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Breach and Termination of a Property Sales and Purchase Agreement (SPA)

A Property Sales and Purchase Agreement is a written commitment between Purchaser and Seller to deliver a property in exchange for an arranged amount of money. On the one hand, this type of agreement requires the Seller to deliver their property in the same condition it was in when the agreement was signed; on the other hand, the Purchaser is required to pay the amount established in the agreement.

Either of the parties could breach a Property Sales and Purchase Agreement whenever they fail to comply with any of the terms established in it. This type of agreement follows the rules stipulated in the Spanish Civil Code, in which we can find the legal consequences in case of a breach of agreement by not meeting one or more of the terms established in it.

Common situations that lead to a breach of agreement and subsequent termination are when the Seller fails to deliver the property in optimal conditions, regardless of whether this is stipulated in the agreement, or when the Purchaser fails to pay the amount stipulated in the agreement due to the lack of raising the funds on time.

When the Purchaser is the Breaching Party

One of the main reasons for non-performance of the agreement during a property purchase is the Purchaser’s inability to pay the amount they were legally bound to by the agreement. As long as the Seller fulfils his/her legal duties, he/she may call non-performance of the agreement, following the conditions established under Article 1.504 in the Spanish Civil Code. Even if non-performance is not contemplated in the agreement, the Seller can exercise his/her right to it, as the purchasing party has failed to meet one of the requirements in said agreement, in this case, payment of the agreed upon amount.

When the Seller is the Breaching Party

Should the Seller fail to meet any of the requirements of the Sales and Purchase Agreement, the Purchaser may exercise his/her right to non-performance. This often happens in the following situations: when the Seller decides not to sell their property, the property is unfit for habitation or if its advertising was misleading. In any of these situations, the Purchaser is the party that has to initiate the process of non-performance of the agreement, so that the earnest money or security deposit is refunded.

Whether you are a Seller or a Purchaser, if you find yourself in a situation in which the agreement has been breached by either one of the parties, please contact our Law firm which specialises in Real Estate Law to advise you on how to best proceed.

Joaquín Pons, Savloir.

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