the doubts and questions raised in recent days may seem countless.

Real Estate in Spain and Coronavirus: Unprecedented Legal Uncertainty

Many people will find themselves in the difficult position of having signed a preliminary sales agreement (« contrato de arras ») and paid the deposit to the seller, facing a deadline for signing the final deed before a notary, and with an uncertain future looming.

This is especially true given that the usual practice in Spain is to pay the deposit directly to the seller. While it is possible to hold the funds in escrow with the notary, this is rarely done in practice (a possibility that is, moreover, expressly provided for in Article 621-8 of Book Six of the Catalan Civil Code).

Sales agreements often offer little protection

In this respect, it is worth noting that, unlike the practice in France, contracts in Spain lack predictability and very rarely contain suspensive conditions.

The questions that immediately come to mind (among many others) are: whether or not it will be possible to go to the notary, and whether financing will be available, if applicable.

Signing documents at the notary's office during the state of emergency

Let's go through this step by step:

Position of the Spanish Notaries Association

Regarding notaries, the Spanish Notaries Association has issued a statement explaining that during the COVID-19 crisis, notaries may only intervene "in urgent matters, as defined by the government."

If the signing date was set before the declaration of the state of emergency and the appointment with the notary was confirmed, it is highly likely that the appointment will be maintained.

Otherwise, you should take your chances. Given the circumstances described (the deadline for executing the authentic deed is approaching and the risk of losing the deposit paid), you can assume that the notary will agree to see you at their office.

Absence of Real Estate Agents

The Catalan Association of Real Estate Agents (API), in its press release of March 26, indicated that real estate agents will not be able to attend signings at the notary's office during the state of emergency, as their presence is not mandatory.

Comparison with France

In France, notary offices have been closed to the public since March 18, and some transactions can still be carried out remotely electronically.

This is a tool that would be well worth adopting in the neighboring country once this crisis is over.

Difficulties Related to Bank Financing

If the buyer is about to obtain bank financing, things can slow down and become complicated.

Bank branches are still operating, but at reduced capacity, as banking sector staff have obviously not been spared by the pandemic, and branches are dedicating significant time and resources to combating the virus.

It is therefore not at all surprising to encounter unusual delays during this period.

The Importance of Conditions Suspensive

It's easy to say in hindsight, but it's always essential to include a condition precedent for obtaining financing in deposit contracts to avoid unpleasant surprises.

The special case of Catalonia

In this sense, in Catalonia, article 621-49 of book six of the Catalan Civil Code, relating to obligations and contracts, provides that if a private contract makes obtaining financing a condition precedent, it is possible - unless otherwise stipulated - to withdraw from the contract by proving, within the agreed period, that a letter of refusal has been received from the bank (whenever the failure to obtain financing is not attributable to the buyer's negligence).

Other practical difficulties encountered by buyers

These are concrete examples of the difficulties raised by these contracts (other scenarios come to mind, such as the issue of travel for people who live in one city and must go to another for the signing, or who reside abroad (without having granted power of attorney).

Indeed, who could have anticipated the border closures and the massive flight cancellations of recent weeks?)

Can the preliminary sales agreement be extended?

All this to say that, obviously, it is best to try to reach an agreement between the parties to extend the deposit agreement deadline. But what happens if the seller refuses?

Force Majeure as a Defense

In our view, this unprecedented health crisis brings together all the elements that the highest Spanish court considers necessary to constitute a case of force majeure (Article 1.105 of the Civil Code) as a ground for exemption from contractual performance, provided, of course, that the preliminary agreement was signed before the outbreak of the pandemic. But of course, the debate is open, and some claim to have foreseen the dramatic effects this disease would have on our lives before anyone else.

But of course, the debate is open, and some claim to have foreseen the dramatic effects this disease would have on our lives before anyone else.

But if we are even slightly realistic: who could have imagined a month ago that we would find ourselves in such a situation?

Furthermore, it is clear that here too, we are faced with the criterion of externality, necessary to establish the existence of a case of force majeure.

Pacta sunt servanda ou rebus sic stantibus ?

This situation leads us back to the general principles of law and raises the question of the predominance (or not) of pacta sunt servanda over the principle rebus sic stantibus.

We believe it is possible to defend the application of the rebus sic stantibus doctrine.

It is true that traditionally, case law has held that an economic crisis cannot alter the terms of a contract and that the application of the rebus principle should be exceptional.

But it is clear that today we are not only facing an economic crisis, but also a global pandemic that has forced the government to adopt the most restrictive measures ever taken in our democracy.

Suspension of Time Limits During a State of Emergency

Finally, one last idea comes to mind: under provision four of Royal Decree 463/2020 of March 14, which declares a state of emergency to combat COVID-19, all limitation periods and lapse periods for any action or right whatsoever are suspended for the entire duration of the state of emergency and any extensions thereof.

What is the nature of the time limit agreed upon in a deposit contract if not a lapse period? This is certainly how the jurisprudence of the Supreme Court interprets it (STS June 17, 2008).

We therefore believe it might be possible to invoke the suspension of the time limit stipulated in the deposit contract, a time limit that will resume running once the state of emergency is lifted.

To corroborate our interpretation, we can refer to the explanation provided by the Spanish Ministry of Justice regarding the procedure to follow once the state of emergency is lifted, specifically concerning procedural deadlines (this is the third provision, not the fourth, which is relevant to us).

This circular is useful because it clarifies the effect of the suspension (which ultimately applies to both limitation periods and lapse periods): the deadline is "frozen" at a specific point in time due to an obstacle or legal cause, and will resume in the same state once the obstacle or legal cause has disappeared. It also specifies (if necessary) that if a 30-day deadline is suspended after the first 15 days, it will then resume for the remaining 15 days.

Each situation must be analyzed on a case-by-case basis

These are, of course, avenues for reflection, and we could dedicate many hours to each specific case to determine whether or not one of the hypotheses developed is applicable to it.

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