Antonio Flores’ Blog

Unbeknownst to most property owners, management of “communities of owners” in Spain has become a source of real corruption.

According to consumers’ organizations, 30% of managers of communities of owners –whether professional administrators or “presidents”- are demanding commissions of between 5%-10% from contractors and supplier companies serving these communities. Where the communities have expensive-to-run or higher maintenance facilities such as gardens, pools or security requirements, providers have larger margins to play with.

Corrupt professional administrators that engage in these practices will demand -or expect to receive- a kickback for awarding contracts, but in a rather discreet elegant manner. After all, they are professionals that get paid for their services and need to dissimulate spurious activities, which are seldom expected of them.

Corrupt presidents on the contrary don’t get paid to their jobs. They become unusually keen on governing the community, will typically behave with crass insensitivity towards ‘dissident’ owners and show despotic manners at AGMs. Often, they will weave a web of friends that are nothing but naive or uninvolved neighbours who, through ignorance, will lend them support by giving out proxies for up and coming community meetings, thus perpetuating the fraud.

These communities are generally teetering on the brink of bankruptcy.

The Spanish Criminal Code can deal with these individuals, if they are uncovered. This is what article 286 states under the title “Corruption between private individuals”:

Whoever, personally or through an intermediary, promises, offers or grants executives, directors, employees or collaborators of a trading company or any other firm, partnership, foundation or organization an unfair benefit or advantage of any nature, in order for the to favour him or a third party against others, breaching their obligations in acquisition or sale of goods or in hiring of professional services, shall be punished with a sentence of imprisonment of six months to four years, special barring from practice of industry or commerce for a term from one to six years and a fine of up to three times the value of the value of the profit or advantage obtained.

But where they are not uncovered, there is only one solution: naive and uninvolved neighbours have to wise up and get involved, whether they live in these complexes permanently or occasionally, replace these corrupt presidents or administrators and establish transparent practices for every provider bidding process (sealed bidding being the fairest and most secure).

Antonio Flores Property Administrators community of owners, AGM horizontal property act, horizontal property act spain, Spanish Community of Owners, Spanish condominium, Spanish property laws

A Court in Alicante has ordered Banco Popular to pay €2.1 million Euros to British investors, plus interest since payment of the deposits, following a failed property investment. According to the ruling issued a 10 days ago the investors, all of them from the United Kingdom, bought off-plan properties in the development known as Fortuna Golf, promoted and built by Promociones Eurohouse 2010 S.L., currently in the process of being wound up.

Buyers paid a deposit of around 30% of the purchase price but, when completion was due, units were only half built and works had been indefinitely halted.

Accordingly, buyers decided to claim from guaranteeing bank Banco Popular, who had issued a collective bank guarantee but given individual guarantee certificates to only some investors.

In their defense, the bank argued that the collective guarantee had been limited by quantum and therefore, any claims exceeding this limit could not be –legally- met.

Lawbird Legal Services S.L. argued that the invocation of qualifying conditions or limitations was against consumer protection regulations, namely Act 57/1.968, and that deposits should be guaranteed in any event and regardless of private conventions reached between developer and bank.

For instance, the ruling confirms that it is beyond logic and abusive to subject the validity of the collective guarantee to the issuing of an individual guarantee certificate as, by not meeting this obligation, the bank would be able to easily deny liability.

The Court also stresses that “it was clear that the intention of the Banco Popular and Promociones Eurohouse S.L. was to underwrite customers’ deposits in the event of default and this is exact what happened”.

Lawbird-based lawyer Luis Gonzalez Ordoñez had personally visited the site on occasion of the filming of a TV programme, Comando Actualidad, aired on state-owned television channel TVE-1.

The case has been extensively covered by national press.

The ruling can been appealed.

Antonio Flores Litigation Act 57/1968, Banco popular, bank guarantees, Bank guarantees Banco Popular, Fortuna Golf, Fortuna Hills, Promociones Eurohouse 2010 S.L.