Antonio Flores’ Blog

Soon after we received a court ruling against property developer Manilva Costa S.A. as a consequence of its dealings with the demised real estate agent Ocean View Properties (OVP), we began to receive new enquiries from private purchase contract holders of Estepona Beach and Country Club. Purchasers had been left stranded in this legal limbo, perfectly orchestrated between developer, agent and appointed lawyer, the latter being the more reproachable of the three for his failure to even get a contract signed by someone (yes, monies were paid to Ocean View Properties and contracts sent to the clients to sign, and then never returned to them with an original signature; never mind about bank guarantees… frightening!).

But at least though, Manilva Costa S.A. managed to finish the properties, and have a finished product which says something about them, even if the properties were delivered late, specifications did not match the agreed ones on contract, and additional facilities were never built.

What has happened with Estepona Golf & Country Club is similar in its inception, but where the development was meant to go there is a void plot, and of course, as above, no contracts were ever exchanged, no bank guarantees to protect the investment secured, no building license granted and it appears that not even was the plot owned by the developer. Unfortunately for these investors, Spanish lawyers appointed to protect them seemingly worked rather on behalf of the deal, because nothing, except for a receipt, did the clients get.

The consequences are, in principle, that investors are now left with little options to sue on a civil court because they have few or no documents to pursue Sungolf Desarrollo Inmobiliario S.A., the Spanish developer, nor Ocean View Properties, since it is now wound up. So I decided to investigate this matter further, and to my surprise I found an interesting article (in Spanish), where a link is established between the above two companies with the biggest corruption case ever to be started in Spain, Operacion Malaya, and with a development known as Punta Perla, a massive $2.5 billion resort.

According to the Sepblac (Spanish Anti-Money Laundering Specialist Service) Sean Woodhall is the necessary link between the Spanish investors, which include Antonio Roca (the mastermind of the massive Marbella Town Hall corruption ring still in prison), Tomás Olivo (owner of La Cañada commercial center and indicted for money laundering), Carlos Sánchez and Andrés Lietor (both businessmen connected to Roca and also indicted for money laundering), and the Dominican projects. The report also says that Woodhall was fronting Berkeley Property Investments, and was the beneficiary of substantial funds forwarded by Sungolf Desarrollo Inmobiliario S.A, and it refers to a project of 395 units in Estepona it is developing and selling with the assistance of Ocean View Properties (it would appear that Ricardo Miranda Miret, Sungolf director, introduced Woodhall to Carlos Sánchez and defined him as his partner).

If one reads the article and analyses how the whole plan was concocted, it seems clear that there was not the slightest intention to build and sell 395 units in Estepona by either Sungolf Desarrollo Inmobiliario S.A or OVP, respectively, but just to extract €30 million to buy into the Dominican Republic Punta Perla development, which makes this a massive swindle equivalent in size to the Fortuna Land scam although with an international component.

What the Spanish investigators at the time never did was link this money laundering scheme with the Estepona Beach & Country Club scam; pending consultation of the report which we are expecting to get a copy of, it seems that there is sufficient evidence to consider criminal prosecution against Ricardo Miranda Miret, the director of the company at the time (and still is) and its shareholders Rosa María Prado Rubio and Javier Espinosa. The local reporter for El Mundo (largest Spanish newspaper), who incidentally is a client of our firm, has taken a big interest in the matter and we will be meeting him early next week to consider lines of investigation to find out where were the funds paid by buyers for apartments at Estepona Beach & Country Club fraudulently diverted.

