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Antonio Flores’ Blog

Thoughts about laws and regulations which affect foreigners in Spain

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Archive for the ‘Litigation’ Category

Supreme Court to Protect Spanish Off-Plan Property Buyers’ Without Bank Guarantees

May 18th, 2016

shutterstockUnfinishedConstruction

A couple of days ago, BBC News readers woke up to a tantalizing headline for failed Spanish property investors: “up to 100,000 UK investors in Spanish homes could get payout”. The BBC quoted a Barcelona-based law firm, Spanish Legal Reclaims (SLR), on the round figure of investors who could in line for a full refund.

A fortnight ago, we almost anticipated the BBC’s article when stating various 2015 Supreme Court rulings had confirmed its support for banking, insurance and, notably, off-plan property consumers:

Off-plan property deposits: In May 2015, and the in December 2015, the SC ruled that property developers are responsible “in any event” of down payments made by consumers on off-plan properties, provided the bank was aware of the purpose of the payments.

The ruling, along with two prior ones, addressed the issue of bank’s duty of care towards consumers, in line with the provisions of the 1968 Act on Deposit Guarantees on Off-Plan Properties.

But whilst the rulings are encouraging for anyone caught in the 2008 off-plan property debacle, not every investor will qualify.

As a rule of thumb, investors will have the right to claim from banks who failed to guarantee deposits in the following circumstances:

  1. That the bank was aware the deposits were for the purpose of building off-plan property; proving ‘awareness’ is pretty simple inasmuch as banks ought to have known that hundreds of thousands of Euros going through developer’s accounts were from property investors. There have been cases where funds were remitted to UK accounts operated by real estate or intermediary companies, a situation that complicates matters. The “Ocean View Properties” off-plan property scandal comes to mind here.
  2. That the properties we not completed or, if completed with delay, that the buyer had formally exercised his right to terminate the contract for breach of contract before the developer had obtained the license of occupancy. Banks–and Courts for that matter- are aware that many thousands who were no longer interested in completing on finished properties will file claims for the return of their deposits.
  3. That the buyer was not a property investor i.e. buying several units for reselling, in which case he/she will not be classed as a consumer under the 1968 Act.

As with most legal matters, a case-by-case analysis will be required to establish the feasibility of a legal claim.

Litigation , ,

Madrid Courts Rule in Favour of British Investors Against Spanish Banks

January 29th, 2016

shutterstockSpanishPropertyDevelopmentBanco Popular, BBVA, Banco Mare Nostrum and Valencian Building Society S.G.R. have been ordered to pay over 2 million Euros, plus interest, to 40 British investors represented by Lawbird Legal Services.

The rulings were received on the same day and refer to investors who had paid large deposits on off-plan properties in El Pinet, in Alicante, and Costa Palatinum, in Murcia.

Court number 1 in Madrid wrote the following arguments on deciding the outcome:Banco Popular had issued two bank guarantees, one for 19 mm Euros and a further one for 4.4 mm Euros.

  • S.G.R. had too issued a guarantee for 5 mm Euros.
  • Banco Pastor had offered the developer a counter-bank guarantee which, according to the Judge, amounted to a collective policy to insure off-pan deposits.

For its part, the Appeal Court in Madrid (Section 25) held, in support of the investors, that:

  • A recent Supreme Court ruling had concluded that for the 57/1968 Act to apply, the off-plan property should be used for family living accommodation purposes, whether temporary, accidental or circumstantial. This includes “touristic apartments” as they are to be used by the owners as holiday homes, irrespective of their use as an investment for the most part of the year.
  • The developer had voluntarily submitted to the 57/1968 Act by producing a general bank guarantee that specifically referred to the Act.
  • Off-plan property buyers in Spain have an “inalienable right” to have their off-plan deposit underwritten, rights that cannot be waived by banks who, having issued a collective insurance cover failed however to grant individual policies to buyers.

 Banks have been ordered to pay the Courts the designated amounts, or face enforcement proceedings.

Both rulings are available to readers who so request a copy (less information deemed confidential at Lawbird’s discretion).

Litigation, Property , , , ,

Alicante Court Orders Banco Popular to pay €2.1 million to 60 British off-plan property investors

November 8th, 2015

A Court in Alicante has ordered Banco Popular to pay €2.1 million Euros to British investors, plus interest since payment of the deposits, following a failed property investment. According to the ruling issued a 10 days ago the investors, all of them from the United Kingdom, bought off-plan properties in the development known as Fortuna Golf, promoted and built by Promociones Eurohouse 2010 S.L., currently in the process of being wound up.

