Antonio Flores’ Blog

The development known as El Patio de Doña Julia, built by developer Evemarina is poised to become a real mess if our fears are confirmed. The chronology of events leading to Evemarina´s insolvency is known to those involved, except for the fact that the developer may have sold the whole development on the 21st of August 2009 to a company associated with Caja Rural, the savings bank financing the development.

We are naturally very worried, as we represent a large number of clients in El Patio de Doña Julia, most of whom already expressed their desire to pull out of the transaction due to a number of reasons, namely late delivery, faulty construction and presumably a lesser value than that reflected in the contract. So after we sent notice of cancellation (requesting full refund), and we received a letter back from the developer rejecting our demands and intimating that they would pursue our clients, it may soon transpire that the whole development has been handed back to the bank through a sale to a company called “Gestion de Inmuebles Virgen de los Peligros” (which in Spanish means nothing less than Virgin Danger Property Managers), without notifying legitimate purchasers with a valid contract.

Unfortunately Evemarina’s insurer ACC Zurich Insurance also rejected our attempts to cash the insurance policies on grounds that completion –with habitation license- had taken place in a timely manner, that is, before the final date to deliver the units agreed to in the contract. This date has attracted much controversy as it established an discretionary extension that has allowed Evemarina to finalize the works, in our opinion, without breaking the contract (thus preventing our clients to invoke this getaway clause so as to abandon a project for which they no longer had their hearts on).

If the above is confirmed, we can be faced with a scandal of significant proportions as not only Evemarina’s directors, but also the savings bank property management company, could be deemed to have engaged in a fraudulent scheme by selling the same properties twice without refunding the advance payments to the first buyers (in the case of Evemarina), and buying the units knowing that these had already been previously sold on a private purchase contract (in the case of Gestion de Inmuebles Virgen de los Peligros, AKA Caja Rural). This, may I add, will in most countries be construed as a criminal offense punishable with prison terms.

We will post regular updates on this blog post as we obtain fresh information.

Antonio Flores Litigation, Property ACC Seguros, El Patio de Doña Julia, Evemarina, Gestion de Inmuebles Virgen de los Peligros, Zurich Insurance

Zurich Insurance, one of the leading insurance companies in Spain through its ACC Seguros y Reaseguros branch, has refused to pay the sum guaranteed on an insurance policy to a client of our firm on the basis that the developer had stopped all works as it was put into Administration. This dangerous situation, which we would all think is the number one reason for a bank guarantee and/or insurance policy to exist is precisely the impediment put forward by Zurich to say “I´m sorry, we can’t”.

Zurich did attend the payment of just under 40 checks to clients of this firm on the Larsol development as it was not going to be finished, although the developer is still operating. Conversely the above developer, Nadalsol, even though technically insolvent, may be finalizing the works at Medina Golf Residencial Granada, though with a significant delay.

Zurich has decided not to pay based on the following:

1. That the recent Insolvency Act precludes them from paying out on the policy as it would jeopardize their right to reclaim this sum from the developer in a separate recourse action, as the insolvency administrators could argue that the execution was unduly granted.
2. That as we extended the validity date of the policy (which we did, just in case) we also inadvertently extended or agreed to a new completion date for the property bought on contract (The funny thing here is that the validity of insurance policies and bank guarantees for the purpose of guaranteeing funds are never limited in time, except by the license of occupancy, according among other to a most recent ruling by the AP Madrid 27th Dec. 2007).
3. (That perhaps they have ran out of money!).

Well, none of the arguments can be sustained for the following:

1. Argument 1: Because the relationship between the Insurer and the Consumer is autonomous from the vicissitudes affecting the developer as the latter is not party to the contractual relationship.
2. Argument 2: Because it is plain daft and stupid! How can extending the maturity of a insurance policy relate to a completion date for a property?

It is extremely frustrating when trying to explain disappointed investors that a company like Zurich Insurance will look for any excuse on the book to try to not abide by the clear wording of consumer protection laws on off-plan purchases which envisaged the protections specifically for cases of insolvency.

So if Zurich does not pay, who will then in this current climate?

Antonio Flores Litigation, Property Bank Guarantees in Spain, larsol, Medina Golf Residencial, Nadalsol, Zurich Insurance