NEW SUPREME COURT SENTENCE WON BY COSTALUZ LAWYERS/DECASTRO
SPANISH OFF-PLAN PROPERTY PURCHASES - THE SUPREME COURT FIXES JURISPRUDENCE REGARDING BANKS LIABILITIES ACCORDING TO SPANISH LAW - LEY 57/1968
IN THE NEW SENTENCE THE SUPREME COURT STATES THAT CAJA CANARIAS (now BANKIA) OBSTINATELY DENIED REALITY REGARDING THE OFF-PLAN PAYMENTS MADE BY OUR CLIENTS
CAJA CANARIAS (now BANKIA) SENTENCED BY THE SUPREME COURT TO REFUND ALL OFF-PLAN AMOUNTS PAID BY OUR CLIENTS PLUS INTEREST & COSTS
OUR CLIENTS PURCHASED TWO OFF-PLAN PROPERTIES FROM THE DEVELOPER CONSTRUCCIONES LUAYRA S.L. AT THE ‘EL SOBRAO’ DEVELOPMENT IN TRIQUIVIJATE, FUERTEVENTURA
OFF-PLAN PURCHASE CONTRACT SIGNED IN 2006. THE CASE WAS LOST IN THE FIRST INSTANCE COURT OF LAS PALMAS IN 2011 & IN THE PROVINCIAL APPEAL COURT OF LAS PALMAS IN 2013. CASE NOW WON IN THE SUPREME COURT IN 2016.
BACKGROUND
Our clients paid their off-plan deposit to the developer’s account at CAJA CANARIAS (now BANKIA) in 2007. The clients did not receive an individual Guarantee for their off-plan deposit from the developer, Construcciones Luayra S.L. or from CAJA CANARIAS, the Bank that received the off-plan deposit and also issued a construction mortgage loan to the developer.
The purchase contracts for the properties at the El Sobrao off-plan development in Fuerteventura were signed in November 2006 and the deposit was paid in February 2007 by bank transfer to the developer’s account, designated in the contracts, at Caja Canarias.
The developer failed to construct the properties according to the timescales allowed in the purchase contract.
In 2009 we filed a Lawsuit on behalf of our clients, against the developer for breach of contract. In 2010 the First Instance Court of Puerto del Rosario issued a Sentence cancelling the purchase contracts and condemning the developer to return the off-plan deposit plus interest from the date of the court summons. We enforced the Sentence, however due to its financial situation the developer did not pay.
In April 2011 we then filed a Lawsuit on behalf of our clients, against the developer’s Bank – Caja Canarias – asking for conviction of the bank according to its liability under Article 1.2 of LEY 57/1968. The Bank opposed the Lawsuit on the grounds that it had not opened a Special Account for the developer, had not issued the individual guarantee to the buyers and just because it had given a mortgage loan to the developer did not make it liable for the off-plan deposits paid by the buyers.
In September 2011 the First Instance Court of Las Palmas dismissed the Lawsuit and absolved the Bank of all responsibility. Costs were imposed on our client. We filed an appeal and in September 2013 the Provincial Appeal Court of Las Palmas dismissed the Appeal, confirmed the First Instance Sentence and imposed costs of the appeal on our client.
In October 2013 we drafted and filed a Cassation Appeal to the Supreme Court which was accepted into procedure in October 2014.
The Supreme Court has now upheld our Cassation Appeal, revoked the First Instance & Provincial Appeal Court sentences and condemned BANKIA to refund the off-plan deposit plus interest at the legal rate from the date in 2007 when the off-plan payments were paid to the developer’s account. Costs of the First Instance Procedure are now imposed on the Bank.
The Supreme Court has now fixed jurisprudential doctrine regarding Banks liabilities and obligations according to LEY 57/1968 as follows:
‘In house sales governed by Law 57/1968 credit institutions (banks) that receive income from buyers in the promotor’s account without requiring the opening of a special account and the corresponding guarantee or warranty, shall be liable to the buyer for the total amounts paid by buyers and deposited in the account or accounts the developer has opened in that entity’
In relation to the conduct of the Bank, the Supreme Court Sentence states:
‘The responsibility to the buyers for control over the accounts of the promoter legally corresponds to the credit institution where the promoter has one or multiple accounts.
In this case, the defendant obstinately denied the reality of the off-plan payments made by the buyers, who were not the only ones to pay off-plan amounts to the said account, until that reality was incontestably established. Its legal duty to control the buyer’s funds was hardly debatable as it was precisely the entity that had granted the mortgage loan to the developer for the construction’
This is a significant achievement for our clients and for the Costaluz Lawyers/DeCastro legal teams. We began writing and posting about Banks liabilities according to LEY 57/1968 in 2009 when there was very little case law to support our arguments. In the period 2009 to 2012, not only did we have virtually no support for our legal arguments but we were at times criticised in the public domain by other Lawyers.
