May 31, 2020

If you buy flat housing, read the fine print well | Economy

So far this year, 57,827 people have bought a flat house in Spain and in the next 18 months, 24 in the worst case, will see how the foundations of a new life are built. The cranes have returned and with them the purchase on plane, a formula that allows citizens, especially young people who want to become independent, pay little by little that 20% to be paid for the bank to grant the mortgage. Without prior savings, it is the only way for those who want to be owners.

But the bad practices of some promoters and financial entities during the bubble years continue to take their toll on the sector a decade later, despite the fact that today the market is more healthy than ever. The Organization of Consumers and Users (OCU) has recommended these days "do not buy flat housing, especially when there is no building license, there is a lack of transparency in the commitments or contracts contain abusive clauses." He says he has visited 11 marketing promotions. Only five already had permission to build, while another six were awaiting approval or not yet owning land. "The risks of buying off-plan are related to defaults, delays and possible economic difficulties, such as not being able to access the mortgage when the time comes or a possible market downturn that makes the purchase uneconomic," says Enrique García, spokesperson for the OCU .

A similar study every year makes the SOS Housing platform in Malaga, the third Spanish province with more works underway. "94% of the promoters suspend," says Carlos Cómitre, of Law 57 Lawyers and coordinator of the platform. The report is based on 217 visits between July and August to different promotions by people who pretended to be buyers. "Almost all of them have trouble talking about guarantees and deadlines. In almost all contract models we find clauses that harm the consumer," says Cómitre.

The response of promoters and cooperatives has not been long in coming. The Association of Promoters and Builders of Spain (APCE) considers the risks pointed out by the OCU as unjustified. "They do not obey the usual practices of a highly professional sector that complies with current regulations," they point out. "It only aims to attack a driving sector of the Spanish economy, alerting and not informing users properly," they add.

It is true that the developers begin to market homes without having a building permit. It is allowed and is very common. Among other things because "the bank does not grant the promoter loan if it does not credit between 40% and 60% of presales," says Luis Corral, CEO of Foro Consultores.

The problem comes when the client advances money to the developer in this first phase. And it goes back to January 2016, when the new Building Planning Law (LOE) came into force. Since then, "buyers of flat housing are only protected from the moment the developer obtains the building license, so that if a promotion fails, consumers are unprotected," says Marta Serra, director of The Defender of Your home That is, the promoter is not obliged to have guarantees or insurance of the amounts delivered before having the building permit. On this matter, the Ombudsman already issued a series of recommendations in 2015 regarding the change in the LOE, but they were rejected.

"Although we decided not to file an appeal, we do reflect on the fact that the protection of buyers on the plane is insufficient," they comment. The institution says that "between the application for a building license and obtaining it, the responsibility of the developer is not defined, there is no insurance or guarantee. The administrative procedure for licensing may be extended for reasons beyond the control of the developer and Norm says nothing. "

However, APCE denies the helplessness of the consumer. "The amounts delivered in advance must be entered into a special account unavailable from the bank, which can only be used to build the promotion," says José María González, head of the Legal Department of the employer. So, that money cannot be touched until the first brick is laid.

Once the developer obtains the building license, the client signs the private contract of sale. During the following months and until the end of construction, you must pay around 20% of the value of the floor. These amounts are "protected by a surety insurance contract signed with authorized insurance entities or by a joint guarantee issued by authorized credit institutions," González explains.

If the bank does not finally allow the client to subrogate the loan and no other entity grants a mortgage, the contract must be terminated. There is a penalty "provided that it has been agreed in the contract, is proportional and there is another equivalent for the promoter," says Serra. It is usually between 30% and 50% of the money given, says Corral. And if the construction does not start or does not end within the term agreed in the contract, "the buyer can recover all amounts paid on account, plus legal interests," says González.

The employers' association says that the crisis has led to greater professionalization of the sector. Although, in SOS Housing, which in three years has recovered ten million euros from affected families, they report the return of "small promoters who do a work and then disappear."

The OCU has been tougher if possible with the purchase on a cooperative basis. "The risk and uncertainty increase in terms of terms, plans, materials and final cost, which is usually increased. In addition, it requires the buyer to have more savings and some request more than 100,000 euros." The Confederation of Housing Cooperatives of Spain (Concovi) denounces the irresponsible attitude of the OCU, demands a correction and is studying legal action. Cooperatives are called to cover 50% of the demand for housing in Spain. "Not all of them are worthy of calling themselves a social movement, but they are an increasingly cornered minority. They are undercover promoters who, disguised as cooperatives, drive criminal practices," they comment in Concovi. And they continue: "The question is very simple: Is it a federated cooperative? Those that are compliant comply with current regulations," said Concovi, who defends the interests of more than 12,000 families who are self-moving their homes. Under study more than 25,000.

Recover the money

The OCU recalls how in the years of the housing bubble the purchase on the plane became a trap for hundreds of thousands of families who suffered several years of delay or became homeless and without savings. It must be said that some citizens have recovered the sums advanced thanks to the fact that the courts have declared various habitual clauses in the contracts abusive. The deadline to be able to claim the money contributed by an undelivered house ends on October 7, 2020, warns Marta Serra, of the Ombudsman for your Housing.

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