Buyers paid a deposit of around 30% of the purchase price but, when completion was due, units were only half built and works had been indefinitely halted.

Accordingly, buyers decided to claim from guaranteeing bank Banco Popular, who had issued a collective bank guarantee but given individual guarantee certificates to only some investors.

In their defense, the bank argued that the collective guarantee had been limited by quantum and therefore, any claims exceeding this limit could not be –legally- met.

Lawbird Legal Services S.L. argued that the invocation of qualifying conditions or limitations was against consumer protection regulations, namely Act 57/1.968, and that deposits should be guaranteed in any event and regardless of private conventions reached between developer and bank.

For instance, the ruling confirms that it is beyond logic and abusive to subject the validity of the collective guarantee to the issuing of an individual guarantee certificate as, by not meeting this obligation, the bank would be able to easily deny liability.

The Court also stresses that “it was clear that the intention of the Banco Popular and Promociones Eurohouse S.L. was to underwrite customers’ deposits in the event of default and this is exact what happened”.

Lawbird-based lawyer Luis Gonzalez Ordoñez had personally visited the site on occasion of the filming of a TV programme, Comando Actualidad, aired on state-owned television channel TVE-1.

The case has been extensively covered by national press.

The ruling can been appealed.

Litigation , , , , , ,

Abusive Language and Name-Calling in Spain

October 2nd, 2015

Using threatening, abusive or insulting language against a person can be a costly exercise if your ‘victim’ decides to see you in court.

Repetitive use of bad language, the specific circumstances in which it is hurled (private or public) and, more importantly, your choice of words may all aggravate the outcome.

But how do law courts evaluate the level of seriousness and what are the words that will secure a fine, or even a conviction, if reported to the courts and/or the police?

The Spanish Criminal Code, for obvious reasons, has not compiled a list of offending language but has left it to the general public and society to quantify the degree of the insult. As the courts speak for society in this respect, let’s see what they say:

Cordoba Court: Levied a €60 fine for a name-caller who labelled the victim ‘conceited’, ‘manipulating’, ‘blackmailer’, ‘arrogant’ and ‘a bumpkin.’

Burgos Court: Fined a drunken reveler €60 for calling someone ‘lowlife’, ‘son of bitch’ and‘scumbag’.

Barcelona Appeal Court: Fined an ex-wife for hurling abuse at her former husband. Her choice of words – ‘fucking coward’, ‘shyster’ and ‘crook’ – secured her a €100 fine.

Ciudad Real Court: Slapped a €900 fine on a bill sticker for posting notices in strategic points of a village with the following wording: ‘Juan the crook, Juan the swindler, Juan the thief. He claims poverty and buys himself a new car.’

Supreme Court: Fined a policewoman €1,600 and ordered payment of €6,000 in moral damages for calling a colleague a ‘family tradition whore who has secured promotions thanks to her leg-opening skills’.

Supreme Court: Ordered three regular guests attending aTelecinco gossip show to pay €120,000 to a celebrity for hurling the following colourful words and phrases: ‘two-faced’, ‘embittered’, ‘clown’, ‘coward’, ‘swindler’, ‘clumsy’, ‘son of a bitch’, ‘daft’, ‘lacking in class’, ‘pork parents deliver swines’ (Spanish saying), ‘villager’, ‘illiterate’, ‘silly cow’, ‘hustler’. The size of the compensation was in proportion to the prime time exposure enjoyed by the show.

In the following case, a disgruntled litigant who was serving a prison sentence sent a letter to the deciding Judge with the following content: ‘Complaint directed to the Magistrate so that everyone knows that you are one drug-trafficker, arms smuggler, corrupt queer, I would kill you for free if I could you son of a bitch.’

The level of the fine – €360 – was in sharp contrast to the 15-month term of imprisonment also imposed for the death threat, with publicity, as the sentencing Judge understood that the letter was openly distributed in prison, where the felon was already serving time.

Litigation , , , ,

Notes On Spanish Judicial Activity During 2014

July 14th, 2015

When one thinks about litigation in Spain and the time it takes to get a case through the Courts, we automatically think in terms of years, not months.

