the exact same situation
of a 'serious disruption of social life' which
unfortunately for many innocent purchasers has again caused 'irreparable
damage to trust and good faith'.
This is a serious public order matter that the Spanish Authorities must
As you can see below the LEY 57/68 is very clear and provides absolute
protection for the purchaser.
It is not LEY 57/68 that has failed. The failure is that of the
authorities whose duty it was to
uphold the rule of Law.
Article 1 states that any developer or promotor of homes that are
as a permanent or seasonal residence and who accepts purchasers deposit
starting or during construction must meet the following conditions:
Must issue at no cost to the Purchaser a Bank Guarantee or a Certificate of Insurance for ALL
plus legal interest. The Bank Guarantee or Certificate of
Insurance may be executed by the
purchaser if the construction
does not commence or complete for any reason by the agreed deadline.
The buyer is then entitled to a full refund of their deposit together
with the addition of legal interest.
The rate of legal interest mentioned in LEY 57/68 is 6% per annum.
However, The Building Act LEY 38/99
amends this percentage to the legal rate as published annually in the
Oficial del Estado.
The interest is calculated on a simple annual basis and is not
compounded. If the developer mentions in the
purchase contract that the interest payable is 6% per annum as stated
originally in LEY 57/68 then this
will overrule the legal interest rate, providing the legal interest rate
is lower than 6%.
The interest is calculated from the date of the deposit payment until
such time as the refund is made.
Must receive the funds paid in advance by purchasers through a Bank
or Savings Bank and deposit in a
Account held at a Bank
or Savings Bank.
The Special Account must be separate from any
other account held by
the developer or promotor and the
Special Account must only contain
funds deposited for
the construction of dwellings.
It is the responsibility of the Bank or Savings Bank to ensure that the
Special Account is
opened and the Bank or Savings Bank must either issue the Bank
Guarantee referred to in
Article 1.1 themselves, demand that the
Bank Guarantee is issued or verify the
existence of a
or Certificate of Insurance to fully cover the off-plan deposit funds in
The Contract or Sales Agreement for which the developer or promotor receives
advance payments must state:
a) That the promotor or developer must refund the full deposit with the
addition of legal interest
if the construction does not commence or if the construction is not
completed by the date
stated in the contract. The full deposit with the addition of
legal interest must also be refunded
to the purchaser if the Certificate of Habitability (Licence of First
Occupation) is not granted by
the Local Town Hall.
b) The contract must make reference to the Bank Guarantee or Certificate
of Insurance and
it must name the Bank and/or Guarantor.
c) The contract must give the name of the Bank or Savings Bank who will
hold the deposit
funds and it must give details of the Special Account where the funds
will be held.
Immediately after receiving the deposit funds and at time the contract is issued the developer or
promotor MUST provide the purchaser with the Bank Guarantee
or Certificate of Insurance
which must cover ALL amounts paid towards
the price of the property.
If the construction and delivery of the property has not been
completed by the date set in the
contract then the buyer may chose between cancelling the contract and
having the full
deposit refunded together with the addition of legal interest or have an
annex to the contract
drawn up giving the developer or promotor extended time to complete the
The Bank Guarantee or Certificate of Insurance must not have an
expiry date. It only expires when the
Certificate of Habitability
(Licence of First Occupation) is issued by the Local Town Hall.
Any sales and promotional material issued by the developer or
promotor, which makes reference to
the payment of funds in advance for a property, must name the
entity who will issue the Bank Guarantee or Certificate of Insurance and
must give details
of the Bank or Savings Bank Special Account in which the deposit funds
will be held.
This article gives details of the punishments and fines that will be
imposed on the developer
or promotor if they fail to comply with the provisions of this Law.
As detailed in the Building Act
LEY 38/99 the fines imposed for each violation can be up to 25% of the
deposit amount which
should have been protected.
This article states that the rights this Law gives to the purchaser
have a 'Caracter de Irrenunciables',
which translates to 'Inalienable Character'.
In this context inalienable means: Unchallengeable, Absolute, Immutable,
Not Able to be Forfeited, Unassailable, Incontrovertible, Indisputable,
This article also states that the purchasers rights granted by this Law
are so strong that they cannot be
waived even at the request of the Purchaser.
The Building Act 1999 - LEY 38/1999, de 5 de noviembre, de Ordenación
de la Edificación
As mentioned in the above paragraph titled Article 1.1, the Building
Act 1999 - LEY 38/1999 in the First
Additional Provision amended the rate of interest payable on a Bank
Guarantee refund to the legal interest rate instead of a fixed 6%.
As mentioned in the above paragraph titled Article 6, LEY 38/1999 also
confirmed that fines imposed on
developers for breaching the requirements of LEY 57/1968 can be up to
25% of the deposit amount
which should have been protected.
In addition LEY 38/1999 also states:
That the requirements of LEY 57/1968 will apply to the promotion of all
types of homes, including those
purchased by a community of owners or a housing co-operative.
The protection provided by LEY 57/1968 is also extended to amounts paid
in cash to the developer which
must be deposited in the Special Account (Cuenta Especial).
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