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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 518. Stuck and no property
04 May 2011 @ 19:02

A post cowritten with Louise Reynolds of Property Venture in the UK: thanks Louise!

Original link here

Property buyers in Spain-are you stuck with a deposit paid, but no property to show for it?

Thought you were covered by a bank guarantee, but are being told this isn’t the case?

Want to know what to do about it?

Some buyers of property in Spain find themselves in a tricky position. They may have paid a deposit for a property, but the developer went bust and the development never got built, or only partially built.

Well, this is the position:

It is a legal requirement, as part of the buying process in Spain, to have an insurance policy or a bank guarantee, for a deposit on an off-plan property. This is designed to protect the off-plan buyer.

For resale properties there is no legal requirement for this type of Guarantee.

Property Developers, which receive money from buyers before they start, or during the construction, must have an Insurance policy or a Bank Guarantee, provided by an entity listed in the Register of Insurers, Banks,  or Saving Banks, to protect against the situation where construction is not commenced, or not finished, for any reason by the agreed deadline. This has been enshrined in Law since 1968

It is  the responsability of Banks that advanced amounts are deposited in special accounts, separate from any other kind of funds belonging to the developer or promoter. It is in effect a developer´s  Escrow account, controlled by the Bank.

o   Money is held in escrow by a third party until the purpose of the underlying agreement is accomplished, in this instance a finished building. When the condition specified in the escrow agreement is performed, the entity or individual holding the deposit funds (bank) gives it over to the party entitled to receive it (developer). This is known as the second delivery. The escrow agreement is a contract. The parties to such an agreement determine when the agreement should be released prior to making the deposit. After the escrow agreement has been entered, the terms for holding and releasing the document or money cannot be altered in the absence of an agreement by all the parties

So if Banks or Savings Banks have been accepting sums advanced by purchasers, highlighted as deposits for off-plan purchases into accounts, even if not classed as  'Special Accounts' (Cuenta Especial ) and no Bank Guarantees/Insurance Policies were handed to the buyer,  the financial institution 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 or Bank of Spain and must incorporate strict financial controls to prevent money laundering and fraud. These controls together with their own due diligence 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.

If this has not happened in your situation, what can you do about it?

Take individual legal action against the developer and the Bank  where your money was placed.

Take group or individual actions against the banks – which might be more cost-effective-and an established group, which is bringing pressure to bear on Banks, may be noticed more

If you used a solicitor during the purchase, and no Bank Guarantee was given to you, you can also claim against him/her (who should have professional liability Insurance). 

If you do not know where your money was paid to, you can start by asking the solicitor to verify the account where money was deposited, so you can build an action against the Bank too. The Judge can also help you, through the practicing of “ preliminary diligences” at your request, to know who is the liable party.

Please call if you want to discuss your situation:  01932 849536

 

Co-written by Louise Reynolds of Property Venture and Maria de Castro of Costa Luz Lawyers

 

 

 

 



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13 Comments


Chris malone said:
12 May 2011 @ 05:58

I know Maria is following this path for us against the banks but i didn't know that Instant access and the lawyers they put in place when we purchased Fortuna were also liable. Do we have to make a seperate action against them or just wait on the bank court case to take place?
Cheers,
Chris


Maria said:
12 May 2011 @ 10:04

Dear Chris:

If you like, I would prefer you to email me so I can give to you specific instructions about your particular case.

Best regards,

María


Gerry Ingram said:
12 May 2011 @ 12:02

Maria....I am in the same exact position that you describe. Plus Advisors are representing me but it is so very slow. Could we speak?


Maria said:
12 May 2011 @ 13:47

Dear Gerry:

Would you please send an email to us? Our email address is:

web@costaluzlawyers.es

Best regards,

María


Denis said:
12 May 2011 @ 16:51

I paid a deposit and first payment on a house in Mazzaron built my Huma Mediterraneo. The house is built, but the developer has a mortgage on it that he cannot pay and cannot therefore complete. Have been to court and won, but Huma have not responded. I had no bank guarantee and have passed on your advice to my solicitors who say without a bank guarantee there is no way of recovering the huge sum paid to the developer,whilst you say otherwise. I have tried to copy your advice but cannot find a way. Not your problem, but a copy or save capability would be helpful. Is this insurance a recent requirement. My problems began almost three years ago.


Denis said:
12 May 2011 @ 16:51

I paid a deposit and first payment on a house in Mazzaron built my Huma Mediterraneo. The house is built, but the developer has a mortgage on it that he cannot pay and cannot therefore complete. Have been to court and won, but Huma have not responded. I had no bank guarantee and have passed on your advice to my solicitors who say without a bank guarantee there is no way of recovering the huge sum paid to the developer,whilst you say otherwise. I have tried to copy your advice but cannot find a way. Not your problem, but a copy or save capability would be helpful. Is this insurance a recent requirement. My problems began almost three years ago.


Maria said:
12 May 2011 @ 18:30

Dear Denis:

The effects of the lack of Bank Guarantee are stablished by Law 57/68 as being the Banks. Please email me so I can give to you more information.

Best regards,

Maria


Arlene said:
24 May 2011 @ 20:42

i paid deposit to polaris world 3 years ago, and still no bank guarantee, all i get told is do not pay anymore money until first payment is guaranteed!! is it time to try and get my money back now??


Maria said:
25 May 2011 @ 07:38

Yes, it is probably time for you to start your claim


Arlene said:
27 May 2011 @ 19:57

How do we start? the solicitors who were acting for us with PW asked if we would negotiate another property to protect our investment, wasn't sure what to do after that! really do need to sort it asap! thanks for your reply Maria


Maria said:
30 May 2011 @ 08:23

I would advise you to find a good reputable lawyer for this.
Best,
Maria


Arlene said:
17 June 2011 @ 22:48

I really don't know what to do now! i have an email saying saying that the certificate of end of works has been issued. The licence of first occupation should be issued soon also and they will require you to complete your property!! no mention of bank guarantee for 1st payment and i understood the payments were to be 1st 25% the 2nd 15% and then 60% on completion, anyone else in the same situation??

Arlene


Arlene said:
17 June 2011 @ 22:52

please help me, i need to know which course of action to take now!

Arlene


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