It is frequent in contracts for the transfer of dwellings for the offer to be made on special terms and conditions which oblige transferees to hand over amounts before or during construction as a result of their need for family accommodation.

The justified alarm which has arisen in public opinion by the repeated commission of abuses, which firstly constitute a serious prejudice to social coexistence and are furthermore clearly criminal acts, causing irreparable harm to those who, trusting and in good faith, agree without objection to the said offers, make it necessary to establish general preventative rules which ensure both actual and effective application of the financial resources advanced by buyers and future users to construction of their dwellings and the repayment thereof in the event that the construction does not take place.

The measures to provide guarantees which are proposed were established for dwellings constructed with official State protection by the Decree of 3 January 1963 (RCL 1963\61 and Appendix 1951-66, 14538), which it is considered necessary to extend to dwellings of all types and which must blend in with other measures of a governmental and criminal nature which adequately penalise both conduct which assaults the most lofty interests of the community and engaging in acts of a criminal nature. The former and latter are covered by the Public Order Act of 30 July 1959 (RCL 1959\1055 and Appendix 1951-66, 10799), and by the Criminal Code, specifically with the interpretation made by the courts of offences falling within sections 2 and 4 of Chapter IV, defrauding, by giving life to the so-called single, masse offence, since acts which are carried out and affect the community or social co-existence and the public interest are worthy of greater protection, which was echoed by the Prosecution Service of the Supreme Court in its circular of 1 December 1965 (RCL 1965\2263 and Appendix 1951-66, 3239), alluding to the function of promoting action by the justice system of the Ministry of Justice in matters concerning the public interest.

Nevertheless, there are Bodies or Organisations amongst the diversity of developers engaged in the construction of dwellings who, as a result of their rules of constitution, their organisation, functioning and purposes can offer sufficient guarantees to be excepted from application of these measures, which for these purposes must be authorised by the Government in order that it may so resolve on proposal by the Ministry of Housing when it considers it appropriate.

Pursuant thereto, and in accordance with the Act approved by the Spanish Parliament, I have sanctioned the following:

Section 1.

Individuals and legal entities who promote the construction of dwellings, which are not dwellings with official State protection, for use for family residence or domicile, whether on a permanent basis, or temporary, circumstantial or seasonal residence and who attempt to obtain the handover of money from transferees prior to or during construction, must comply with the following conditions:

1. 1. To guarantee the repayment of amounts handed over plus 6 percent annual interest in the event that construction does not commence or is not completed for any reason in the agreed period, by means of an insurance contract entered into with an insurance entity authorised and registered in the Register at the Sub-Directorate General for Insurance, or by means of a joint and several guarantee provided by an entity registered in the Register of Banks and Bankers, or Savings Banks.
   
   
2. 2. To receive advance payments made by transferees through a Bank or Savings Bank in which they must be deposited in a special account, separate from any other type of funds belonging to the developer and which the same may only utilise for purposes arising out of construction of the dwelling. In order to open the said accounts or deposits the Bank or Savings Bank shall, on its own responsibility, require the guarantee referred to in the previous condition.

Section 2.

Contracts for the transfer of dwellings referred to in section 1 of these provisions in which the handover is agreed to the developer of advance payments must expressly state:

• a) That the transferor undertakes to repay to the transferee amounts received on account plus annual interest of 6 percent in the event that construction is not commenced or completed within the agreed periods determined in the contract or no Certificate of Habitability is obtained.
  
  
• b) A reference to the guarantee or insurance contracts specified in the first condition of the previous Section, indicating the name of the guarantor or insurer.
  
  
• c) Designation of the Bank or Savings Bank and account through which the transferee must deliver amounts which the same has undertaken to advance pursuant to the contract entered into.

At the time of execution of the contract the transferor must deliver to the transferee the document evidencing the guarantee referring on an individual basis to the amounts which must be advanced on account of the price.

Section 3.

On expiry of the period for commencing works or handover of the dwelling without the one or the other having taken place, the transferee may elect between rescission of the contract with repayment of amounts handed over on account, increased by annual interest of 6 percent, or grant an extension to the transferor which must be recorded in an additional clause of the contract entered into, specifying the new period with date of termination of construction and handover of the dwelling.

The insurance contract or guarantee together with a certified document evidencing notification of the works or handover of the dwelling shall constitute title to enforcement for the purposes of Title XV of Book II of the Civil Procedure Act in order to require the insurer or guarantor to hand over amounts to which the transferee is entitled in accordance with the provisions of this Act.

The provisions of the foregoing two paragraphs shall be without prejudice to the other rights which the transferee may have in accordance with current legislation.

Section 4.

After the certificate of habitability has been issued by the Provincial Department of the Ministry of Housing and handover is demonstrated of the dwelling by the developer to the Buyer, the guarantee provided by the insurance company or guarantor shall be cancelled.

Section 5.

It shall be an essential requirement for the advertising and publicity of the transfer of dwellings with receipt of amounts on account prior to commencement of construction or during the construction period, that they record therein that the developer will act and contract in compliance with the requirements established in this Act, with express reference to the guarantor entity and the Banks or Savings Banks in which amounts advanced must be paid into the special account therewith. The said matters shall be specified in the text of the advertising carried out.

Section 6.

Breach by the developer of the provisions of this Act shall be penalised by a fine for each infringement which shall be imposed in accordance with the provisions of the Public Order Act (cited), 49/1959 of 30 July, without prejudice to the powers and functions of the Courts.

Failure by the developer to repay all amounts advanced to the transferee in infringement of the provisions of Section 1 of this Act, shall constitute an offence or misdemeanour penalised by Sections 587.3 and 535 of the current Criminal Code, respectively, with the penalties under Section 528 imposed in their maximum degree.

Repealed by sole repealing provision 1 f), RCL 1995\3170, of Act 10/1995 of 23 November (RCL 1995\3170).

Section 7.

The rights granted by this Act to transferees shall be incapable of waiver.

Final provisions.

1. 1. The Government is authorised, on proposal of the Ministry of Housing and by Decree, to determine the official bodies which, as a result of offering sufficient guarantees, shall be excepted from application of the foregoing provisions.
   
   
2. 2. The Ministries of Justice and Housing are authorised to issue supplementary provisions as they consider necessary to implement this Act, which shall come into force and effect on the day of publication in the “Official State Gazette”.

Additional provision.

• The Government is authorised by Decree within six months from entry into force of this Act to adapt the principles thereof which may be applicable thereto to housing cooperatives and owners associations.

Additional Provision One. Receipt of amounts on account of the price during construction.

The receipt of advance payments in construction by developers or agents must be covered by means of an insurance which indemnifies against breach of the contract in similar form to the provisions of Act 57/1968, of 27 July (RCL 1968, 1335), on the receipt of advance payments in the construction and sale of dwellings.  This Act and its supplementary provisions will be applicable in the case of dwellings with the following modifications:

1. a) The legislation referred to will be applicable to the development of all types of dwelling, including those under a regime of owners’ association (comunidad de propietarios) or cooperative housing association.
2. 
   b) The guarantee established by the said Act 57/1968 must extend to amounts handed over in cash or by any bill of exchange, payment of which must be made in the special account stipulated in the Act.
3. 
   c) The guaranteed repayment will comprise amounts handed over plus interest at the legal money rate in force at the time when the repayment is made.
4. 
   d) The fines for breach referred to in the first paragraph of Section 6 of the said Act will be imposed by Autonomous Regions in an amount for each infringement of up to 25% of the amounts whose repayment must be insured or in accordance  with the provisions of the legislation of the Autonomous Region itself.