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El blog de Maria

Your daily Spanish Law reporter. Have it with a cafe con leche.

Legal tip 1048. NEW! Supreme Court doctrine on Lack of Bank Guarantees
15 October 2013 @ 11:10

Supreme Court, last 19th of July, 2013.

Supreme Court had already set decisions on the character of this breach ( lack of Bank Guarantee) on the 11th of April of 2013 and on the 10th of December of 2012 clearly stating that lack of Bank Guarantee ( as lack of First Occupation Licenses) are essential breaches by developer that open the posibility for cancellation of the contract and refund of all amounts paid.

This Supreme Court doctrine has had a progressive development:

 In the first phase, marked by Court Decision dated  October 25th of  2011,  it was made clear that " the omission of the guarantee or warranty , and the deposit in a special account of the sums paid in advance by prospective purchasers of homes , article one  Law 57/68 , involved a breach of the agreement that can be classified as serious or essential" .

Subsequently, in a second phase starting with Supreme Court Decision December 10th, 2012, the Supreme declared its essential character but at the same time, making cancellation just possible when reality, status of events make this cancellation be considered as made in " good faith".

In short and simple words, if house is almost finished, lack of Bank Guarantee will never produce a cancellation and refund of deposits, according to Spain Supreme Court.

A reform of Law 57/68 is  necessary, in order to make clear different breaches and its consequences for the years to come.

A beach of Zahara de los Atunes, Cadiz, Costa de la Luz, Southwestern Spain, at




Like 1


M11Block said:
15 October 2013 @ 12:03

Does this mean only off plan properties will benefit by this ruling? Our property was almost finished when we put our deposit on, but not ready for signing over for over three years. The Court is therefore saying we shouldn't have needed a BG, but we are in the same position as off plan buyers, in fact we thought we were being more cautious by buying an almost finished property and putting 40% deposit on. Perhaps the Courts could look at this practice of putting such a large deposit on and make the deposit only 10%, this would be less of a risk for buyers.

mariadecastro said:
15 October 2013 @ 15:22


It depends on agreements made in the contract and course of building.
Did you agree on a Guarantee for the deposits?


ads said:
16 October 2013 @ 11:29

With respect Maria I find it difficult to reach this same conclusion when you consider that there may well be circumstances that demonstrate failure of good faith on the developers’ part from the outset of the contract and beyond, that could impact the SC’s analysis and decision to award cancellation of contract.

I refer to the following forms of “event”, Maria.
1) Reference to an illegal entity acting as BG in the original purchase contract.
2) Non provision of BG.
3) Alteration of terms and condition of the contract where the consumer has been denied the opportunity to examine all T&C’s, thus causing a significant imbalance to the detriment of the consumer.

The Supreme Court, by making specific reference to the need to analyse “events” and determine “good faith”, surely requires the examination of ALL evidence and review of “good faith” by ALL parties, which should be good for consumer protection.

Only when all facts and events are analysed by the Supreme Court can lack of good faith be determined, and in cases where they clearly demonstrate an unequivocal intent by the developer to deny a consumer their inalienable rights FROM THE OUTSET AND BEYOND then surely there should still be an opportunity for the SC to re-evaluate "status of events" , therefore "making cancellation just possible".

Lawyers representing their clients should be given the opportunity to present ALL facts relating to “events” of this nature to the Supreme Court, and should not be restricted by a system that limits this process in any way or form.

The conclusion to this Supreme Court ruling is hopefully that all actions on the part of the developer from the inception of the purchase contract and beyond cannot, nor should be ignored, and where they demonstrate from the outset, a complete disregard of “good faith” on the part of the developer, they should according to the SC’s previous ruling and rules of fair balance lead to cancellation of the contract.

I look forward to your response to the above with regard to this significant ruling that impacts all too many who have been subjected to what can only be described as a complete lack of good faith by parties intent on denying consumers their inalienable rights.

ads said:
20 October 2013 @ 06:05

Dear Maria,

As a Spanish legal representative and great advocate of consumer protection, especially with regard to the Bank Guarantee abuse, would you be willing to report back to the Supreme Court following this ruling that you have identified above, the need (and hope for a fair balance) that the Supreme Court will allow a review of all "events" that relate to "good faith", as I have expressed above? (such aspects as illegal BG written into purchase contract with subsequent T&C's amended without purchaser's consent).

They state
" Supreme declared its essential character but at the same time, making cancellation just possible when reality, status of events make this cancellation be considered as made in " good faith".

Only when we fight for a fair balance of analysis of "good faith" will trust be restored in the Spanish legal system.

mariadecastro said:
21 October 2013 @ 18:55

Dear Anne:

There is no procedure way for me to do so. I am very sorry.



ads said:
23 October 2013 @ 00:07

Dear Maria,
I have just responded to your blog titled "Deposit contracts by Banks", but it may be worth repeating this here:

What appears to be consistently happening now is a growing failure within the system of justice in Spain to recognise and take action against malpractice from all quarters (whether this be legal, developer, or bank malpractice). Legal negligence, lack of due diligence, deception by failure to inform or seek consent, deliberate intent by whoever, all have the same "harmful" impact on the innocent consumer, and all demonstrate a complete disregard for consumer protection.

It's time that this continuing "harm" is recognised by the judiciary and Supreme Court in Spain and this can only be achieved by exposing it at every opportunity.

This is why Maria, I was hoping that lawyers would collectively address this problem by consistently reporting and placing on record all "events of bad faith" to the CGPJ or whoever.

mariadecastro said:
23 October 2013 @ 16:26

Step by step, justice is being made in regards of off plan problems of the real estate boom. In my small opinion.

ads said:
16 November 2013 @ 13:06

Sorry Maria but in the interest of transparency I have to push this point so that we can understand this latest supreme court ruling.

Are you saying that given the above SC ruling relating to "housing nearly finished" that under NO CIRCUMSTANCE will there be any purpose to, or opportunity, for client's legal counsel to effectively gain cancellation of contract by bringing illegal activity (either illegal BG written into the original purchase contract or non provision of BG) and/or legal malpractice (denial of knowledge and/or failure to seek consumer consent to changes in the terms and conditions of the contract or BG, to the detriment of the purchaser) to the attention of the judiciary when "house is nearly finished" ?

Are you saying it is a foregone conclusion that contract cancellation will never be achieved so there is no point to any legal challenge when "housing is nearly finished" ?
This will mean that "events" that effectively compromised consumers' inalienable rights will have been ignored in the eyes of the Spanish law.

Does this ruling therefore in effect deny the consumer the right to prove that good faith has not been demonstrated by the developer or conveyancing lawyer to the detriment of the consumer?

If this is the correct interpretation of this ruling, then isn't this ruling in effect being discriminatory in practice by only reviewing good faith from a one-sided perspective, to the benefit of the developer?

Do you not feel that this is of sufficient significance to place on official record your concerns relating to this injustice, in the form of a complaint to the CGPJ(where an appeal has been lost) and Bar Association?

How can this discriminatory action be challenged? Why would reform of Ley 57/68 be required when the SC have already made mention of "good faith"..... surely good faith should be reviewed from all perspectives?

Are you concerned by this ruling and if so are you suggesting that there is nothing that can be done to protect your clients from this scenario?

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