CRIMINAL LAW DIVISION
Complex real estate transactions frequently occupy the intersection of civil, commercial and, on occasion, criminal law. Supreme Court Judgment (STS) No. 2287/2026, of 21 May (ECLI:ES:TS:2026:2287), delivered by Justice Leopoldo Puente Segura, revisits that boundary in the context of a transaction in which a plot of land had been transferred under an agreement requiring the future delivery of a residential property and was subsequently sold to a third party without effectively incorporating that prior obligation into the subsequent transfer.
The significance of the judgment does not lie in treating every contractual breach as a criminal offence. Rather, it lies in clarifying the circumstances in which a subsequent disposal of property may give rise to criminal liability by affecting rights that had already been contractually committed.
A Disposition Giving Rise to Criminal Liability
The distinction between a civil breach of contract and criminal wrongdoing requires careful analysis. As the Supreme Court observed in STS No. 3264/2022, of 15 September (ECLI:ES:TS:2022:3264), delivered by Justice Javier Hernández García:
“The boundary between civil and criminal liability lies precisely in the strict requirements of criminal typification.”
The same judgment further explains that not every breach of civil obligations amounts to fraud unless there is evidence of:
“the existence of a prior intention not to perform and the use of deceptive conduct as the causal factor inducing the transfer of assets.”
This distinction is important. However, STS No. 2287/2026 addresses the specific offence of improper fraud (estafa impropia) under Article 251.2 of the Spanish Criminal Code, which follows a different legal rationale. In this context, it is not necessary to establish the prior deception that characterises the ordinary offence of fraud under Article 248. Instead, the focus shifts to the disposal of an asset as though it were free from encumbrances when it had already been subject to a prior transfer, encumbrance or other legally relevant commitment.
The Court states this expressly:
“It is clear that this particular offence does not require any deception. Nor does it require the existence of any concealment from the third party of the prior exchange agreement.”
It continues:
“The offence therefore does not require the implementation of any deceptive scheme or conduct.”
The critical issue is therefore not whether the transaction ultimately failed. Rather, it is whether the asset was disposed of in disregard of pre-existing rights that were known or had been assumed, thereby placing the affected party in a legally contentious position. As the judgment succinctly explains:
“Once the second sale or encumbrance has taken place, the offence has already been completed, since the harm consists in the legal uncertainty affecting the injured party’s rights.”
Accordingly, the dividing line is found not in the failure of the transaction itself, but in the subsequent disposal of property that is incompatible with an existing legal position.
Future Construction and Pre-existing Rights
Perhaps the most interesting aspect of the judgment concerns transactions involving future construction. At the time of the initial agreement, the promised dwelling had not yet been physically built. It could therefore be argued that the original purchaser had not acquired ownership of something that neither existed nor had been delivered.
The Court does not ignore this civil law difficulty. However, it rejects the argument that it is determinative from a criminal law perspective. Although the dwelling had not yet been constructed, the contractual rights arising from the earlier transaction already existed. Those rights could be frustrated if the property were subsequently transferred as though no such prior commitment had ever been made.
The judgment therefore concludes that there is no obstacle to applying the doctrine of improper fraud:
“even where the dwelling which the developer had undertaken to build off-plan and deliver had not yet been constructed.”
This reasoning has significant practical implications. In transactions involving land-for-development exchanges, off-plan sales, land contributions to development projects, real estate developments or successive transfers of property, criminal liability does not depend solely on formal ownership or on the physical existence of the future asset. It may also arise where a subsequent transaction effectively deprives previously assumed contractual obligations of their practical effect.
In other words, assets that have not yet been registered, delivered or constructed may nevertheless be subject to legal commitments that materially restrict their availability for subsequent disposal.
Corporate Criminal Liability and Property Development Companies
The judgment is also noteworthy from the perspective of corporate criminal liability. STS No. 2287/2026 does not examine in detail the requirements of Article 31 bis of the Spanish Criminal Code. Instead, it addresses an appeal that was based primarily on the argument that the underlying offence attributed to the individual defendant had not been established.
The Court therefore reasons:
“Having dismissed the previous ground of appeal, this second ground must necessarily meet the same fate, since it was presented merely as the inevitable consequence of the possible success of the first.”
The practical lesson is clear, albeit one that should be approached with appropriate caution. Where a company’s defence rests exclusively on denying the existence of the underlying criminal offence, confirmation of that offence may significantly undermine the company’s own position.
For property developers, directors and investors, this reinforces the importance of treating prior contractual commitments as more than merely civil contingencies. Before transferring real estate assets, companies should identify any outstanding contractual obligations, unregistered burdens, commitments relating to future delivery, private agreements, ancillary documentation and other relevant communications. Equally important is maintaining a clear audit trail of corporate decision-making, the due diligence undertaken and the safeguards incorporated into the transaction.
The Amount Defrauded and the “Encumbered Asset”
The judgment also provides useful guidance regarding the quantification of the offence. The defence argued that the corporate fine should be calculated by reference only to the value of the dwelling that had not been delivered. The Supreme Court disagreed, holding that the fraudulent conduct related to the transfer of the land as though it were free from encumbrances, rather than merely to the value of the promised dwelling.
The Court explains:
“The issue is not to quantify the loss suffered by Florencia’s heirs or by the third-party purchaser, but rather the nature and extent of the fraud objectively committed by disposing of an encumbered asset as though it were unencumbered.”
The expression “encumbered asset” should be understood here in a functional rather than a purely technical sense. It does not refer exclusively to a registered proprietary charge, but more broadly to an asset whose availability had already been limited by a prior legal obligation. This is an important clarification, confirming that legal analysis cannot be confined to the information recorded in the Land Registry alone.
The judgment also illustrates how, in economic crime, the amount relevant for determining criminal penalties, fines or corporate liability does not necessarily coincide with the amount recoverable by way of civil damages. Civil liability seeks to compensate the loss suffered, whereas the criminal assessment focuses on the objective scope of the fraudulent transaction and the incompatible disposal of rights previously granted to another party.
A Criminal Law Boundary That Begins Before the Transaction Is Signed
STS No. 2287/2026 does not criminalise ordinary real estate disputes. Its significance lies precisely in defining the limits of criminal liability. It is not enough that a transaction ultimately fails, nor that one party breaches its contractual obligations. Equally, however, parties cannot avoid criminal scrutiny merely by presenting a transaction as an ordinary civil matter where, in reality, the asset has been transferred in disregard of rights that had already been legally committed to others.
For companies, developers, directors and investors, the judgment offers a practical lesson. Before transferring any real estate asset, it is essential to review not only its registered legal status but also its contractual history, existing commitments, outstanding obligations and the documentation that will be relied upon in dealings with third parties.
In transactions of this nature, criminal risk management begins well before the agreement is signed. It starts with maintaining a clear documentary record of the decision-making process, ensuring transparency throughout the transaction and properly identifying the legal limits affecting the availability of the asset. The criminal law boundary is crossed not because a transaction proves unsuccessful, but because an asset is disposed of as though it were free from restrictions when, in fact, it was already legally burdened by the rights of others.