Interesting reading:

• Operación Malaya: La Conexión Dominicana (article in Spanish)

Antonio Flores Litigation, Property Andrés Lietor, Antonio Roca, Berkeley Property Investments, Estepona Beach and Country Club, Fortuna Land Scam, Manilva Costa S.A, Ocean View Properties, Operacion Malaya, OVP, Punta Perla, Ricardo Miranda Miret, Sean Woodhall, Sungolf Desarrollo Inmobiliario S.A, Tomás Olivo

Some days ago, while walking a friend’s dog around La Mairena (Marbella) on an early morning walk in a rainy day I came across an unusual but shocking sight: someone had left abandoned what seemed to be thrity or so huge forty ton boulders, plenty of earth, recently laid pre-grown lawn sections and a smashed gazebo. As I walked around the mess, the sun rose above the horizon and I realized that it was in fact a massive retaining wall that had not been able to shake off the water from the unrelentless rain of the past 4 months and had come crumbling down on to the street.

Of course, when you see this you start thinking on the safety of the people living up in the villa which was the main reason for the wall to be built, but also you think on what words would the owner have for his architect, builder, engineer and, generally speaking, anyone involved in the construction of it. So the next course of action would be to call his lawyer (at last, some business coming our way!), get his opinion on the matter and ask the expected question: so tell me, where do we go from here?

It is not very difficult to imagine what unfolds later: developer, architect, building surveyor (in Spanish “aparejador” or, if you want to avoid offending them, “arquitecto técnico”, sounds cooler), contractor, engineer, OCT (Technical Control Body, in charge of performing the tests on materials and build methods necessary for the 10 year guarantee) all pointing the accusing finger to each other or, where a friendship has been established or alliances exist within the group, whoever they like the least. This frantic buck passing I suppose is only a natural response to what seems a huge bill coming your way, because in the case study of today the works to put that right could easily cost a couple of hundred thousand euro.

Spanish legislators must have seen this very clearly because what they have done, by means of the Edification Act 38/1999, is to put the blame, prima facie, on every single professional which has made money on the project: developer (if different from the owner), architect, “technical architect”, contractor, the OCT and materials suppliers. Which means that, if within a prudent time, they have not met to pull the wrongdoer from within the gang, the law allows the owner to preventively file a civil complaint against all the above operators, jointly.

In principle, it should be easy to establish whose responsibility it was to ensure that the wall stayed upright for many years to come, and so Spanish case law specifically states that, as a general rule, professional liability has to be identified, and so attributes responsibility for defective construction to the contractor, and responsibility for defective design to the architect, and only where it is technically not possible to discern where did it all go wrong will they all be responsible (called “concurring guilt”).

If the architect or the builder had subcontracted the work to other professionals, they both still remain responsible for the lack of competency of their choice of subcontractors, although will have the right to pursue them at a later stage. Builders will also have the right to pursue suppliers if  the materials used were found to be defective.

Fortunately nowadays 95% of new constructions have a 10 year insurance policy (Seguro Decenal) taken out cover defects which compromise the mechanical resistance and structural stability of the job, and so it is much easier to pursue this avenue and twist the insurers arm to get the wall up again quickly. It is then up to the insurer to chase the rest of the gang to establish responsibilities and be reimbursed if they feel it is appropriate, provided they have not waived their liability previously (insurance companies working with the School of Architects or Technical Architects tend to include this clause in their policies).

Finally, the policy will cover the following:

1. Cost of execution of the repair.
2. Architect’s and surveyor’s fees.
3. OCT fees.
4. Licenses and taxes involved in executing the repairs.
5. Any other cost necessary for the execution of the works.

So if you are one of those who thinks that the rain in Spain will NOT stay mainly in the plane then get yourself a proper 10-year insurance policy!

Antonio Flores Litigation, Property seguro decenal, spanish ten year insurance policy

In Spanish, ‘La Verdad’ means ‘The Truth’. But it is also the name of a local newspaper in the Murcia region that interviewed, back in 2006, a young and confident looking José Luis Pérez Carrión, Marketing Manager for Calidona. In this interview he extolled the virtues of the Corvera Golf  and Country Club grand project and its impressive facilities, including the PGA Olazabal-designed Golf Course (Ryder´s Cup contestant) and a 5 star De Vere-run hotel, with Spa and so many more luxuries you would expect from a hotel of this stature. Quoting Perez Carrión:

“We offer a different life-style, close to nature and the beach with a view to practice sports within an unbeatable environment and with all the facilities that the client may need. Also, owing to an agreement between the prestigious hotel chain De Vere, specialists in golf accommodation, we will be able to offer the services of a luxury hotel and a Spa.”

