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The Spanish Lawyer Online

Antonio Flores’ Blog

Thoughts about laws and regulations which affect foreigners in Spain


Archive for August, 2009

This Would Never Happen in the UK

August 27th, 2009

this-would-never-happen-in-the-ukOver the years I have been working as a lawyer I have often had to listen to harsh criticism, from our clients, of the Spanish legal system. This, although understandable, was almost always accompanied by the phrase “this would not happen in the UK” which left me intrigued as to the virtues of a legal system which I am aware protects far more consumers than companies.

Last week I was confronted by a client (possibly soon to be ex after listening to a popular ambulance-chasing solicitor operating from a popular expat website) who had a good go at us for what she thought was a deficient protection of her interests. The matter in question involved UK clients who had bought at a development called Cortijo del Mar, being built by Grupo Labaro (which went into voluntary receivership) and subsequently bought by FM Consulting.

All the ingredients of a legal nightmare were put in place: a significant deposit paid, a developer which went bust, the 2008 property crash and presumably the loss of regular income of the investors. Significantly, the new developers FM Consulting bought the development (in cash so I’ve heard) and progressed with the construction, advising clients that some delay would be expected but nonetheless the properties would be finished. All the while, the investor’s money had been guaranteed by a bank guarantee.

Yesterday I was reading the Times Online and came across an article about investors who stood to lose hundreds of thousands of Euros to a developer that went bust, here we go, I thought! According to the article, Dylan Harvey Residential Ltd (DHR), part of the Dylan Harvey Group, had gone into administration two weeks ago with debts of £100 million. I then read that “the investors’ case against the group has been building for more than a year, as angry depositors tried and failed to get their money back on the projects that had still not been started. Many who asked for a full refund were invited to transfer their deposits to another project.”  Inmediately the comment “this would not happen in the UK” came to mind although in a reverse manner: bank guarantees would never happen in the UK and that is why these investors are out of pocket! In Spain, most developers had given bank guarantees so investor options had the backing of, in principle, solid banks and insurance companies.

Going back to our clients, I advised them that it was not us who found a development for them, it was not us urged them to invest and it was certainly not us who went bust. Now that the developer has resumed construction they are eager to pull out as the property may not be worth the original price they agreed to buy it at. It does seem that although a contract protects their position, a bank guarantee protects their investment and the Courts their interest we are to blame for everything which has happened and this view is unfortunately shared by a couple of self-proclaimed “bank guarantee” experts and I-will-tell-you-what-you-wish-to-listen legal advisors.

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Don Juan the Offender

August 13th, 2009

Originally conceived by Tirso de Molina in the 17th century and made internationally famous by Lord Byron, Don Juan Tenorio is today considered a master or charm and the archetype of the heartless and remorseless Spanish seducer.

Developers at Don Juan Phases II and III, Arrohabitatge S.A., have, conversely, managed to master no charm but all the wrong arts of client relationship management and enraged, only in our office, 20 or so of our clients, 3 lawyers, 4 paralegals and 1 secretary, all the while showing no heart nor remorse.

The latest episode, or I would say three, can be succinctly explained:

  1. British client visits the offices of Arrohabitatge and the developer convinces him to sign a letter, in Spanish, where he undertakes to close on their sale before the 1st of September 2009. As the second purchaser on the contract (wife of the signatory) is not present, the developer introduces the name of a lawyer of our firm and confirms his representation on behalf of her, of course without him even knowing his name is being used. No mention is made to licenses and to the fact that these clients already cancelled their contract and attempted to enforce their bank guarantee to recover their deposit.
  2. Roberto, a Spanish lawyer originally from Argentina representing approximately ten clients at Don Juan, sends a strong letter to the developer in respect of a legal issue. Ana, a female Doberman employed by the developer, picks the phone up and asks Roberto if he is at all familiar with the laws of Spain and questions his qualifications while reminding him that “we’re not in Argentine you know, so change the tone and content of your faxes”.
  3. Javier, another lawyer working with us attends completion of a sale at the Notary Office. The development director turns up and finds the branch manager of Caixa Galicia, the savings bank in charge of guaranteeing the buyers’ down payments and who incidentally had accepted the execution of a few of them. She confronts him and censures his decision to pay back deposits, and without prior notice starts screaming at him.

The above is an example of what we have gone through in the last four years although this is, by far, not over. It has now been discovered that there is a criminal court case going on against a Town Hall official for allegedly granting a construction license in exchange for a favour, and yet the license of habitation has now been granted (4 August 2009) although one year after when it should have been issued.

Our clients hearts’, understandably, are no longer with the development and want to pull out of what they once considered a dream. A dream shattered by delays, court cases with the Town Hall and the Railway Company and, not the least, by an appalling treatment by Arrohabitatge.

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