Property Buyers’ Legally Consented Rip-Off
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.
The situation with San Jose is repeated across Spain on many developments including the Las Higuerica Finca Parcs development in Hellín.
The Banks failed to comply with their obligations according LEY 57/1968. Many banks are clearly guilty of gross negligence and a complete lack of professional due diligence. Some banks even colluded with the developers whom they financed and allowed purchasers funds to be used illegally.
I am a victim of Bank Guarantee abuse on the abandoned Finca Parcs development.
After paying my off-plan deposit in 2006 and not receiving the legally required Bank Guarantee I immediately thought the Banks had a liability according to LEY 57/1968.
I suspected that in these situations, action solely against the developer would not result in the return of the deposit as most developers would asset strip or declare bankruptcy.
However back in 2007 I found it difficult to find a Lawyer who agreed with my point of view.
In 2008 I managed to find a Lawyer who began to share my view that the Banks had a liability according to LEY 57/1968. Consequently I instructed them to act for the Finca Parcs Action Group against the developer and funding Bank of the development – Banco CAM.
In 2010 I launched the Bank Guarantees In Spain Website & Petition – http://www.bankguaranteesinspain.com As a result I have met with both the Spanish & British Governments to discuss the issue of Bank Guarantee Abuse.
I have met with much resistance along the way – from Lawyers, Banks, Developers, Government Officials etc. However, slowly but surely the tide is turning in favour of the consumer/purchaser, whose rights granted by LEY 57/1968 are of an ‘inalienable character’. The rest as they say is history.
The subject of Bank Guarantees and the liability of the Banks is a ‘hot potato’ but I always believed that there was substance to my proposals and arguments!
I am pleased that many other Lawyers have now followed this course of action and that there is abundant Case Law to support the argument regarding the liability of the Banks according to LEY 57/1968.
I wish everyone success in their fight against the Banks for their failure to provide or to honour Bank Guarantees for Off-Plan developments in Spain.