It´s February 2010 and la verdad is that there is no hotel, just as much as there is no equestrian centre, sports facilities, swimming pools, tennis club, private gym, commercial centre and a number of other amenities that were the primary reason for a couple of hundred people to buy in this development.

We took an interest in this case after being contacted by a few persons who had bought in Corvera Golf and Country Club, and after agreeing to take up their cases, a lawyer of the firm and a sort of specialist forensic valuer went over to draw up a report on the resort and it’s (lacking) facilities, and indeed it appears that many of them never left Corvera architect’s drawing boards, and are therefore just that, “un sueño” (a dream), as it reads on the bottom left part of the original promotional plan embedded in this post.

This is conclusive that a degree of contractual default has taken place, which will entitle buyers to file for cancellation of the contracts on the basis of misrepresentation. It is then up to the lawyers to argue the case successfully, with as much ammunition as possible (contracts, brochures, articles, witnesses, including Olazabal if required), and propel it to a successful conclusion for our clients, judge permitting.

In a similar claim we filed against Manilva Costa and Ocean View Properties, the judge of First Instance in Estepona granted contractual rescission as he found that the developer “misrepresented and misled buyers by promising, through marketing literature, facilities such as top restaurants, shops, a health and leisure club, tennis courts, Turkish baths, sauna, Jacuzzi, fully equipped gymnasium, heated pool and kindergarten service, and it is clear that none of those have been built”. He then added that “from the documents submitted to this Court, it has been established beyond doubt that the publicizing of these facilities in brochures was a fundamental element in the buyer’s decision to buy, as collectively they had induced him to proceed with the purchase of a property which was located in a relatively isolated development and distant from similar facilities.”

With respect to buyers in Corvera Golf and Country Club Phase IV, the above can be irrelevant because their properties have not even been built and therefore contractual default will come from delayed completion. The rest of phases seem to have been built more or less on time, that is, within 18 months from the date of issue of planning permission (such is the delivery date on the contract) so we are reluctant to base the case on this argument.

As with many other Court cases, we will play the devil’s advocate so as to test the quality of our legal arguments and identify weaknesses in its structure and content since Corvera will fight this case to the end. But still, the De Vere 5 star hotel is just not there!

Our case is due to be filed within days. We will keep anyone with an interest in this development posted through this blog.
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• Update March, 14 – 2010: Lawbird.com Corvera Golf and Country Club Section updated
• Update March, 03 – 2010: Photos taken last week of the unfinished facilities have been added below:

Antonio Flores Litigation, Property Calidona, Corvera Golf and Country Club, litigation against spanish developers, Manilva Costa, Manilva Costa SA, Ocean View Properties

My previous post on the matter (Part 1) would have not been complete if no mention was made to contracts with developers and bank guarantees so below are a list of classic legal fairy tales on the subject.

On Courts/Litigation

1. Court costs are very high in Spain. Not at all, there are no Court costs because court proceedings are free (it’s called “justicia gratuita”) except if you decide to go the Supreme Court (these magistrates are a bunch of snobs and so may request you pay a deposit). It is the lawyers who will charge you the money together with the procurators (who inexplicably have yet not been eliminated as they are totally superfluous and have the habit of falling asleep in Court hearings). But if you have a good case and you win it is likely that legal fees will be awarded on the losing party and therefore you will be reimbursed. Obviously the contrary may happen if you lose in which case fees can double.
2. You will lose if you litigate against a Spaniard or a Spanish company because the system protects them: TOTAL RUBBISH. Yes, I can see the black continent from my terrace but this does not mean that we live in a banana African republic (not yet though). Never have I heard, been told or read any complaints from anyone to the effect of denouncing the judiciary system for judging on patriotic grounds.
3. Never litigate in Spain, it will take 10 years: yes, if you decide to go all the way to the Supreme Court. But the average for a Court of First Instance ruling is 14 months and we all know that time flies…

