In response to Legal Tip 187 - Banks Breached Law 57/68 - posted on Eye On Spain on 1 December 2009 by Maria de Castro, I would comment as follows:
Below are the relevant Articles of LEY 57/68, firstly in Spanish and then in English.
A very important sentence appears in the Second Article:
"Para la apertura de estas cuentas o depositos la Entidad bancaria o Caja de Ahorros, bajo su responsabilidad, exigira la garantia a que se refiere la condicion anterior."
Which translates in English to:
"For the opening of these accounts or deposits the Banking institution or Savings bank, under its responsibility, will demand the guarantee to which the previous condition refers."
So the Bank or Savings Bank, under its responsibiliy must demand the guarantee to which condition 1.1 refers.
This puts a clear liability on the Bank or Savings Bank to ensure that the legally required Bank Guarantees are issued.
Also article 1.2 states that:
"Depositing the sums advanced by purchasers through a Bank or Savings Bank, which must be deposited in Special Account, with separation from any other funds belonging to the promoter"
Therefore if Banks or Savings Banks have been accepting sums advanced by purchasers clearly referenced as deposits for off-plan purchases into accounts which are not classed as 'Special Accounts' (Cuenta Especial), as required by LEY 57/68 Article 1.2, then the Bank or Savings Bank is liable to refund those amounts to the buyers if with a minimum level of due dilligence they would have realised that the said funds were deposits for off-plan purchases.
Banks in Spain are regulated by the Banco de Espana and must incorporate strict financial controls to prevent money laundering and fraud. These controls together with their own due dillegence must result in the Bank or Savings Bank having a clear understanding that the funds were for off plan purchases and therefore subject to the legal requirements of LEY 57/68.
Immediately a Bank or Savings Bank becomes aware that a developer/promotor who it is funding, is instructing purchasers to deposit funds for off-plan purchases into accounts which do not comply with LEY 57/68 Article 1.2, then the Bank has a duty to freeze those funds and demand they be transferred into a Special Account and to issue the corresponding Bank Guarantees immediately or to return those funds to the purchaser.
As Maria says under LEY 57/68 the Banks were established as the 'guardians of legality' and must therefore be held responsible if they fail in this very important and legal duty.
LEY 57/68 - Article 1.1 and 1.2
Primera - Garantizar la devolucion de las cantidades entregadas mas el seis por ciento de interes anual, mediante contrato de seguro otorgado con Entidad aseguradora inscrita y autorizada en el Registro de la Subdireccion General de Seguros o por aval solidario prestado por Entidad inscrita en el Registro de Bancos y Banqueros, o Caja de Ahorros, para el caso de que la construccion no se inicie o no llegue a buen fin por cualquier causa en el plazo convenido.
Segunda - Percibir las cantidades anticipadas por los adquirentes a traves de una Entidad bancaria o Caja de Ahorros, en las que habran de depositarse en cuenta especial, con separacion de cualquier otra clase de fondos pertenecientes al promotor y de las que unicamente podra disponer para las atenciones derivadas de la construccion de las viviendas. Para la apertura de estas cuentas o depositos la Entidad bancaria o Caja de Ahorros, bajo su responsabilidad, exigira la garantia a que se refiere la condicion anterior.
First - To ensure the return of the payments made plus six percent annual interest, by means of Contract of Insurance granted with an Insurance Entity inscribed and authorized in the Record of the General Sub-department of Insurers or by means of a Bank Guarantee issued by an Entity inscribed in the Record of Banks and Bankers or Savings Banks, if the construction does not commence or complete for any reason by the agreed deadline.
Second - Depositing the sums advanced by purchasers through a Bank or Savings Bank, which must be deposited in Special Account, with separation from any other funds belonging to the promoter, which may only contain funds deposited for the construction of dwellings. For the opening of these accounts or deposits the Banking institution or Savings bank, under its responsibility, will demand the guarantee to which the previous condition refers.
The Banks must now be forced to accept their legal obligations under LEY 57/68.
Of course, it must also be remembered that the developer/promoter has a joint liability with the funding Bank to comply with all the requirements of LEY 57/68. In the case of Finca Parcs, the promoter Cleyton GES has clearly acted illegally by failing to protect purchaser funds and by their failure to provide the legally required Bank Guarantees for reservation deposits from 2004 onwards.
Furthermore, Sales Agents who continued to promote and take reservations on a development despite being fully aware of the fact that both the promoter and funding bank were acting illegally, should also be held accountable for their actions.
Kind regards
Keith
FINCA PARCS ACTION GROUP
Email: fpag@btinternet.com
Mobile: 07956 375749
Intl: 00 44 7956 375749