Bank Guarantees: All That You Ever Wanted to Know but Were Afraid to Ask

[Lawbird Lawyer]

Dear Sir,

I think you've opened a can of worms.

Law 57/68 establishes that it's the developer's duty to hand you a bank guarantee or insurance policy to secure your stage payments in an off plan purchase. The law doesn't mention anywhere it's the lawyers' obligation.

Furthermore in the Building Act (Law 38/99) the penalties are imposed only to developers, not the conveyance lawyer handling the matter, for failure of compliance on the issuance of bank guarantees.

That's what the Law prescribes.

Now we can start a contentious debate on whether lawyers are responsible or not to obtain these BGs from developers on behalf of their clients.

The fact is that in light of the above laws which specifically rule this matter nowhere does it mention that lawyers are obliged or its part of their duty of care to obtain them.

This is when I take the opportunity to add in a shameful plug as a disclaimer that our law firm has obtained always BGs to the entire satisfaction of all our conveyance clients in off plan properties before we ensue with the all too predictable lawyer bashing replies. Although in all honesty we've hardly done any significant conveyance at all in the past as we are specialised foremost in litigation.

We've written an article that endeavoured to wrap up neatly the matter of Spanish bank guarantees for off-plan properties. It's worth a read.

Another matter being what is our personal stance on this matter.

Our opinion is that it's obvious it's part of the integral duty of care of any conveyance lawyer towards his client to ensure that each and every stage payment, including the initial security deposit which strikes the property off the market, is secured by means of valid bank guarantees or insurance policies.

But our opinion is non consequential.

What matters really is what the Law rules and nowhere does it rule that it's the lawyers' duty, much less his responsibility, to secure them. Which is why on taking this matter up to a Bar Association it unsurprisingly fails as from a legal point of view the matter is clear in our humble opinion.

I believe one should clearly distinguish between lege ferenda and lege lata; even more so lawyers on passing legal advice and opinions in public venues.

It's always all too easy to post what the expat community wants to hear and receive the ensuing round of applauses. Albeit what's really difficult is when you write on how matters really work out in practice and receive the predictable flak for daring to be outspoken or dare to stand out-of-the-line in this politically correct World we all live in.

I am fully aware that the above statement may cause some controversy, but that's the legal exposition of how matters are currently. Which is why we always add the tag on our legal articles and advice.- make sure you hire an independent lawyer/law firm. Many of these legal pitfalls are easily avoidable having hired someone independent that cares only for your interests and has no vested interests of their own lurking away in their mind.

You can of course always follow the path of claiming against their professional indemnity insurance, providing they are registered lawyers, and see how that one works out.

If the laws need to be addressed on this grey area, so be it. But that's how things are currently and that's how we tell it.

Caveat emptor.