On Contracts with Developers and Bank Guarantees

Lately, a very popular topic on legal-gossip websites:

1. I have a contract with a developer, don’t want to proceed and I have been advised by someone with a zillion posts on an expat website forum that a particular lawyer will succeed because he/she is an expert in Consumer Protection Law: run away, would not touch it with a barge pole! The reason is simple: no decent lawyer will want this type publicity because it is immoral. Lawyers should never give sweeping legal advice on a particular subject without reading a contract and analyzing all elements. Those who fail to follow this principle are regarded as ambulance chasers.
2. I have a bank guarantee/insurance policy and therefore can just cash it and walk away: NO, this would defeat the purpose of the bank guarantee which is to protect the investor from a failed property investment and not serve as a getaway facility. You can however cancel and try to execute, directly or through the Courts, where notoriously a delay has taken place. Results are varied, from banks/insurers paying happily to refusing point bank, with similar results when going to Courts (recently Banesto has accepted to pay 80% of 11 deposits they were guaranteeing in a Court case we filed against them and their client, Promaga).
3. Statutory Force majeure and Acts of God are not applicable in Spanish law: WHY NOT? Article 1.105 of the Spanish Civil Code, in force since the 19th century, says the contrary. Developers can excuse themselves for not completing on time if they can prove that the delay was caused by events catalogued as any of the two.
4. The developer has delivered my property one month late and therefore they are at default and have to return my money, by law: NO judge will accept this unless specifically written into the contract and no developer is stupid enough to have done that. The exact amount of days or months of delay will depend on the wording of the contract, the reasons for the delay, the judge ruling the case (some say that 3 months is enough and others say that 9 months does not defeat the economical purpose of the contract and so it is insufficient).
5. I bought a new property, I could not complete, the developer delivered on time and summoned me for completion, after which they cancelled. I have lost my deposit and cannot do anything. Not always. It is quite possible that the contract was a one-sided agreement because it was entered with the developer at a time when they had (limited) precious properties for seemingly endless numbers of keen property investors (i.e., property boom) and so it was a case of take-it-or-leave sort of agreement. The consequence of this is that clauses which can be considered as unequal, could not be negotiated at the time of buying, are not reciprocal and are not proportioned are null and void. This includes the clause where the buyer loses the deposit if he does not complete if the developer does not include one where he will refund twice the deposit if he too fails.
6. I have bought a property from a developer and therefore I am a consumer, which gives me the right to cancel the contract if I wish: No, careful! Being a consumer does not mean that you have every right, if you wish to pull out, to cancel your contract and demand your monies back. There are times where developers have fully complied with the contract and there is little hope in successfully winning a case for contractual default, in fact they are open to enforce completion of the transaction, both in Spain and in your own country if they deem it appropriate.
7. I wish to cancel my off-plan contract and I’ve been told I have a “Solid Case”. You may well have one, a very strong one in fact, in which case cashing that bank guarantee is a plausible option and alternatively a Court case. But once again be cautious: there are some pseudo-legal website forums where you are told pretty much that no matter what you have done and/or the developer has done you always always have a ‘strong case’. To put a comparison it’s like a doctor telling a moribund terminally ill patient that no matter how serious the ailing is they will make a quick recovery (I could not find a less graphic comparison but it is how I see it). Examples of this are for example fallacies such as the one that says if you don’t get a mortgage you can pull out in any case, or that one whereby if the developer is late by 1 month you can pull out.

This list is by far comprehensive so if you come across anymore do let us know!

Antonio Flores Litigation, Property ambulance chasers, legal gossip, litigation against spanish developers, spanish courts