Lack of Bank Guarantees. Bank´s responsability. Case Law

Legal tip 350. Lack of Bank Guarantees. Banks´responsability. Case Law. 
29 September 2010 @ 07:41 

Dear Maria

Good news! We are moving ahead.

The Bank receiving the off-plan deposit must demand that the developer holds the funds in the Special Account.

For off-plan deposits held in the Special Account then the Bank must either issue the corresponding Bank Guarantee or verify the existence of a Bank Guarantee or Certificate of Insurance.  If the Bank fails in this obligation they are guilty of a lack of due diligence.

If the Bank receives the off-plan deposits and fails to ensure that they are held in the Special Account as required by LEY 57/68 then the Bank is guilty of gross negligence.

If the Bank fails to issue or to verify the existence of a Bank Guarantee for off-plan deposits in its custody and then allows the developer to withdraw the off-plan funds the Bank is clearly guilty of gross negligence, lack of due diligence and failure to protect the consumer.

Under LEY 57/68 the Banks are jointly and severally liable for the off-plan deposits in their custody.

The developers may be corrupt and go bankrupt or asset strip.  They are totally unregulated and are a law unto themselves.  They have no respect for the law and do not seem to fear the Spanish legal system at all.

BUT the Banks are a registered financial entity regulated and supervised by the regional ombudsman and the Banco de Espana.  They must comply with Spanish Law and European Banking Regulations.  They must be transparent and observe good banking practice including consumer protection.

It is clear that many of the Banks & Savings Banks involved with developers and off-plan properties were only interested in the profits they expected to make from funding the projects and selling mortgages to prospective purchasers.

The Banks must be made to pay for their gross negligence and complete lack of professional due diligence.  There is no excuse for their negligence.  They are fully aware of the requirements of LEY 57/68 and the obligations imposed on them.

Kind regards

Keith

 Dear Keith

Has anyone been successful suing the banks for lack of a BG?

 Dear Keith

Has anyone been successful suing the banks for lack of a BG?

 Yes, there is already a case won.

case was won........has buyer got the money now,   winning cases and getting paid are not the same thing in spain, please advise

It seems still not, as there might be an appeal.

I get the feeling that the people who bought off plan in all good faith are never going to win. I cant believe the level of corruption.  When you say WON it obviously means NOT WON.

How devious, sad and obscure.

Chrissie1

Hi Chrissie1

The level of corruption in the off-plan sector is huge and on many occasions it is unbelievable.

But, we will NEVER give up the fight for justice.

We are asking for nothing more than our INALIENABLE legal rights granted to us by LEY 57/68.

We are waiting for confirmation of the full details of the Case Law specifically relating to legal action against the Banks for lack of bank guarantees.  I have been told by a legal firm that they have won a case against a Bank for their failure to provide Bank Guarantees.  However they then went on to say that the Developer and Bank have appealed the decision.

But this was only told to me verbally.  We have requested full details of the court decision in writing and until we have sight of this we are unable to use this decision as Case Law.  It may prove useful, it may not.

However, there is other Case Law that can be used in legal action against the Banks for lack of Bank Guarantees.  María makes reference to two such decisions at the start of this thread.

Chrissie1 - nobody is trying to be devious, sad or obscure.  The concept of legal action against the Banks for lack of Bank Guarantees is a new and complicated issue.  More information is coming to light each week and more Lawyers are beginning to agree with this course of action subject to certain circumstances in each individual case.

Previously the only option was to take legal action against the developer.  This is all very good - the cases are normally won - but the developer has either gone bankrupt, gone into administration or asset stripped by the time the case is heard.  So the purchaser rarely gets their money back from the developer.  The only real winner is the Lawyer who still get their fee.  But now we have another course of action, against the Banks, that has been studied deeply over the past 2 years.

The Developers are unregulated and blatantly ignore the Law.  It is easy for the developers to go bankrupt or disappear.  However, the Banks are regulated by the Banco de Espana and regional ombudsman.  The Banks have to be accountable for their negligence and lack of due diligence.

The Banks are an integral part of LEY 57/68.  All off-plan deposits must be 'Received through a Bank or Savings Bank and deposited in a Cuenta Especial, separate from any other account held by the developer'.  Without the Banks the developers cannot legally accept off-plan deposits.

