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El blog de Maria

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

Legal tip 187. Banks breached Law 57/68
01 December 2009 @ 12:08

 

Main ground of Law 57/68 is the protection of money  advanced by individuals before construction work begins or during it, in many cases the savings of a lifetime.

The actual preamble or exposicion de motivos of the said Law establishes that all the "abuses in this type of businesses have made as necessary the establishment of general preventive rules which will guarantee both the real and effective application of money advanced by purchasers and prospective customers to the building of the house and to the refund in the event that the building does not take effect".

One of the preventive, general, inalienable obligations that the Law established was for banks or savings banks,  where money was paid to by buyers, to secure the establishment of Bank Guarantees or insurance UNDER THEIR LIABILITY. Banks were therefore here  established as guardians of legality.


There are therefore two responsibilities of Banks and Savings Banks:

1. - Common due diligence and professional duty.
2. - Special obligation of provision 1.2 of Law 57/68.
 
 
The question that really matters here is this one: Can Banks oppose to Consumer the fact that the developer did not deposit the money in a special account?

In my opinion they cannot.
 
The general, imperative and inalienable character of rights of Act 57/68 as established by the preamble of the Act and Article 7 makes this as non opposable against the consumer.
 
In any case, if the Bank can argue they did not know? that the money was for off-plan, and after being liable of the lack of Guarantees and pay compensation for it, will have an action against the developer who did not allocate those funds in a “special account”, which they will be able to prove very easily.
 

Los colores del otoño por guervos.
 Autumn colors by Guervos at Flickr.com
 
 


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7 Comments


Keith said:
01 December 2009 @ 14:52

Below are the relevant Articles of LEY 57/68, firstly in Spanish and then in English.

A very important sentence appears in the Second Article:

"Para la apertura de estas cuentas o depositos la Entidad bancaria o Caja de Ahorros, bajo su responsabilidad, exigira la garantia a que se refiere la condicion anterior."

Which translates in English to:

"For the opening of these accounts or deposits the Banking institution or Savings bank, under its responsibility, will demand the guarantee to which the previous condition refers."

So the Bank or Savings Bank, under its responsibiliy must demand the guarantee to which condition 1.1 refers.

This puts a clear liability on the Bank or Savings Bank to ensure that the legally required Bank Guarantees are issued.

Also article 1.2 states that:

"Depositing the sums advanced by purchasers through a Bank or Savings Bank, which must be deposited in Special Account, with separation from any other funds belonging to the promoter"

Therefore if Banks or Savings Banks have been accepting sums advanced by purchasers clearly referenced as deposits for off-plan purchases into accounts which are not classed as 'Special Accounts' (Cuenta Especial), as required by LEY 57/68 Article 1.2, then the Bank or Savings Bank is liable to refund those amounts to the buyers if with a minimum level of due dilligence they would have realised that the said funds were deposits for off-plan purchases.

Banks in Spain are regulated by the Banco de Espana and must incorporate strict financial controls to prevent money laundering and fraud. These controls together with their own due dillegence must result in the Bank or Savings Bank having a clear understanding that the funds were for off plan purchases and therefore subject to the legal requirements of LEY 57/68.

Immediately a Bank or Savings Bank becomes aware that a developer/promotor who it is funding, is instructing purchasers to deposit funds for off-plan purchases into accounts which do not comply with LEY 57/68 Article 1.2, then the Bank has a duty to freeze those funds and demand they be transferred into a Special Account and to issue the corresponding Bank Guarantees immediately or to return those funds to the purchaser.

As Maria says under LEY 57/68 the Banks were established as the 'guardians of legality' and must therefore be held responsible if they fail in this very important and legal duty.

LEY 57/68 - Article 1.1 and 1.2

Primera - Garantizar la devolucion de las cantidades entregadas mas el seis por ciento de interes anual, mediante contrato de seguro otorgado con Entidad aseguradora inscrita y autorizada en el Registro de la Subdireccion General de Seguros o por aval solidario prestado por Entidad inscrita en el Registro de Bancos y Banqueros, o Caja de Ahorros, para el caso de que la construccion no se inicie o no llegue a buen fin por cualquier causa en el plazo convenido.

Segunda - Percibir las cantidades anticipadas por los adquirentes a traves de una Entidad bancaria o Caja de Ahorros, en las que habran de depositarse en cuenta especial, con separacion de cualquier otra clase de fondos pertenecientes al promotor y de las que unicamente podra disponer para las atenciones derivadas de la construccion de las viviendas. Para la apertura de estas cuentas o depositos la Entidad bancaria o Caja de Ahorros, bajo su responsabilidad, exigira la garantia a que se refiere la condicion anterior.

First - To ensure the return of the payments made plus six percent annual interest, by means of Contract of Insurance granted with an Insurance Entity inscribed and authorized in the Record of the General Sub-department of Insurers or by means of a Bank Guarantee issued by an Entity inscribed in the Record of Banks and Bankers or Savings Banks, if the construction does not commence or complete for any reason by the agreed deadline.

Second - Depositing the sums advanced by purchasers through a Bank or Savings Bank, which must be deposited in Special Account, with separation from any other funds belonging to the promoter, which may only contain funds deposited for the construction of dwellings. For the opening of these accounts or deposits the Banking institution or Savings bank, under its responsibility, will demand the guarantee to which the previous condition refers.

The Banks must now be forced to accept their legal obligations under LEY 57/68.

Kind regards

Keith




Maria said:
01 December 2009 @ 15:36

Great Keith and thanks again for pushing me into re-consideration and deeper study of the Law 57/68.
Thanks and I do hope judges will have the sensibility to issue fair decissions on regard of this.

The Law proffessor who is assisting us thinks that the more we are the better, so....


Sandra said:
01 December 2009 @ 17:42

So the legal potection is there for the deposits. In black and white and quite clearly stated the onus is on the banks to ensure the safety of the funds.
So why is the Spanish government, who entrusted the banks with such responsibility, not acting now that they have failed to comply?
It is pointless making these laws without also setting up a system of checks to ensure they are upheld, or setting out the consequences for failing to comply.
The bottom line is that the banks have become too powerful and not just in Spain.


Maria said:
02 December 2009 @ 08:42

Yes, Banks mission is wrongly understood and they are the ultimate product of a self-centered system just focused on benefits.
I am eager to go to the fight.
Maria


Gynter said:
12 January 2010 @ 20:08

Do you know of any cases that has been faced to the Spanish court that has won?
I.E do you have any cases that can show precedence to a trampolin Hills case, I believe not -
BUT
I would like to see ONE lawyer-company that could take lead and be the front runner and invite "our lawyers" (assuming that most of us already have decided on a lawyer - not being you) to create a strong front against the law system -
your call...


Redman said:
12 January 2010 @ 23:20

A link here gives the complete law in Spanish.

http://civil.udg.es/normacivil/estatal/contract/L57-68.htm


Maria said:
13 January 2010 @ 09:00

Gynter:
I agree with you. Lawyers should get together to fight this. We are having our first Work Session with a Law Proffessor in order to bring good-deep arguments to the defense this Friday.

Any lawyer wanting to know about this is welcome to contact us.

Best wishes to you all,

Maria


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