Wednesday, October 31, 2007

You can sue a builder after 1 year

Many contracts drafted in Spanish by Panamanian builders - and gladly accepted by many real estate agents claiming to act in best agent of the foreign buyer - have a clause which says:
THE APARTMENT shall include the following warranties FOR REPARATIONS: one (1) year from the date of the certificate of occupancy, except in cases of negligence due to THE PROMMISORY BUYER’s use or abuse.

The term may vary to read 1 year from the date of signing of the promise agreement or registration of the final deed.

When faced with claims for tiles popping up from the expansion of poorly dried floors, leaks into penthouses during heavy rains, plywood kitchen furniture bulging because of water dripping from substandard plumbing, many builders point to said clause to tell the buyer to go somewhere else.

Enter the old 1917 Civil Code, which in Article 1343 states:
"The contractor of a building which was damaged for construction defects ("vicios de la construcción"), is liable for the damages and injuries if the defect ("ruina") occurred within a term of 10 years, counted from the date when the construction ended; the same liability, and for the same time, will have the architect who directs it, if he knows that the defect is due to the soil or the management.
"If the cause was the breach of the contractor to the contract conditions, the action for indemnization may last 15 years."

An essay RESPONSABILIDAD CIVIL POR DEFECTOS EN LA INDUSTRIA DE LA CONSTRUCCIÓN by Dr. Pedro Barsallo points out how the Spanish Supreme Tribunal has been holding that the developer must also be liable for thos contractor liability, under Article 1591 of the Spanish Civil Code, which has the same text as Article 1343. This is specially important in Panama, where a buyer may sign a promise to purchase agreement with one corporation (for example: LANDHOLDING, S.A.), at the offices of a developer (PROMOTOR DEVELOPMENTS, S.A.), which in turns hires another company to be the contractor and get construction permits (BUILDER ENGINEER, S.A.) and another corporation is subcontracted to do windows and/or kitchens (INCOMPETENT SUBCONTRACTORS, S.A.), usually all with the same directors and most likely the same shareholders.

The Panama Supreme Court has been quoting the essay in several decision against builders, such as :
ROBERT TOLEDANO et al v PROVENCO, S. A., VENTAS Y PROYECTOS, S. A., PROYECTOS Y EDIFICACIONES, S. A. and CIELO RASO, DIVISIONES Y AISLAMIENTO, S. A. (July 3, 2001): PROVENCO, S. A. and PROYECTOS Y EDIFICACIONES, S. A. were found liable for US$33,222K in damages, out of US$60K claimed for losses during 14 months of repairs at the Mar Plaza condo in Marbella.
PRODUCTOS DEL MAR Y DEL CAMPO, S. A. and PASTAS FRESCAS, S.A. vs BASTIDAS, S.A. and CONSTRUCTORA VILLARREAL, S.A. (January 30, 2003): CONSTRUCTORA VILLARREAL, S.A., was found liable for US$40K in damages caused to neighboring complainants while working in the land of BASTIDAS, S.A.

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