And yet we could all be very wrong if we are to believe the findings of the 2014 report issued by the supervisor for the judiciary, the General Council of Judicial Power (CGPJ).

According to report published this year, Court cases are taking months rather than years to be resolved. This and other interesting ‘judicial’ data available online can be summed up in the length of my column:

1.    Courts issued rulings in the following average time:

  • Civil cases: 7.6 months
  • Civil appeal cases: 7.5 months
  • Divorce mutually consented: 1.9 months
  • Divorce not mutually consented: 9.5 months

2.   Foreclosure proceedings are a different story: on average, it took the Courts 28 months to finalize these cases.

3.    Percentage of rulings that are appealed:

  • Courts of First Instance rulings: 11.7%
  • Appeal Court rulings: 4.8%

4.    Ratio of court rulings upheld vs. reversed on appeal:

  • Upheld: 63.6%
  • Reversed: 19.5%
  • Partially reversed: 16.0%

5.    Number of court cases in a year: In all of Spain, last year just over 8.6 million court cases were filed, around 8.8 million were finalized and just over 1.6 million rulings were passed. Andalusia is the most belligerent regional community in 2014, with 230 court cases per 1.000 inhabitants. The least is La Rioja, with 136 (wine must have had something to do with it!)

6.    Number of cases per Court: On average, 1.669 cases per year.

7.   Number of complaints: In 2014, approximately 16,000 complaints were lodged in relation to the dispensation of justice. Of these, 200 complaints were received in the Law Societies.

8.  Compensation granted for courts’ responsibility for defective operation: in 2014, approximately €6 million were awarded in compensation for defective or dysfunctional dispensation of justice.

9.  Money lodged within Courts’ bank accounts: during 2014, Santander bank (officially appointed by the Spanish judiciary) had an average balance in its accounts of €3.4 billion.

Litigation , , ,

Buying Property in Spain: When the Liability Falls on the Lawyer.

March 26th, 2015

Spanish lawyers assisting investors in the purchase of property have been regularly charging the fairly standardized fee of 1% plus Vat. For many, this is an unnecessary expense that can easily be avoided by getting one of the following to help in the process: a family friend, a local “gestor” or even the real estate agency. Their arguments are varied: lawyers charge too much for what they do, they are bad in communicating with clients and if something goes wrong, they don’t want to know.

To a certain extent, I can sympathize with detractors of legal professionals who represent property buyers; they reckon that because we have Notary Publics and a Land Registry system, investors should be protected and minor legal guidance should suffice. In an ideal world probably, but not elsewhere.  

I naturally advocate using lawyers to buy property, and so does the claimant in civil liability case that was brought against a firm of lawyers based in Marbella and their insurers. For this client, the fee of 1% plus Vat has possibly turned out to be the best investment ever made for he has recovered, from the Law Society insurers (Caser Seguros), €107,000 paid in year 2000 -plus interest since that date- on 2 failed off-plan apartment.

The mistake made by these property conveyance lawyers was not small: when they demanded bank certificates guaranteeing the investments, mandatory under Spanish law, the property developer managed to get away with flogging them fake insurance policies issued a shelf company, Compagnies del Guaranties, run by an Italian fraudster.

There was actually no need to run through the lengthy bogus document which had, I must admit, an air of “officialness”. Just by searching the words “Compagnies Des Guaranties” one would have seen them prominently featuring on a blacklist compiled by the Dirección General de Seguros.

Granted, do you don’t need to pay a lawyer to do this simple job. But honestly, how many investors would have noticed that these were spurious policies? Very few, as it happened, when you realize the nationwide dimension of the con. At least, in a quirk of fate, those who hired a negligent lawyer will get paid!

 

Legal Practise, Litigation , , ,

Property Auction Rigging in Spain: Nationwide Fraud Unchallenged

January 15th, 2015

Example of Real Auction in Spain

Auction rigging, commonly known as bid rigging, is a form of collusion between real estate speculators whereby they conspire to illegally rig the bidding process. This fraud at public real estate foreclosure is a criminal offence and in some countries (U.S), each bid-rigging carried a maximum penalty of 10 years in prison a $1 million fine.

According to a U.S. Department of Justice note, “over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants.”

Spain’s Courts have been equally responsive when dealing with this problem: we can recall one famous bid-rigging fraud case in the Valencia Courts where 42 individuals (on appeal 27 were acquitted) received lengthy sentences, two of which got 10 years each. The only difference with the US is the last high profile case took place in… 1995. And since, very little Government activity to curb this plague.

