Bank Guarantee subject to contract change

I am purchasing an apartment at Ochando Golf resort and transferred 25% deposit in April 2007.
The deposit was transferred in good faith on the understanding that a Bank Guarantee would be issued. I have since discovered that there is no bank guarantee in place.
The apartment was due to complete in April 2009 although there is a 6 month grace period in the contract so developer has until October 2009 to complete. As far as I know the building on the actual apartments has not even started yet although some work to golf courses, show homes is complete.
My lawyer has advised that they had been chasing for the bank guarantee since the beginning.
The developer has now advised that the bank guarantees are ready to be issued but only if we agree to them postponing the completion date in the contract by 1yr. If we do not agree then no bank guarantee!

I would appreciate any advice on this as I feel we are being blackmailed. If we do not agree and the builder goes bust we could lose our deposit.

Dear Sir/Madam,

We have already recieved a few queries on this development.

Hopefully your appointed lawyer is independent and is not appointed or recommended by the developer as this may cause conflicts of interest.

It is still too early to pull out and litigate.

Realistically you should at least wait 6 months as from the scheduled delivery date outlaid in your Private Purchase Contract. Please read our litigation article on the matter, specifically point one:

10 Reasons Why Your Case Against a Spanish Developer May be Thrown Out of Court - 30 Sep 2008

At least until April/May 2010 you could not pull out and litigate, successfully that is. As you can pull out before but I would not advise it.

On the matter of Spanish bank guarantees you may want to read our article:

Bank Guarantees: All That You Ever Wanted to Know but Were Afraid to Ask - 12 Nov 2008

It doesn't make much sense to sign an extension on the delivery date of the property in exchange of receiving a bank guarantee. As on doing so you will now have to wait until April/May 2011 or even more.

As per our article above, the issuance of bank guarantees is unrelated to anything. Developers are obliged under law to hand them out to off plan purchasers. Period.

If your developer is asking for an extension quite obviously he will not deliver the property in time. This could be because he may need to raise additional funds? Maybe he has to reapply for the Building Licence as the 2 years have elapsed already without anything being built.

This letter in fact may be used against him in an ensuing court case on applying for a full refund of the amounts.

If your developer is weak financially it might be a good idea to secure a bank guarantee in case he goes into administration.

The decision is up to you, it's your money.

You may want to read yet another article of ours on the matter to help make up your mind:

Is Litigation Against Spanish Developers Worthwhile? - 23 May 2008

Yours faithfully,

Thanks for your response.

I have already read the articles and found them very informative. I have advised the lawyer that the bank guarantee must be dealt with and have offered to contribute and claim money back from developer at completion (if this ever goes ahead).

They appear to be saying that it is the bank offering the guarantee that want us to agree to the extention in time. Surely there are other places to source a BG

Am I able to arrange my own guarantee as I thought this was something the developer had to do? Is the cost of such a guarantee based on a percentage of deposit?

Sorry for all the questions but I am keen to secure my deposit.

My main concern about waiting til Oct 09 is that faced with refunding a large number of deposits the developer may decide to go into adminstration rather than pay out.

Dear Sir/Madam,

No need to apologise for askings us legal queries, that's why we are here.

Unfortunately you cannot arrange your own BG. It's up to the developer to sort it out.

The reason being why probably the developer's bank are themselves keen in pushing for an extension on the delivery date is because they are bound to underwrite the BG. So they wouldn't like to issue a BG which you are going to execute in November 2009.

It's in their best self-interests to have you sign the extension of the property so as to delay the chance of you executing the BG.

Come October 2009 I strongly doubt your developer is going to pay out without you suing them. Due to the ongoing financial turmoil developers are not refunding voluntarily, you have to take them to court which is where litigation lawyers step in.

The developer is not prepared to issue a BG - even if there is no financial cost to them!

The developer will only issue a BG AFTER we have signed an amendment to the contract postponing the completion date. We have already fell for this once!

Our lawyers appear to be saying that we cannot take action purely over the bank guarantee, without filing a claim for breach of contract. Is this true?
I do not think we would stand a chance going for breach of contract as it has not been breached yet!