The Banks are the guardians of LEY 57/68.  They have obligations under LEY 57/68.

The Banks have been the 'vehicle' through which the illegalities were allowed to happen.  Many Banks have been complicit in the activities of the Developers.

Many Banks have just turned a blind eye to the fact that off-plan deposits were being received into the wrong type of account.  Many Banks have compounded their negligence by allowing developers to withdraw off-plan deposit funds which should have been Bank Guaranteed and protected in a Cuenta Especial.

The Banks backed the developers for one reason - PROFIT.

The Banks know the requirements of LEY 57/68 but due to their own greed for profit they chose to ignore the rights of the consumer and turn a blind eye to the requirements of Spanish Law.

They cannot be allowed to get away with it.

If your money is at risk, never give up the fight.

Please support the Bank Guarantees in Spain petition - www.bankguaranteesinspain.com

Kind regards

Keith

Sadly it appears an inevitability that these days, so long as there are no realistic time constraints in place, that anyone losing a case will go through the appeal process and thereby play the delaying game. It's a part of the Spanish legal system that is in dire need of reform to ensure that clients are not continually compromised once receiving a successful judgement.

I have to ask the question Maria, what is your take on the significant court delays that are now the main problem for those seeking ACTUAL return of monies from the Spanish justice system? Is there nothing that you and other legal professionals can do to halt this backdoor method of  injustice? Is it any wonder that there are so many who have lost faith in the Spanish legal system when their win counts for little when it comes to recompense according to successful judgements. It's a disgrace to be honest and is one of the aspects that many fail to realise is a major stumbling block to achieving justice. I also wonder if these delays are yet another aspect to the horrible corruption that appears to exist in Spain right now. Are there other hidden underhand reasons as to why so many are stuck in a system that denies them justice? Ae there protectionist aspects at play here?  What is the legal profession doing about this? Please lets be open and honest about the realities that exist right now, and EVERYONE should be doing their part to ensure that these instances are brought to light. Keith's petition is endeavouring to do just that, alongside the Bank Guarantee issues, so it's essential that all caught up in this sad scenario support his efforts.

It's essential that those who are witness to this sorry saga give their voice to the campaign also and support those of us who are endeavouring to be pro-active and effect legal reform and fair justice to everyone's longer term advantage.

I look forward to your response on this Maria.

Hello everyone.  I just wanted to point out that it is not only the appeal system that delays justice being carried out. 

We went to court in 2008 the case took months to get to court as the developer refused to acknowledge any letters, bureau faxes, emails etc. The case went to court without them and this then took until April 2009 when the judge ruled in our favour for return of deposit, plus interest, plus all legal costs. Again they would not acknowledge any communication which meant our lawyers had to go to court to ask judge to allow us to access their assets and bank account, this still has not come through, and still we wait. 

So you see there are many scenarios that can delay the justice system.  We have signed Keith's petition and our lawyer is also pursuing the bank for the return of the monies paid through LEY 57/68.  We are not sure what this would mean if we won the case against the banks, would they also be responsible for the interest and legal costs, could they then appeal or ignore sentence and take up to another 12 months, I don't know.

Also one other thing that I cannot understand is when the builder takes your deposit plus IVA 7%, what happens to that money  (government tax), does the bank hold it, does it go to the government or is that just lumped with the deposit, giving the bank and developer more interest. Also what happens to our house during all these years of waiting, which legally 40% should still belong to us, it is getting into disrepair is it flooding?

It is now 4 years this month since we paid our deposit on a house that was complete.  So to answer one of the original contacts question, the time can take anything from 4, 5 even 7 years. So don't hold your breath.

R and G

We too suffered at the hands of court delays. Our enforcement order took 13 months after petitioning before it was even issued, never mind enacted, and in the interim the developer asset stripped. The developer appeal following our case win was back in 2008 and although the company is still trading we still await a resolution from the judge. It's an absolute travesty of justice what is happening right now, and many are being significantly compromised by these court delays and delays from the judiciary.

Unfotunately a win is only classed as a win at the point of return of monies as far as I'm concerned, and sadly not at the point where you achieve a successful judgement.