This is not the only unusual thing: in this country, possible to witness firsthand how these fraudsters operate. All you have to do is attend a busy auction dealing with a coveted property.

Let’s take the Marbella Courts as an example where a selected group of “subasteros” (a mix between a speculator, opportunist, outright fraudster and a liar) operate with worrying impunity; these guys are familiar faces, “dummy bidders” that turn up day in day out to boycott auction procedures by chasing away legit bidders –occasionally with threats-, demanding money from serious contenders in exchange for not participating (as well as offering them money to refrain from doing so), or escalating the bids to force out any newcomer.

The boss of this Mafiosi syndicate used to be a bold (bald too) overweight individual (names withheld); he had experience, money and contacts in Courts, and led the rest in their nefarious activities. It appears he has now taken a step back, perhaps his prominence was beginning to mirror his physique and got that timely feeling that it was just the right moment to retire. The rest unfortunately remain, as so do many other hundreds operating throughout Spanish Courts.

Sadly, lawmakers have not yet noted the flaws of the current system nor the simplest solution for this instance of corruption: first-price sealed-bid auctions in which bidders place their bid in a sealed envelope and simultaneously hand them to the auctioneer, the Court in this instance.

Litigation , , ,

Spain Tax Residency Cases: when the devil is in the detail

December 1st, 2014

shutterstock_Iakov Filimonov

The above proverb often implies that details might cause failure, and failure is what occurred to the three real test-cases (below) who thought that, by having a tax-residence-of-convenience status (Andorra and Switzerland) and spending a short time there, they would be shielded from the action of the AEAT (Spanish Tax Office).

TEST CASE 1: A self-defined Swiss tax resident lost an interesting case brought by the Spanish Tax Office who deemed him a resident of Spain. The tax payer had argued that, according to the DTA (Double Taxation Agreement) Spain-Switzerland, he could be classed as a resident of both country. Indeed, the man had properties in Switzerland and Spain, and had one daughter in each country; according to the Spanish Supreme Court, these facts alone would not conclusively establish where his connections were stronger. The devil in this case was he had signed up to the Spanish Automobile Club as well as Maritime Clubs in Ibiza and Marbella, without analogous memberships in Switzerland (attempts to convince the Taxman that there was no sea in this country were to no avail…).

TEST CASE 2: A Spanish Andorra-based taxpayer could not successfully argue against the evidence that was stacked up against him, notwithstanding his marriage to an Andorra citizen. The AEAT challenged his status by arguing that he had a company in Barcelona, his apartments in Spain were being regularly used (utilities were up and running), yet there was no proof of rental activity, he had a daily subscription to a local paper and had hired domestic employees. In upholding the Tax Office’s case, the Catalonia Supreme Court (1254/2013) deemed a tax residency certificate from the Andorran authorities not relevant.

TEST CASE 3: Similar to the above case, the Spanish Tax Office successfully proved that the Andorra resident was in fact in Barcelona-based because his medical insurance broker was based in the city and, more conclusively, a local hospital had reported frequent visits inconsistent with living in Andorra.

On a next issue, we will discuss those who were able to successfully challenge the AEAT who, we should not forget, has no influence over a Court decision (contrary to popular belief).

Litigation, Tax Law , , , ,

Spanish Police Forces’ Operations Protocols

May 12th, 2014

Most people are aware that a European Arrest Warrant (EAW) is an arrest warrant valid throughout all member states of the European Union. Once issued, it requires another member state to arrest and transfer a criminal suspect or sentenced person to the issuing state so that the person can be put on trial or complete a detention period.

