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LAW AGAINST FRAUDS IN REAL ESTATE

It is in force the Law Against Frauds in Real Estate which was published in the Official Gazette Number 39.912 on April 30th, 2012.

As its Article 1 dictates, this Law has the purpose of establishing a set of norms meant to regulate and control the construction, sale, presale, permits and protocols of dwellings, taking into consideration the process of construction and all agreements between individuals, whatever their contractual denomination may be, with the use of deceitful practices and breaches of contracts by providing the crime of real estate fraud and others of similar nature.

Article 6 provides that the Presidency, through the Ministry with competence in the subject of dwellings and habitats, will be the governing body of the system of construction and sale of dwellings in the country and it will be responsible for creating the General Management Direction of the National System of Dwellings and Habitats, which will create policies and strategies for the application of this Law by tracking and controlling the process of construction, sale, presale, permits and protocols in housing, all in accordance with the guidelines of the Ministry. In accordance with Article 7 of the Law, the General Management Direction of the National System of Dwellings and Habitats will be in charge of regulating, administrating supervising, inspecting, controlling on behalf of the Nation, all construction companies and their representatives. Among its many attributions we can find the following: To guarantee all rights and obligations found in this Law; To design, implement and evaluate the mechanisms of application, control and follow up of this Law and to review all contracts pertaining to the sale and presale of dwellings.

It is created the National Registry of constructors, contractors, producers and promoters of dwellings and other civilian organizations dedicated to the construction, sale and presale of dwellings, as well as establishing all regulations and to exercise all functions of control to guarantee its constant update; and in conformity with The Third Transitory Disposition, the constructor, promoter or producer in a project for the sale or presale of dwellings will have a period of sixty days to register in the General Management Direction of the National System of Dwellings and Habitats.

Article 14 contains the requisites for all contracts or equivalent documents regulated by the Law and it provides that all contract models must be reviewed and approved by the General Management Direction of the National System of Dwellings and Habitats.

Article 18 creates an absolute prohibition to unilaterally rescind the contract in homes for sale of presale that were already offered, with the only exception of the lack of payment of over ninety days for any cause directly attributed to the buyer. However, the request to rescind the contract must be approved by the General Management Direction of the National System of Dwellings and Habitats. Nevertheless, the buyer can unilaterally rescind the contract with a simple written notification to the seller and to the General Management Direction of the National System of Dwellings and Habitats with at least ninety days of anticipation.

In case the contract is rescinded, Article 20 provides that the constructors, contractors, producers and promoters must reintegrate to the buyer the totality of the amounts given in payment as well as interests, within a period of thirty days after the written notification and it provides for the absolute prohibition of any penal clauses in the contract.

PENALTIES:

Among the many sanctions imposed by the Law, we point out in these notes the following:

a) Article 40: a fine of two hundred and fifty Tax Units (250 TU) for those who violate the provisions of articles 17, 20 (include or allow penal clauses in favor of the seller) and 21. Fines of up to five hundred Tax Units (500 TU) for those who violate articles 13, 14 (not including all requisites for contracts and evading the previous approval by the General Management Direction of the National System of Dwellings and Habitats) 22 and 30.

b) Those provided in Article 43 for constructors, contractors, producers and promoters of dwellings that appropriate the funds received from the buyers of dwelling in the process of construction or not yet constructed and do not deliver the promised real state, will be punished in accordance with the Penal Code and must return all the received money, pay the interest at the average rate of the five most important banks; and pay six hundred Tax Units (600 TU) in punitive damages to each buyer.