Antonio Flores’ Blog

In this video blog I talk about bank guarantees and the responsibility of financial entities that consented property developers use their bank accounts to collect deposits, without ensuring that those deposits were guaranteed. In this instance, the bank applied the 57/1968 Act which stipulates that “banks will ensure under their responsibility, prior to opening a special account for a property developer, that a guarantee has been taken out.”

Some interesting case law can be read here.

Antonio Flores Litigation Act 57/1968, Aifos, Banco popular, El Pinet, Enforcement guarantees, Execution bank guarantees, La Caixa, La Fortuna, Offplan property, Spain bank guarantees

I make no disguise that, professionally, I am closely connected to property, therefore this post, to many, will have limited significance due to obvious bias. If I was however to collate my experiences over the years, good and bad, when dealing in real estate in Spain, and I compare them with how transactions are conducted these days, I would necessarily conclude that it is now safer than ever to invest in property in Spain.

The crisis has operated like an unstoppable tsunami that has swept right across the property market, sucking in its wake dodgy agents, opportunistic developers, corrupt town hall officials, crooked mortgage brokers (like the one that conned Banesto out of a few millions) and a handful of funny lawyers. And with them, a myriad of very questionable anti-property purchaser practices that had dangerously became close to standard, in spite of almost everyone living, directly or indirectly, on these bona fide consumers or investors. It may be convenient to enumerate these unethical antics, by trades, to keep things in perspective.

We must remember that:

1. Never again should anyone pay any monies to a developer unless a bank guarantee or an insurance policy is available…, obvious isn’t it? More the point is that, realistically, insurance companies will never touch advance off-plan property payments and banks are likely to request unthinkable amounts of collateral. The immediate consequence of this is that only the very cash-strong will be able to develop and this is just good news.
2. Never again should anyone pay monies to a developer who:
   
   1. Does not own the land (Citrus Europe Ltd.)
   2. Does not have a building license (Aifos)
   3. Cannot give bank guarantees (not enough space in this post to name them),
   4. Uses the deposits for a Murcia development to run a complex in Venezuela (Proyectos Antele S.L.)
   5. Uses a bent-as-hell agent as a deposit-collector who then ends up keeping them (Grupo Mirador and Palmera Properties/Gotardo)
   6. Runs away with the portion of the purchase price, earmarked for cancelling the loan on your property, to Germany (Abacon Delta S.L.)
   7. Sells a half built complex to a third party and does not refund (Citrus Playa Macenas S.L. and Ready2Invest )
   8. Takes 60 deposits for an Almeria development to a UK company and then dissolves it (again, Citrus Europe Ltd.)
   9. Or all of those together plus sets up a Ponzi scheme, is known to have never built one property in his entire life in spite of claiming, at a fastouos ceremony, to have erected no less than 6,000 in the Costal del Sol, even persuading gullible Prince Albert to believe such bullshit!  (Sun Golf Desarrollo Inmobiliario S.A. or Mr. Ricardo Miranda Miret).
3. Never again will developers bully buyers as they were used to doing, as for example La Reserva de Marbella S.A. were experts at. I always wondered why was it that when you bought an apartment for €200,000 you were almost expecting to be treated like s**t, but if you went for a meal you were the king if you tipped handsomely…
4. Never again will developers make you sign a private purchase contract for 70% of its real price, the balance of 30% to be paid to a Switzerland account, in advance, undocumented and, of course, never to be reflected on the private purchase sale deeds…(any ideas?? :))
5. Very unlikely (never say never) will a Socialist/Communist Government, regional or otherwise, allow licenses to be granted on thousands of properties only to later, due to political opportunism and a spate of much publicized corrupt Town Hall officials arrests (which I agree with but without the cameras), instigate the revocation of almost all of these licenses, promote demolitions, warn of impending heavy fines on everyone, including the bona fide owners and, in sum, scare the hell out of thousands of those owners plus an undetermined number of potential investors in Spain.

