Unfair terms in contracts for the sale and purchase of homes under construction are those contractual clauses which create a significant imbalance to the detriment of the consumer in favour of the seller or builder. These clauses usually take advantage of the builder’s position of power vis-à-vis the buyer, who generally has little or no bargaining power. These types of contracts are often standard or adhesion contracts, i.e. unilaterally drafted by the stronger party (the seller) without allowing the buyer to negotiate the terms.
The main characteristics of these unfair terms and their legal implications in the area of the sale and purchase of homes under construction are analysed below.
1. Definition and legal framework
Unfair terms in contracts for the sale of homes under construction are mainly regulated by consumer protection legislation in many countries. In the case of Spain, for example, Royal Legislative Decree 1/2007, which approves the revised text of the General Law for the Defence of Consumers and Users, expressly prohibits the use of unfair terms in consumer contracts.
Such terms are defined as those which, unless individually negotiated, cause a significant imbalance between the rights and obligations of the parties, to the detriment of the purchaser, who is generally considered to be the weaker party in the contractual relationship.
2. Main unfair terms in the sale and purchase of a property under construction
Some of the most common clauses considered unfair in this type of contract are:
a) Indemnity clauses
These clauses attempt to exempt the builder or developer from any liability in the event of non-compliance or defects in the construction. This type of clause is against the law, as the developer is liable for latent defects and construction defects during the statutory periods.
For example, the clause exempting the developer from liability for defects in the dwelling caused by other professionals, which, according to the Ley de Ordenación de la Edificación obliges the developer to react.
b) Clauses waiving consumer rights
In some contracts, the buyer is obliged to waive rights recognised by law, such as the possibility of claiming for faults or defects in the work, or even to waive the right to terminate the contract in the event of serious breach by the vendor.
For example, clauses which require the buyer to declare conformity with the contract on the basis of facts which are insufficient to detect defects in the property, even if they are concealed.
c) Clauses imposing disproportionate penalties on the buyer
Another example is the imposition of disproportionate penalties on the buyer in the event of non-performance. For example, if the buyer is late in making a payment, a disproportionate compensation or penalty may be required, whereas if the developer or builder is late in delivering the property, the penalties are nil or minimal.
In this case, it is considered unfair to leave the date of delivery of the property indefinite, or to make the delivery period excessively long, or to make the delivery period dependent on an event that is entirely within the control of the vendor/developer.
d) Unilateral modification of the contract
Some clauses allow the vendor or developer to unilaterally modify the contract without valid justification or prior notice to the purchaser. This is particularly problematic when it comes to the description of the property, the delivery times or the technical characteristics of the construction.
For example, clauses that allow changes in the final price of the property, changes in the conditions and qualities, or changes in the works shown on the plans.
e) Delivery of the property without a certificate of occupancy
A recurring problem is that the contract allows the property to be delivered without the first occupancy or occupancy licence. These licences are essential for the purchaser to be able to legally occupy the property and allowing delivery without them is clearly an abuse.
3. Legal consequences of unfair terms
Unfair terms in contracts for the sale and purchase of housing under construction are considered null and void. This means that they are deemed not to have been included in the contract and cannot be enforced by the party who included them in the contract. However, the nullity of a clause does not mean the total nullity of the contract, which remains valid in its other provisions, unless the contract could not survive without the unfair clause.
Buyers may apply to the courts to have such clauses declared null and void. In the event of a declaration of unfairness, the courts usually restore the balance between the parties by removing the clause in question and applying the relevant statutory provisions. In addition, the buyer may claim damages if he has suffered economic loss as a result of the application of an unfair term.
4. Recommendations for avoiding unfair terms
In order to avoid being affected by unfair terms, it is essential that buyers of homes under construction follow some key steps:
- – Read the contract carefully: Even if the contract is an adhesion contract, it is important to read it carefully and to seek advice from a specialist lawyer if confusing or potentially unfair terms are identified.
- – Ask for changes: Although complicated, you can always try to negotiate certain clauses or at least ask for clarification.
- – Check the developer’s solvency and reputation: Dealing with reputable developers reduces the risk of abusive clauses.
- – Report: If you suspect an abusive clause, it is advisable to contact a consumer association or a lawyer to assess the situation and, if necessary, file a complaint.
Conclusion
Unfair terms in contracts for the sale and purchase of homes under construction are a threat to buyers’ rights, especially in a market where developers are often in an advantageous position.
Consumers should be aware of the importance of checking contracts carefully and, if they find unfair terms, of pursuing their rights through the appropriate legal channels.
Current legislation is designed to protect consumers, and terms that breach this protection can be declared void, ensuring a fairer deal for the buyer.
If you need help with a contract for the sale of a property under construction and want to make sure that there are no unfair terms affecting your rights, please contact us.
