Antonio Flores’ Blog

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.

In this video blog I talk about bank guarantees and the responsibility of financial entities that consented property developers use their bank accounts to collect deposits, without ensuring that those deposits were guaranteed. In this instance, the bank applied the 57/1968 Act which stipulates that “banks will ensure under their responsibility, prior to opening a special account for a property developer, that a guarantee has been taken out.”

Some interesting case law can be read here.

Antonio Flores Litigation Act 57/1968, Aifos, Banco popular, El Pinet, Enforcement guarantees, Execution bank guarantees, La Caixa, La Fortuna, Offplan property, Spain bank guarantees