Now the Supreme Court has fixed doctrine regarding developer’s Banks liabilities according to LEY 57/1968 using virtually the same words that we have written repeatedly during the past 7 years. The rest as they say is history and in the last 4 years we have won well over 150 cases for our clients against developer’s banks including the landmark Finca Parcs Action Group case against CAM Bank (Sabadell) in June 2012.
KEITH RULE, the Erin Brockovich of Spanish Off-Plan Property
• STOPPING THE BANKS. The Englishman has helped to stop forever the financial voracity that lead to speculation, illegalities and the real estate bubble in the buying and selling of off-plan property in Spain
• CREATED JURISPRUDENCE & LAW REFORM. He formed the FINCA PARCS ACTION GROUP in 2008 and initiated a legal action that created jurisprudence in the Supreme Court and led to the modification of the law governing the matter.
• SPAIN IS NOW THE SAFEST EUROPEAN COUNTRY FOR OFF-PLAN PROPERTY PURCHASES. He was a small business owner from Britain, who in 2008 saw what the Spanish Supreme Court has now in 2016 defined as jurisprudence. He also led protests and petitions that may have contributed to the reform of the law that now makes Spain the world's safest country for off-plan property purchases.
• HEALTH OF THE OFF-PLAN REAL ESTATE MARKET. Clarity and determination resulted in the Banks having to comply with legal obligations & responsibilities to buyers, which is good for the balance and health of the housing market.
• HIRED BY LAW FIRM. His efforts resulted in him winning his landmark case against BANCO CAM (now Sabadell) for the Finca Parcs Action Group in 2012 and now being employed as a cornerstone of the legal team that he first instructed to fight his own case in 2009.
Erin Brockovich in Spain
Keith Rule now works helping hundreds of people who, like him, invested in Spanish off-plan property during the last real estate financial boom and saw failed promotions lead to the liquidation of property developers to whom they had paid their life savings.
In 2008, when he faced his own problem, it was clear to him that he had to take legal action against the developer’s bank that had accepted his off-plan deposit money and not just against the developer.
"In 2008 I remember initially saying to him that if you do not have a Bank Guarantee then you could not take legal action against the Bank," says Maria de Castro, director of the Costaluz Lawyers team.
Keith insisted and raised an impressive amount of evidence obtained with a degree of thoroughness worthy of the best law firms.
"Oh yes, we met Keith Rule personally in a hotel in Tamworth in 2010 where we were staying for some days working with another group of clients in a different case. He arrived at the hotel with his family sized suitcase filled to the top with files. We were listening for hours. At least we had plenty of coffee!!" explain the Costaluz Lawyers team members with whom Keith now works.
The evidence and arguments demonstrated by Keith Rule in his 600 page dossier of evidence back in March 2010 won the hearts and minds of our legal team as it covered all angles and lit the spark for the fight against the banks that has culminated with the Supreme Court Sentence we recently won for another client.
He had interest and passion for serious study to find the legal arguments and jurisprudence for the matter that he saw clearly.
Since then, in all his visits to Algeciras, where our offices are located, Keith is accompanied by the same large suitcase, now full of other client’s documents. As a joke, his colleagues usually say, "Keith and his suitcase," "The Terror of the banks", "English Iron Man"....
Change in Law and Jurisprudence
The jurisprudence that existed when Keith began his own fight back in 2008 was very low and certainly there was nothing from the Supreme Court.
Since we won Keith’s Finca Parcs Action Group case in the summer of 2012, more and more Sentences from the Provincial Appeal Courts have emerged relating to the responsibilities of banks receiving money from purchasers of off-plan properties. In December 2015 the initial arguments we first discussed and wrote about with Keith some 5 or 6 years ago were defined as jurisprudential doctrine by the Supreme Court.
On 9 March 2016, LEY 57/1968 jurisprudence became definitive following a 2nd Supreme Court ruling and several days later our own team of Costaluz Lawyers, De Castro & Keith Rule won a judgment the Supreme Court which applied this doctrine for the first time.
Along with the creation of this well orientated and consumer protective jurisprudence for off-plan property buyers, our work over the past 8 years has also led to the reform of the law itself, LEY 57/68, for clarity and protection of the consumer.
Spain: now the safest country in the world for buying and selling off-plan properties.
