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New Ruling on Bank Guarantees Spain 2015

Posted by admin on 22nd September 2015
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NEW RULING ON BANK GUARANTEES SPAIN 2015

We have all read the horror stories of buyers being scammed by unscrupulous and some would say criminal developers in Spain.

Many innocent victims lost their life savings after handing over vast sums of money to purchase an off plan property which was never been built and the developer has seemingly disappeared along with a few million euros of other people’s money.

For many years the Spanish government have done nothing to assist the thousands of buyers who lost money during the construction boom and it was left to individuals to fight for their money back through the Spanish legal system.

In 2015 the Supreme Court ruled that under the current laws governing off plan purchases not only is it compulsory to safeguard buyers deposits with a bank guarantee but also if the developer fails to fulfil their contractual obligations a buyer can claim his full deposit. This is irrespective of whether a bank guarantee has been issued or not.

Furthermore, the lender is also liable to safeguard the buyers deposits, the buyer therefore has the right to claim their money back from which ever bank was involved in the project without claiming from the developer.

This ruling hopefully will enable off plan buyers who have given up on their lost money to successfully claim against the financial institution, lender, bank even if the developer is now sunning himself on a Brazilian beach.

In brief the ruling states.

  • Bank Guarantees are an essential in a legal off plan purchase, and must be provided by the developer.
  • If no bank Guarantee was issued a buyer can still sue a lender for deposits.
  • Developers and lenders are jointly responsible for securing buyers off plan payments. This means that a buyer can sue the lender without being forced to wait for the outcome of suing the developer.
  • The developer must set up a dedicated account where all payments are deposited and protected during the construction.
  • The limitation period to file a lawsuit is 15 years.
  • The amount guaranteed is all of the payments made by the buyer including the initial reservation deposit pay all of the deposits. This is irrespective of what amount is secured in the wording of the bank guarantee.
  • Expiration dates on a bank guarantee do not apply, a bank guarantee will only expire when the first occupation license is obtained and the developer is able to hand over the property to the buyer.

UNFORTUNATELY AS OF 2016 IT APPEARS THE SPANISH GOVERNMENT IS CHANGING THE LAW REGARDING OFF PLAN PURCHASES AND THERE WILL BE LESS PROTECTION FOR THE BUYER.

THIS IS PROBABLY A DIRECT RESULT OF POWERFUL LOBBYING BY THE BANKS AND THE CONSTRUCTION INDUSTRY AND IN OUR OPINION A VERY DISAPPOINTING BACKWARDS STEP IN THE SPANISH CONSTRUCTION INDUSTRY.

Please see our Article from 22nd September 2015 RE: IMPORTANT CHANGES TO SPANISH BANK GUARANTEES FROM JANUARY 2016.

We will continue to update our website and will also now be adding to our listings details of bank guarantees and also details of licencia de Obras (Licence of Works)

Source: Raymundo Larraín Nesbitt, Lawyer.

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