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Increase in the Price of the Sale of Real Estate Project

12 de febrero 2021


| By: Jose H. Fung D. |

As a lawyer, our training obliges us (although I confess that personal conviction weighs more) to defend the respect and enforceability of the rights and obligations that are agreed within a contract. Respect for fundamental principles such as enforceability between the parties of contractual agreements is one of the pillar1s that certainly allow us to live in society, if not, it is enough to just imagine what would happen if an individual could undo any commitment that he had contracted by contract. This is why the excessive application of rules that seek to protect the interests of consumers are so dangerous when they are abused.

The uncontrolled application of legal tools that make it possible to cross out the contracts as abusive  or make them less valid by accusing them of “adhesion contracts” are ultimately quite dangerous  mechanisms in terms of rights and obligations refers to. There cannot be a healthy commercial process  if there is no certainty of compliance of the obligation.  

With this in mind we address the topic of the price increases in real estate projects, weighing that  we are referring to those valid, agreed and foreseen increases as provided by Law, in this case Article  79 of Law 45 of October 31, 2007 and Article 43 of Executive Decree No. 46 of June 23, 2009, applied  in conjunction with Resolution A-063 of July 15, 2015.  

The increase in the price, in the sale of a new property, is valid, the Law allows the parties, buyer (client  or consumer) and seller (promoter or economic agent) to agree, in the exercise of free will, under which  scenarios it can produce an increase in the price of the real estate unit. Both Article 79 of Law 45 and  Article 43 of Executive Decree No. 46 provide for this possibility and at the same time confer on the  Consumer Protection Authority the power to “verify” that the increases charged are valid, but what  exactly what the ACODECO verifies?  

In our opinion, ACODECO is called by Law to verify two things: one, that the increases are enforceable,  that is, that they are agreed between the parties in compliance with the requirements of the Law,  requirements that translate into the information that the contract: total amount to be paid, form of  payment, conditions or factors that motivate the increase, ceiling of the increase, how the increase will  be proven, term to communicate the same, and term to pay the increase. The second element in which  ACODECO intervenes is in the verification of the increase, that is to say, that by faculty of Law, it can  verify the validity of the increases, which it does, reviewing and verifying that the increase corresponds  to factors that really exist and that in effect these had a real impact on the price.  

That said, it is more than acceptable for the Consumer Protection Authority to exercise control over the  application of price increases since it is obvious that there are Promoters who do not exercise this right  in the best way and it is correct that the application of an increase when it is not such, however, the  vast majority of Real Estate Developers suffer valid increases in their construction costs, increases that  truly affect the final price of the real estate unit. We defend the position of that great majority that  may be affected by the incorrect application of the ACODECO’s power to supervise.  

The Law does not discriminate factors that produce an increase. This means that all those assumptions  provided for in the contract that have the potential to produce an increase must be accepted as valid,  in other words, if the contract recognizes it, ACODECO cannot reject the existence of a certain cause  of increase, it cannot do it because the Law does not allow it. However, it is correct to affirm that  ACODECO does have the power to review that the increases that are invoked are valid, as the Law  says, but only those increases that occur due to an increase in the cost of construction materials, then:  ¿ What happens when the increase does not correspond to an increase in materials? The answer is  simple: ACODECO cannot verify it and therefore is beyond its competence. This means that if an  increase occurs in a complex way by more than one factor of increase, ACODECO will have to segment  and verify only the percentage that corresponds to the increase in materials, and that, provided that  the entity has a price index, since if it does not have it, it can only be limited to verifying the coherence  between what is said in the contract and what was effectively applied.  

Proof of what has been said can be found in Resolution A-063 of July 15, 2015. Knowing that it is  limited in the exercise of the power to verify because it does not have product variation rates, the  Consumer Protection Authority proceeded to establish a measurement method that I call  “documentary”, which is not provided for in the Law. As is known, the regulatory authority could not go  against the legal instruments that it intends to develop so that this resolution, in our opinion, becomes  illegal, by establishing a method contrary to what the Law directly and expressly dispone.  

Through Resolution A-063 of July 15, 2015, ACODECO tries to make up for the deficiency and at the  same time expand its power to thereby veto the increases that in its opinion should not be charged in  violation of the legitimate rights of the Real Estate Sector.  

In conclusion, if ACODECO can only validate the increases that originate in the increase in materials,  it cannot rule out, much less invalidate, the increases that occur due to the incidence of other natural  factors in the construction segment such as salary increases, increases in financing costs, costs for  additional improvements, labor among many others that are valid and real and with more than enough  potential to make a work more expensive.  

It is questionable and reprehensible that the Consumer Protection Authority coercively prevents, under  the threat of recurring fines, the collection of an increase that it does not recognize as valid, simply  because it does not have the legal power to verify it. While the Law is not modified, ACODECO must  limit itself to doing what the Law allows it to do, which is to respect any increase factor that is recognized  in the contract, refrain from giving an opinion on those factors other than the increase in materials and  verify the increase by increase of materials based on a variation index method, which is the only  mechanism recognized by the Law.

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