Antonio Flores’ Blog

It is not unusual for the build up of a property fiasco to start like this:

… at a glittering awards ceremony held at the London Marriot in Grosvenor Square on Friday 4th of November, The Harrial Group representing the Las Torrentas Development won the best architecture (Whole Development) in the Bentley International Property Awards- the world’s biggest and most important property event”

From: http://www.lastorrentas.com/

It then gathers momentum with abundant advertorial news articles where the development receives the highest praises for being the best of its kind…on the drawing board.

The proponents of Las Torrentas, a 150 home development in the Spanish countryside town of Calasparra, The Harrial Group S.L. were directors Linda and Andrew Jones, a couple from Abergavenny, South Wales. And so excited they were that they convinced the mayor of this small agricultural town, if persuasion was at all required, to meet Abergavenny Town Council with a view to establishing a new twinning relationship between the Spanish and Welsh towns.

And then the Jones’, in a fit of hysterical excitement probably fuelled by the sums of unsecured deposits that were being transferred to their accounts by trusting purchasers, and the underserved and silly Bentley award, got confident and wrote a letter stating, among other things, that “about 15 years ago, when my husband Andrew and I started investing in property, we were shocked by the low standards of some developers”

Well, 15 years on, shocked-turned-shocking Andrew and Linda Jones have done a runner with other people’s money and are keeping a low profile, hiding presumably in Abergavenny.

Due diligence carried out on the development reveals the following:

1. The Harrial Group Spain S.L. never had planning permission on the plot(s), and yet they confirmed that completion would take place on the first six months of 2008. On the 6^th of May 2006 a public announcement on the official local gazette declared a period of 30 days for submission of allegations in respect of the proposed Las Torrentas project, indicating that once this stage is over, a report on ecological impact assessment will be drawn up with a view to determine the convenience of approving the project and if positive, the conditions under which it is to be carried out. The project has now been indefinitely shelved.
2. The Harrial Group Spain S.L. never provided bank guarantees to their customers. Clearly, when the funds were taken by the developer, he knew or should or could have known that the probability of the project stalling was very high, and yet chose to exchange contracts, request payment and fail to provide a bank guarantee.
3. The Harrial Group Spain S.L. has never filed company accounts with the Companies House (Alicante), since it was first created (!), which is indicative of business malpractice and lack of activity.
4. The Harrial Group Spain S.L. entry with the Companies House has been cancelled due to not having submitted tax returns, with date 19/07/2001, which is indicative of business malpractice and lack of activity.
5. Press and media: What dealings did the Jones’ have with the Calasparra Town Hall are unknown, but a payment of €160,000 was made so that they would reclassify enough land to build 150 villas in an area considered of high ecological value  given the presence of river rats, partridges and other animals as well as local agricultural land.
6. And what about the development plot? All we have found is half acre of arable land suitable for…rice-growing.

Conclusions to be drawn from this:

• The Jones’, infamously advised by local lawyers, have misappropriated others peoples monies and could face prison terms in application of current jurisprudence where a property developer has not guaranteed the down payment nor has offered a refund.
• Stay well away from Bentley International Property Awards awardees, just in case.
• Always have a disclaimer opportunistically stating that “we do not hold responsibility for any errors and we cannot be held reliable directly or indirectly for any loss whatsoever”. You can then add, for full protection, something along the lines of “we are entitled to take your monies and run, and shall not be held responsible for not looking back”.

Antonio Flores Litigation, Property Las Torrentas, Linda and John Andrews, litigation against spanish developers, The Harrial Group S.L

Try to guess what is it that the following have in common: an electrical company from Alicante, a cement subcontractor from Valencia, a real estate company from the Balearics, the Spanish Inland Revenue, the Spanish Social Security, 6 banks and 65 employees (2 of which guard an empty plot), on the one side, and 150 consumers that were hoping to acquire Spanish off-plan property on the other.

You guessed right: they are all registered with the courts on occasion of a voluntary company administration arrangement of a large Alicante-based property developer, San José Construcciones, hoping to perhaps get paid some money back over the course of a number of years.

The above scenario, however normal it may appear to be these days, hides a fundamental legal flaw that brings into question, once again, a legal system that has routinely failed to protect those who deserved the utmost protection: consumers.

Such flaw can be inferred from the controversial fact that the first group of creditors are hoping to get paid with the monies of the second group, the buyers, who should have had their deposits bank-guaranteed or insured pursuant to a Franco time law, the Ley 1968/57 Act, that was specifically enacted to avoid the situation they are now in.

In this case-study the irony (or irritation) is that BBVA, the second Spanish bank in size, is queuing up to try to grab a chunk of the money they are supposed to have been guaranteeing in the first place, since they provided a collective bank guarantee to underwrite deposits on a 120-unit development, deposits on which they profited handsomely for the developer’s mortgage and various commissions were being paid out of these. Crazily enough, this bank will only agree to “voluntarily” comply with its mandatory obligation after some arm-twisting, which involves lawyers and legal action.

Another surprising aspect of this all is the fact that criminal case-law states that no developer can use consumers’ down payments for anything else but building the contractually agreed property, and this excludes real estate commissions, admin staff salaries, pocket money…etc. As there is not one brick on the plot, helping consumers get their monies back should be a priority of any property developer, particularly where many lawyers have found that the criminal route can render results (many developers are serving prison terms for this), not the least where the developer has broken the law so blatantly.

Financially ailing developers are probably too traumatized by what has happened and can only hope the market will recover one day (and that lawyers will not press too hard). On the contrary banks shirking their legal, and ethical, responsibilities towards trusting property buyers (Spanish and foreign alike) has to now come to an end, particularly where abundant bank-guarantee case law is invariably favouring consumers and banks are seemingly getting unlimited funding from the Spanish State.

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Adaptation of the post originally written for the Olive Press – The Banks Are to Blame.

Antonio Flores Litigation, Property Bank Guarantees in Spain, BBVA, Ley 1968/57, litigation against spanish developers, San José Construcciones