I would like to take any action I can to obtain a bank guarantee on the existing contract and would appreciate it if you could advise me of the potential cost involved (Legal cost and cost of BG). I do not think our lawyer is acting in our best interest over the issue. Would you be able to look over a few of the emails sent/ received to the lawyer and let me have your professional opinion?

I anticipate we will have to litigate once the contract term has expired. Obviously I would be happy to wait providing a BG in place. Please can you advise approx cost of litigation so I can start saving! If you have been contacted by other investors - would we be able to bring a group action against developer if he does break the contract.

Thanks

Jo

Dear Sir/Madam,

We disadvise suing a developer on grounds of "breach of contract" due to him not having issued the mandatory BGs in an off plan unit.

Please read our article:

10 Reasons Why Your Case Against a Spanish Developer May be Thrown Out of Court - 30 Sep 2008

Specifically point six which I quote:



We have compiled a set of points in which a judge may rule against the plaintiff....

...
6. Suing on grounds of a lack of Bank Guarantee. If you feel tempted to sue a developer because he has not provided you with the mandatory Bank Guarantees on buying an off-plan property, you will most likely lose. One cannot cancel a contract and demand full payment of your stage payments on such grounds.



We will not represent you or anyone else in such a case because it is irresponsible for us to engage in reckless litigation which you are bound to lose as explained in our litigation article above.

On you losing you would be liable not only for your own legal fees but probably also for the developer's lawyers and advocate. So you could easily be out of pocket by 22,000€ on losing.

We only accept cases which stand a good chance of success so as to avoid our clients throwing good money after bad. You cannot force a developer to give you a BG. The only thing that can be done is impose on them 25% administrative fines on the amounts that should have been insured but that will not help you in the least as it will not procure you a BG unless of course your lawyer uses it as a veiled threat to negotiate their obtention.

Regarding representing you litigating to recover your funds as per my prior reply we will be glad to assit you but it is still too early in our professional opinion. I understand your plight but you would have to wait one more year, until April/May 2010 to stand a good chance of success.

Litigation prior to that date is pushing it and you risk losing a great deal of money as stressed above.

Yours faithfully,

I seem to be having the same problem. Why is it that you cannot get answers when someone somewhere has your money. I was assured that the deposits were put into an escrow account that neither the developer nor I could touch pending completion. I now find that this is not the case. I have to admit there is nothing in writing about the escrow account and the company I dealt with are in liquidation. I am waiting to hear from the lawyers as we speak but so far I am getting nowhere.
In the event we get to October (which is the additional six months allowed in the contract) would that be the best time to approach the developer direct or should I do this through the lawyers although I am starting to believe they have their own agenda.
Regards and thanks for any help you can give to me.

Dear Sir/Madam,

As explained above to the other person, you would have to wait at least until April/May 2010 to pull out and litigate.

October is the scheduled delivery date of the property. Come October 2009 you just cannot pull out on the following day and litigate, at least successfully.

Please read our article on reasons not to litigate, specifically point one:

10 Reasons Why Your Case Against a Spanish Developer May be Thrown Out of Court - 30 Sep 2008

I would advise you the cancelling of the Private Purchase Contract is done by a litigation lawyer, not by yourself.

go to http://ochando.co.uk/ and read about going bust
sorry

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Originally Posted by Unregistered

I am purchasing an apartment at Ochando Golf resort and transferred 25% deposit in April 2007.
The deposit was transferred in good faith on the understanding that a Bank Guarantee would be issued. I have since discovered that there is no bank guarantee in place.
The apartment was due to complete in April 2009 although there is a 6 month grace period in the contract so developer has until October 2009 to complete. As far as I know the building on the actual apartments has not even started yet although some work to golf courses, show homes is complete.
My lawyer has advised that they had been chasing for the bank guarantee since the beginning.
The developer has now advised that the bank guarantees are ready to be issued but only if we agree to them postponing the completion date in the contract by 1yr. If we do not agree then no bank guarantee!

I would appreciate any advice on this as I feel we are being blackmailed. If we do not agree and the builder goes bust we could lose our deposit.

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