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The Spanish Lawyer Online
The Spanish Lawyer Online

Antonio Flores’ Blog

Thoughts about laws and regulations which affect foreigners in Spain


Archive for February, 2012

Why Spanish Developers Should Encourage Bank Guarantee Action

February 25th, 2012

Since getting involved in legal action pertaining to unfinished-or-never-started-developments (e.g. by Ochando S.A., Promociones Eurohouse S.L. and Grupo San José Construcciones e Inversiones S.A.), one thing that I have found rather incomprehensible, from the perspective of a law firm actively pursuing the return of off-plan deposits, which should have been placed “in escrow” or backed by a bank guarantee, is the inconsistent and conflicting information on points of law that is being circulated by all manner of participants (lawyers, developers, group actions, banks, internet forums etc.).

But aside from the many interpretations, one can give to whether a credit should be ordinary, privileged or none at all, within the receivership/insolvency proceedings, or whether you should have terminated your contract on, before or after the developer did some or other action through the mercantile courts (all of which baffles me significantly), or that you are, or aren’t, or perhaps may be entitled to 40, 50 or 60% of your deposit in a number of years to come, what is clear to me is one thing: a consumer’s deposit for a property in, say, La Fortuna Golf is not and never to be used to pay for a topographical surveyor’s outstanding invoice on, say, Residencial San Pedro del Pinatar, looking after the salary of some night guard at Residencial San Pedro or more annoyingly, a plumber to fix some piping problem at the mansion of a company director.

Property developing companies have two options when handling off-plan buyers’ deposits: either keeping them in safe custody and not use them save for the needs of the specific development, and if not used return them fully, or provide a bank guarantee: there are no more options. Dragging bona fide consumers through a receivership procedure alongside electrical suppliers, cement subcontractors, real estate agents, the Spanish Social Security or the Spanish Inland Revenue seems not the right thing to do, particularly where it is the deposits of off-plan buyers who are earmarked to satisfy the debt of all others, related or not to the development in question.

Current case law does not envisage any other use for those funds, certainly not have them used for purposes not allowed to by law. Which means that these developers should be, in my opinion, encouraging, guiding and assisting off-plan property buyers in cashing bank guarantees to precisely avoid the aggravation of their already difficult situation, i.e. the transformation of these civil disputes (contractual default) to an action for criminal swindle and misappropriation, which entails serving time, particularly on those developments where nothing has been built (on others with a certain percentage built, advice would have to be on a case-by-case basis).

Legal Practise, Litigation , , , , ,

Lawyers Suing Lawyers

February 16th, 2012

It is every so often that I get enquiries from disgruntled former clients of colleagues, claiming that their chances of recovery, on occasion of a legal dispute or in a failed property transaction have been seriously diminished or even thwarted by, in their view, negligence of the acting lawyer. And whenever the option to sue another lawyer is raised by a third participant in the meeting (it tends to be a friend, acting as the Good Samaritan for the occasion), the victim of the suggested negligence tends to raise all kinds of objections, arguing that “lawyers tend to stick up for each other and they will avoid filing lawsuits against fellow practitioners..”

Admittedly, this perception is widely spread among foreign people, further aggravated when they throw in other elements of collusion (lack of determination or bias, the logic idea that other lawyers are naturally antagonistic toward lawyers who sue lawyers, corrupt judges, unknown timescales, costs etc.).

Good lawyers always want to police their profession, they believe that lawyers who have damaged their clients should be held accountable. Warren Trazenfeld

The reality is that, unlike in the US, in Spain we don’t have lawyers specialized in suing other lawyers. It is in fact a field of the law that is almost unknown, and you will normally find that it takes a lawyer with a very tough skin to feel comfortable in this practice. Yet there are now more and more articles devoted to legal malpractice being published, quoting relevant rulings and other interesting material on the issue and astonishingly, when you make a search on one of many legal libraries on use, using the words “abogado negligencia”, the result shows a whopping… 5221 court rulings!

So it might be that we need to embrace the motto of a known Miami-based malpractice lawyer, Warren Trazenfeld, who some years back said: “Good lawyers always want to police their profession, they believe that lawyers who have damaged their clients should be held accountable”.


Legal Practise

Top 7 Worst Banking Practices I Have Come Across

February 8th, 2012

It is only a few days ago when we read a story of an ailing 80-year-old diagnosed with Alzheimer and dementia, who had been sold €18,000 worth of… worthless financial products from CAM bank. The gentleman in particular had an officially recognized 80% disability, impaired vision and a history of strokes, and yet, he was persuaded by his branch manager into buying CAM shares for €9,000 and a further €9,000 on deposit, until year…3000!

This example of disgraceful behaviour, far from being an isolated case, adds on to a long list of what we could call “bankers´ most despicable actions” (we would completely miss the point if we thought that these are not man-made) and illustrates the utter disrespect and greed of certain individuals working for some banks.

So listed below are Top 7 Banks’ questionable at best, despicable at worst practices I have come across both in the exercise of the legal profession, and exemplifies the declining ethical standards within the industry.

  1. Equity Release: a scam that was operated by a number of Scandinavian and British banks where pensioners were asked to gamble away their lifetime savings on two main pretexts: that by registering a mortgage on their property, they could eliminate Inheritance Taxes for their children, legally, and that by investing the loan obtained from the mortgage they would obtain an additional income to their limited pension. A few criminal ongoing court actions, and an avalanche of soon to come civil suits will determine how ethical it was for Rothschild Bank offer a 90-year old a 90% loan on her property…
  2. Clip or Swap clauses on mortgages: financial products wrongly sold to mortgage-loan customers as insurance against increasing interest rates. The bona-fide insurance policy was in reality a complex derivative instrument. Most Spanish banks indulged in this awful practice and court cases are being resolved in favour of customers. Bankinter, Popular Bank and a few other culprits have lost 523 Court cases versus 90 ruled in their favour…
  3. Bad-advice provided by Deutsche Bank to its customers when advising them that Lehman Brothers and some Icelandic banks, which ultimately went bust, were, nevertheless, the investment of choice. Court number 57 in Madrid is currently dealing with the matter.
  4. Awful advice by Santander Bank when offering customers to invest with “world’s biggest conman” Bernie Madoff, despite knowing since 2006 the dangers of investing with him, according to the press.
  5. Deceitful advice given to long-standing clients by La Caixa, CAM, BBVA and many other banks to sign up “preferential shares”, when they thought they were depositing their savings on a fixed-deposit. Whereas one would think that younger, dynamic and financial-savvy investors would take on these products, this meeting held by very upset customers seems to suggest otherwise.
  6. Abusive use of the extra-judicial foreclosures by some banks. This repossession mechanism is generally (and inadvertently) agreed to by the borrower when signing the mortgage loan deed, is conducted by Notary Publics and can lead the bank keeping a property for €1. An association is fighting to expose this practice.
  7. And lastly, a shocking photographic report of Jyske Bank’s not-so-exquisite treatment of an evicted property owner, his belongings and the property itself, following a bizarre dispute lasting 18 years. The Gibraltar-based bank managed to regain possession of an offshore-company-owned property although not ownership, that was retained by the ultimate owner (our client), as confirmed by a  number of quirky court rulings that nevertheless allowed Jyske to put their hands on this property with one sole purpose: destroy as much as they could!

Mortgages, Scams , , , , , , , , ,