Spain, being part of the EU, is no exception when applying foreign EAWs in all its territory. But there are other types of warrants that are largely unknown and yet are used by Spanish Police Forces regularly. This the list they use, with the associated protocol code:

  • Code 1/ Ascertainment of Domicile and Whereabouts: applied when a person is being sought after to notify them, officially, of impending legal action. This warrant can mature and become an arrest warrant.
  • Code 2/ Search, Arrest and Attendance: applied when a person has allegedly committed a serious offence or a defendant has not turned up when requested to do so, either by the Police or the Courts. It is commonly known as ‘arrest warrant’.
  • Code 3/ Search, Arrest and Imprisonment: applied when a person has been convicted but later absconds.
  • Code 4/ Prohibition to leave the country: applied to persons that are subject to legal action or minors, where there is risk of parental child abduction.
  • Code 5/ Prohibition to enter the country: applied to non-EU citizens that have an entry ban.
  • Code 6/ Protection of a person: applied to people under 18 years of age or incapables.
  • Code 7/ Specific surveillance: applied to people that have a residence ban in a specific area, or are being investigated, and it includes verifying the origin, destination, itinerary, belongings, habitual domicile and identity documentation.
  • Code 8/ Discreet surveillance: without attracting attention, gather as much evidence on the suspect (as above).
  • Code 9/ Search and Arrest for Extradition: commonly carried out in cooperation with the Interpol Service or the ‘Sirene Office’. The arrested person is take to Court who will decide on the merits of the case.

Litigation , , , ,

Finca Parcs Case: The Land Mark Ruling that Was Not

July 15th, 2013

What Mr. Keith Rule and Castro Abogados have achieved is one great result for the 47-strong Finca Parcs (Hellín) group of claimants who, having paid upfront deposits on a failed off-plan development, found to their horror that through the incompetence of their legal representation, no bank guarantees were available.

An undeniable great exposure has meant that numerous claimants who are on the same boat are starting to enquire what is it with this case that is different from many others, in process or already finalized with equal result. Our firm has received a handful of such enquiries, and presumably, many other are already receiving similar emails.

In writing this, I am aware that I do risk being dismissed as some miserly person void of happiness and filled with envy at the successes of others, but far from it: I do wish to congratulate the Castro family and Keith’s group for this success that, by “juridical contagion”, should help everyone involved in this conundrum.

But still, factuality deserves respect and so, once again, let us allow the truth get in the way of a good story:

  • The CAM bank and Cleyton Ges S.L. had given out the 1968/57 bank guarantees to a very large number of customers at Finca Parcs, some of which in fact happened to be represented by us. When the developer kicked the bucket, those with bank guarantees were duly refunded by the CAM whereas those who did not, were told to sod off. No surprise there considering that the predatory CAM bank was governed by a gang of pirates who saw no issues with lending themselves astronomical amounts to invest in the Caribbean, a robbery now subject to criminal investigation.
  • To contend that this is a landmark ruling is to be dismissive of the work of many other lawyers who have already obtained success in identical cases. The reality is that there are plenty of rulings that contradict Mr. Rule’s claim that this is legal precedent, no matter how hard, perhaps at the insistence of the media, they were conveniently omitted. Strangely enough, the original article published in El Pais does not say it’s a groundbreaking case, and it does not for the simple reason that it was a serious journalist who did his homework and got the facts right (he did call us and we pointed him to  the most reliable source of information: online law libraries!). Conversely, we could admit that, where no bank guarantees of any description or special accounts were available, a ruling ordering a bank to pay would be deemed worthy of being classified as legal precedent. In the ruling of this post, both bank guarantees and a special account were actually available.Keith’s Rule: Don’t let the truth get in the way of a good story!
  • To say that Mr. Rule had “…taken on bank bosses after discovering a 45-year-old property law making them jointly responsible with promoters for returning guaranteed deposits on failed developments” is just risible; Mr. Rule has not discovered the 57/1968, just as Roberto Sanchez Saavedra did not discover the Spanish Civil Code (it was already there when his great-grandfather was born). The reality is that the “dug out” 1968 Act was helping many when Franco still went wild-boar hunting, and thousands have already benefited since then…including many of the Finca Parcs victims.

In summary, what has really happened is that Keith Rule and his group hired competent legal representation to help them out, and were lucky that funds were channeled through the developer’s accounts with the CAM, and not pocketed by the rogue developers via overseas accounts (even in this case protection may still be available). And not the least, that many buyers had bank guarantees whereas others didn’t (implying the existence of a blanket bank guarantee), an unfair situation caused by the inaction of property conveyance lawyers, the developer and the CAM bank and, as far as Spanish consistent case law is concerned, totally unacceptable.

But to announce that this is a groundbreaking ruling -when the bank had already given out dozens of individual bank guarantees (a few examples below) to as many customers, and there are plenty of identical rulings on the matter-  is just false.

 

Proof that Bank Guarantees for Finca Parks do Exist

 

Downloads

Litigation, Property , , , ,