Keith’s colleagues believe that all the cases being won against Banks involve, "balance and security for the off-plan property market in Spain, good role of the Spanish Courts and portray the positive image of the Spanish legal and judicial system to international eyes". All these are effects of the legal action that we now call the ‘Keith Rule Action’.
Before gaining a legal victory against CAM Bank for his 47 strong Finca Parcs Action Group in 2012, Keith had spent many years campaigning for off-plan buyers rights according the Spanish Law, LEY 57/1968. His efforts began in 2008 with protests against CAM Bank which resulted in a 100 page complaint file being submitted to the bank’s head office in 2009.
In 2010 he launched the Finca Parcs Action Group website (www.fincaparcsactiongroup.com) and a Petition to the Spanish Government and Bank of Spain by way of his website Bank Guarantees in Spain (www.bankguaranteesinspain.com). Keith also sent written complaints to the Valencian Savings Ombudsman and to the Bank of Spain.
In February 2011, Keith together with Jaime de Castro from the Costaluz Lawyers/DeCastro legal team completed the Finca Parcs Action Group Lawsuit and submitted it to the Court. Later that year Keith was invited as part of a small delegation to meet with David Lidington MP (Minister for Europe) at the Foreign and Commonwealth Office in London to discuss the Finca Parcs issue and the wider Bank Guarantees situation for off-plan property buyers in Spain.
Meetings and protests at the Spanish Embassy in London also took place, including a meeting with the then Spanish Housing Minister, Beatriz Corredor.
Costaluz Lawyers & Keith’s Finca Parcs Action Group won their case in the First Instance Court in 2012 and the Bank lost its Appeal in 2013. The Finca Parcs Sentence then became Case Law for other similar cases.
Over the years there has been much media interest in Keith’s work including numerous articles in the British & Spanish media, TV interviews & BBC Radio Interviews.
But the fight goes on………… Currently, Costaluz Lawyers, the Law Firm for whom Keith has worked since 2013 is still acting for many buyers who, like him, paid off-plan deposits to developer’s bank accounts without receiving the corresponding guarantees. There are many cases still in court and the Law Firm are continuing to gain new clients. All this underlines the impact Keith's work has contributed to the Spanish legal system.
Milestones achieved over the years regarding LEY 57/1968:
- Banks must cover all the amounts paid, not only those covered by an Individual Guarantee
- The Guarantees do not expire until the First Occupation Licence is issued
- The existence of a line of guarantees or contract of insurance guarantee between the Bank and the promoter and proof of payments made by the purchaser as provided in the contract, gives rights against guarantors
- Despite having acceded to the agreement of bankruptcy of the developer, the rights against the guarantor or the receiving bank are not extinguished
- Even if the bank account is not named by the Bank as a ‘Special Account’ it will be treated as ‘Special’ according to the Law due to the source and destination of the funds deposited therein
- The obligation to secure the off-plan deposits is a fundamental requirement of the banks derived from the Law
- Actions against a developer’s bank expire after 15 years
- Interest is payable from the delivery of amounts and not from the filing of the Lawsuit
Finca Parcs Action Group Leader, Keith Rule says:
“It was hugely significant when we beat CAM Bank in the first Finca Parcs Action Group Lawsuit in 2012 and even more so when the First Instance Sentence was then confirmed by the Provincial Appeal Court in April 2013.
We have now recently won second case for another group of Finca Parcs buyers against CAM Bank.
In 2008 & 2009 when I formed the Finca Parcs Action Group I was of the opinion that developer’s banks had liabilities and obligations according to Spanish Law, LEY 57/1968, regarding off-plan deposit funds, but one of my biggest hurdles back then was to find a Lawyer who also shared my view.
Fortunately I found Costaluz Lawyers, who since winning the first Finca Parcs case have now won similar cases against developer’s banks for many other clients on failed off-plan property projects all over Spain. Furthermore the Supreme Court has recently confirmed many important aspects regarding banks liabilities according to LEY 57/1968 and this has now been fixed as jurisprudence with the case recently won in the Supreme Court by Costaluz Lawyers”
María de Castro, Director of Costaluz Lawyers comments:
“These victories against banks in favour of consumers are good for a balanced economy and for rebuilding trust in the Spanish legal and judicial system. Keith’s efforts inspired us all and our recently won case in the Supreme Court is testament to the many years of hard work by the whole team. He really is like a dog with a bone – he just never gives up”
Jaime de Castro, Director - De Castro Gabinete Jurídico comments:
“Spain is unique among European countries in having an effective Law to safeguard buyer’s off-plan deposits. The Spanish Courts have been applying this Law strictly and categorically and I am confident this will continue”
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Beach "The english man" (El Inglés), South of the Gran Canaria, Canary Islands, Spain