Legal tip 552. Case Law on Banks liability when NO Bank Guarantee

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16 Aug 2011 00:00 by mariadecastro Star rating in Algeciras (Cadiz). 9002 forum posts Send private message

Legal Questions? Speak to Maria Direct

  Legal tip 552. Case Law on Banks liability when NO Bank Guarantee 

20 June 2011 @ 21:50 


Very recent Case Law ( dated 3rd of May 2011) by Burgos Appeal Court


1.- Claimer requests both developer and Bank ( issuer of a generic Bank Guarantee) to provide the individual Guarantee and subsidiarily to refund the handed amounts plus legal interests.


2.- On Banks liability Judge interprets that the constitution of the guarantee is so essential that if it is not met, the buyer directly acquires rights for devolution of the handed amounts. Banks are obligued to restitution of handed amounts due to negligency for not constituting the required Guarantees.


So, if you bought off plan and claimed for refund of deposits, obtaining a win but finding an unsolvent developer who cannot pay you back, go and find possible liabilities of the Bank who issued the general Bank Guarantee and did not assure you had your individual certificate for the protection of your amounts. Banks where you placed your amounts are also liable for the refund according to provision 1.2 of Law 57/68.


Great for Burgos!


Playa de Areacova, Cangas de Morrazo, Rias Baixas, Galicia, Spain by Inmobiliaria Lares at


Maria L. de Castro, JD, MA



El blog de Maria

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16 Aug 2011 17:23 by kingdingaling Star rating. 27 forum posts Send private message

Am I right in thinking this is the situation closest to all of us?

If so surely we must be entitled to refunds than?

If only it was that simple!



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16 Aug 2011 23:22 by spanishpunter Star rating. 65 forum posts Send private message


Maria may well be right but it is the practicalities that matter

The Bank of Spain has either now, or very shortly, will make the Banks make ‘proper provisions’ against bad debts

This law as stated by Maria is ‘to be blunt’ not just known to her!!!

And the Bank of Spain is or will be fully aware of ‘generic  bank guarantees and their future liabilities to the Cajas and Banks’

Spanish banks are fully aware of their potential liabilities and in the current situation I would be very surprised if all the banks have not already made ‘provisions for loss’ on generic  bank guarantees

But accepting liability is another matter!!

Now that is not just Spanish banks..see UK banks and their reluctance to accept liability until forced for over charging fees and miss selling!

So in simple terms Spanish banks and insurance companies who provided BG facilities to developers  in the good times but did not issue them [ no doubt as part of ‘normal practice’ at the time in conclusion with their client!] know that they have a liability

The problem is, as the banks know, that those affected are all individuals who do not have the resources to take a court action to take on the banks!!

I do not criticise Spanish banks for this as it is the same the world over

But in USA this would be a classic class group action with no fees paid up front but the lawyers getting big bucks when they win----normally out of court

And even now in UK this applies in some situations

I am an investor and we are not in USA but I do think that a well managed a ‘class action’ in Spain is the only way forward

We do after all live in the ‘United States of Europe’ and Spain is a big supporter of that principle

The Spanish lawyers will no doubt require fees up front as they are not yet as advanced in the provision of legal services on a No Win No Fee basis-perhaps a bit old fashioned in this respect

[It is not just UK buyers who have these problems and as the majority of Costa home buyers were the Spanish themselves it would be interesting to know how they have been treated by the Cajas, Banks and the lawyers ]

To start a ‘class action’ a Spanish law firm or firms have to make it attractive for large numbers to put up ‘a reasonable deposit’ and to make it clear with a proper presentation that they also will be taking a financial risk in backing up their legal opinion

Big fees if they win!

They all have a vested interest in sorting these BG problems out as does Spain itself-waste of time having a road show to encourage EU buyers without having sorted out the problems of the out of control boom years-no one listens when they say buying now is safe!

And the Banks, with part completed developments, will have to clear these potential liabilities before new developesr, in the  post-recession scenario, will want to take on the sites  

Take ACC and OTCC as an example:

Both will eventually be built as they are both ’excellent property locations’

OTCC has all permits and ACC will in due course if not already

But a re start and sales to ‘new buyers’ is impeded by the old claims- even if they go into administration

EU laws including Human Rights could tie up ACC and OTCC for years-new developers will not take the risk of old claims

Why do you think that Huma are now offering alternatives of other Bank repossessions?

To clear liabilities so they can move forward

[However they still seem to think that the old buyers are not aware of ‘real values’- if they made ‘sensible offers’ they may get some takers!]

And the only reason why Huma Med and Indalo are not in administration is because it is not in the interest of the supporting Banks to allow it!  

What is the Banks potential liability?

Say 300/400M € but that is small money compared to the financial benefit of encouraging the future of holiday home buyers in the Spain

Even if it double that amount for a quick settlement

Also big fees for a win class action for the lawyers!!

That is briefly my basic views as a long time property dealer!...who has, I’m afraid to say seen it all before

So where do we go now?

1.       If reputable Spanish law firm set up a ‘class action presentation USA style’ then I for one would join in

2.       But in the meantime I have through my own lawyers instituted legal action at a cost of 1800 €

3.       I am ex ACC now OTCC

4.       So that I have ‘secured my position’ as whilst legal proceedings are taking place they have an ‘ another embargo’ and liability on my plot albeit pending getting a court decision, which of course we will get  

5.       And then it is a matter of waiting

6.       And I’m afraid that may be until there are good signs that the economy of EU is improving and they will want to ‘clear the decks for the future’

7.       Offers of alternatives from Huma can only be a good sign-they must  want to clear up the title

8.       What would I settle for?

9.       Well I would like the lot including interest!!

10.   But just the capital and legal fees would be very attractive just now with the low exchange rate  

11.   A property at current market value would tempt me to take a punt and cut my losses  

To summarise;

1.       ACC/OTCC everyone is waiting to see what happens

2.       Lots of embargoes which will frustrate the future of these two good sites

3.       Huma alternative property offer are a ‘just silly’ as they are 25/30% over current market value and I would be surprised if anyone takes them up

4.       Very interested in a ‘class action’ against the Spanish Cajas and Banks

Is there a Spanish law firm prepared to go this route?

USE Class Action like a USA Class Action



This message was last edited by spanishpunter on 16/08/2011.

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