Thought you were covered by a bank guarantee, but are being told this isn’t the case? Heard about the €100bn bank bailout in Spain? Well the banks now have another headache, but the Banks’ headache is good news for Spanish Property buyers who have not been able to complete.
Some buyers of property in Spain have paid a deposit for a property, but the developer went bust and the development never got built, or only partially built.
It is a legal requirement, as part of the buying process in Spain, to have an insurance policy or a bank guarantee, for a deposit on an off-plan property. This is designed to protect the off-plan buyer.
Property Developers, which receive money from buyers before they start, or during the construction, must have an Insurance policy or a Bank Guarantee, provided by an entity listed in the Register of Insurers, Banks, or Saving Banks, to protect against the situation where construction is not commenced, or not finished, for any reason by the agreed deadline. This has been enshrined in Law since .
It is the responsibility of banks, to ensure deposit amounts need to be placed in special accounts, separate from any other kind of funds belonging to the developer or promoter.
Spanish Property Deposits – recent legal success
Judges in Spain are taking notice of a recent ruling (June 2012) which is setting a precedent for Spanish banks. Banks in Spain are being held to account and there is now an established legal recourse for Spanish property buyers, who have paid a deposit, but not been able to take ownership of their property.
A Spanish bank which had refused to return off-plan deposits belonging to 47 British expats who invested in a failed Spanish property development has been ordered to repay €1.5million, as reported by the Telegraph.
The Finca Parcs Action Group, which is what the group action by the expatriates is called, led by Keith Rule, each paid between €10,000-70-000 in deposits for off-plan homes on a development near Murcia. The developer, Cleyton GES SL, disappeared in 2009, 4 years after the first deposits had been lodged at Spain’s fourth biggest savings bank, Caja de Ahorros del Mediterraneo (CAM) and only after a small proportion of the properties had been built. Keith Rule has worked with Costa Luz Lawyers to get this successful verdict returned.
At the court hearing in Hellín, Spain, the judge ruled against the developer and CAM bank, referring to ‘serious breaches’ on behalf of the developer and an ‘absolute disregard by CAM bank to the obligations imposed on financial institutions by Spanish law.’
This now opens the floodgates for the numerous other would-be-buyers of Spanish property, who have come unstuck in the Spanish Buying process in a similar manner.
It goes to show that taking group actions against the banks – which is usually a more cost-effective-route – can bring pressure to bear on Banks, so that they have to act fairly. It also paves the way for more individual legal action against other developers and Banks with whom money was placed, because a legally-binding precedent is taking shape.
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Tags: holiday home, off-plan, Overseas Buying process, Overseas finance, Spanish Banks