With all we know now in respect of the degrees of criminality so many property developers ran into, an off-plan property industry that is almost non-existent (good old Taylor-Wimpey seems the only one around) and the property-associated corruption almost disappearing, the very few developers that are still around will no doubt jump through hoops to ensure that only la creme de la creme will be sold, at the right price of course!

Antonio Flores Litigation, Property, Scams Abacon Delta S.L., Aifos, Citrus Europe Ltd, Citrus Playa Macenas S.L., Grupo Mirador, Jesus Gotardo, La Reserva de Marbella S.A., Palmera Properties, Proyectos Antele S.L., Ready2Invest, Ricardo Miranda Miret, Sungolf Desarrollo Inmobiliario S.A, Taylor-Wimpey

We have become accustomed to obtaining favourable Court rulings on behalf of clients who had exchanged contracts with Aifos with the hope of receiving a property, a pretty normal thing in normal circumstances, that is.

If we go back some years, on the surface, Aifos property business gleamed: hundreds of investors sunk their money with Aifos mostly with one aim, to make money. But Aifos engine rooms were not getting the required spare parts, namely building licenses, to deliver the product.

Perhaps above any other, the worst thing Aifos did was to sign contracts with punters stating that the projects in question had planning permission to build the apartments when this had not been obtained and in some instances not even applied for. It is in this respect that our firm has obtained a ruling crucifying Aifos for lying through their teeth, well deserved I shall say, and forces them to pay a client €24K, which is what he had paid on account of a final price of €106,000, plus an extra €110,000 in compensation (!), which equates to the increase in value a similar property would have cost him more had he decided to purchase it at the time of cancellation of the contract; Or, what his property would have been worth had it been built (and not when the judge ruled, which is now, when properties are ostensibly cheaper). We are grateful to Judge Eva María Gomez Diaz, working from Court number 10 in Malaga, for reaching this sensible conclusion.

Unfortunately Aifos´ immorality has long become a way of life for them, and they have now sought protection by applying for voluntary insolvency which will mean that the prospect of receiving their deposits plus interest and legal fees is now considerably reduced. The Aifos gang and it´s henchmen will long remain in memories of very many as the symbol of the putrefaction and depravity within the real estate business in the boom years of the Costa del Sol.

Antonio Flores Litigation Aifos, aifos administration, aifos bankrupt, aifos insolvency

A Marbella judge ruling has been overturned by the Malaga High Court, once again proving that the interpretation of Spanish property law can vary from white to black in a matter of moments, depending on who is given to the opportunity to opine.

In this specific case the Marbella Judge stated that the lack of First Occupancy License for a property at Santa María Green Hills was not directly attributable to the developer (thereby signalling that it was not an essential part of the contract) and concluded that the buyers could not cancel the contract on those grounds, given that the property was finished and ready for occupation pending compliance with the Marbella General Plan. In this judgement the magistrate even warded costs to the developer.

The Malaga High Court´s conclusion is exactly…the opposite: that the First Occupancy License is an essential part of the contract and that irrespective of the legalization of the development under the new Marbella Plan the developer was at fault for not having delivered a fully legal property on time.

Interestingly my good friend Luis Gonzalez has just won a case against Aifos on behalf of a client who had bought in the development Calahonda Hills, though Ocean View Properties. This judgement is interesting because it forces the developer to return the deposit (40K Euros) plus interest but also the price increase of this same property should the client had wished to buy a similar property at the time of filing the case (what we would call loss suffered or gain prevented). Conversely the judge does not consider the claimant to have suffered any mental anguish over this plight and decides not to award compensatory moral damages.

The above shows that we are still far from knowing what will Spanish judges think and do when presented with similar cases and if there will ever be some form of consensus over this crucial matter. If only someone could get them together in a pub for a round of pints I´m sure we would not have these so-far-apart opinions!

Antonio Flores Litigation Aifos, Calahonda Hills, Ocean View Properties, Santa Maria Green Hills