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My lawyer says I don´t need to ask the developer for a bank guarantee. Is he correct?
Property Law
Antonio Flores Vila
17th of March 2004
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Q. I am purchasing a property off plan, in Spain, for completed in 18 months time and to be paid for in three stages: 20% in 1 month, 20% in 9 months and 60% on completion.
I am employing a Spanish Lawyer. I asked him about a bank guarantee but he says it is not necessary as he has checked out the builder and there is no problem. Is he correct? I feel uneasy about handing over such a lot of money. What happens if the builder goes out of business? Am I correct in
thinking that with a bank guarantee I would get my money back, without a guarantee I would get nothing?
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A. It strikes me that a Spanish lawyer refuses to acknowledge the need for a bank guarantee, especially where the law (1968 Act) provides for coverage to the consumers and the developer is obliged to comply with it. To consider a company financially sound may be imprudent these days if we see the situation with companies like Enron or Parmalat (in Italy), who have filed for bankruptcy leaving behind a string of creditors.
I have to therefore conclude that your lawyer is not correct in assuming that there is no problem with not giving out bank guarantee, or it could well happen that he does not wish to upset the developer, or perhaps an agent, if you have been recommended to the lawyer by any of the two.
With the above guarantee you ensure that a third party (bank or insurance company) will come up with the money should the developer not finalise the works or he does not manage to start them. Always claim a bank guarantee when purchasing property in Spain.
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