Over 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.