Having said all of this I still feel strongly, like Keith,  that we should not let these circumstances deter us from seeking justice. We need to remain determined to regain our monies and stay pro-active in that cause. Hopefully this will be with the support of everyone who can recognise that these instances of injustice do Spain great harm in the process.

 In order to answer Ads very reasonable question about what we lawyers can do regarding Court delays:

Together with the corresponding writings to the Court for the promotion of the procedure, a claim before the General Council for Judicial Powre (CGPJ) is possible.  I am aware that they also do all in their hands to improve the system.

There is an ongoing process for the modernization and computerizing of the whole judicial system.

http://www.eyeonspain.com/blogs/costaluz.aspx?month=20095

I see very little evidence of efficiency being introduced into any system in Spain.

WHY?

Because the system creates jobs for over 4 million civil servants shuffling paper.

Everyday we go to one office or another and take a meat counter ticket and queue for 3-4 hours.

We go from one office to the next and virtually everything must be done in person - not online and certainly not by telephone.

We need tax sticker to submit forms - that's a task in itself just getting the stickers! I had a case last week where the procurador was unable to obtain stickers becuase of the nature of the transaction. I then used a lawyer to go to another office and obtain the stickers. This is not standard 030 tax work but EU legal matters where we need to pay certain fess and attach stickers.

We are regularly kicked out of one police station trying to get NIE numbers and then sneak into another police station and get them no problem - I used to argue and say show me the law but it got me no where so now we say thank you and go on to next police station and smile a bit more. Again not normal NIE applications. The law says we need NIE but then they won't issue so we lie a bit as to why we want them and likewise with tax stickers.

The Colegio de Abogados recognise procuradors create delays in the system - this was commented on earlier this year in a joint meeting between the law society of England & Wales and the colegio de abogados de malaga.

The use of notaries and power of attorney all contribute to inefficiency.

A system set up to employ gestorias ......

The problem is Spanish people who have not practised in other jurisdictions accept Spain as it is because that is how it has always been.

Faro:

Please send proposals. I will send them out to the General Council of Judicial Power. Your contributions and unvaluable. Please, you and any other else, send them

Best wishes,

Maria

Thanks for the information Maria and Faro. Fascinating to hear the realities. It is obvious that Spain has a great deal to do to play catch up in this regard, so wouldn't it be far better to use this over supply of manpower resource that Faro speaks of, towards a more productive end? Unfortunately we are the scapegoats caught up in this transition as things stand right now, but if we have more people like Maria who appear willing and able to influence change, to bring on board productive ideas that ultimately benefit the consumer, the better. The skill will be to effect change in such a way so as not to be too protectionist nor too self interested, otherwise you just change one bad system for another.

Maria is right to look outside for those with experience in this regard, as why keep reinventing the wheel? Keith also has a great deal to offer and I personally thank him for his determination and resolve, not to mention hard work in his endeavour to find solutions to the problems we have identified. Faro has much to offer in terms of first hand experience I would have thought, so I hope that you can work more closely together, debating your ideas and hopefully we will all benefit in the process (ever the optimist). It's all too easy to identify problems, it's finding workable and fair solutions, to bring those affected by change on board, to be inclusive rather than divisive, where the skill lies. But along the way it's essential to face many uncomfortable realities.

In the interim however, those of us caught up in this bureaucratic nightmare have to stand strong, and more importantly stand together (support Keith and Suzie's petitions, www.bankguaranteesinspain.com  and www.spanishpropertyscandalpetition.co.uk ), to effect the change that everyone knows is overdue. I just pray that we don't get down trodden in the process!

On the point of court delays Maria and the CGPJ that you refered to, rather than do this piecemeal, could a group claim be catered for? Is it part of your plan Keith to incorporate this from the information you receive from petitioners? How would this work?

Best to all.

Thanks Ads.

Yes, Keith is approaching the CGPJ on Bank Guarantees, but any other matter related to organisation and functioning of justice can be also broght to this body. They are happy to receive and face them.

Maria,

To your knowledge are lawyers reporting their findings to the CGPJ themselves? Does the CGPJ act as a think tank? Do you have an organisation to review problem areas within the judicial system and promote better and more efficient practice? Are good Spanish lawyers pro-active in this regard, feeding back and influencing change? Is this the role of the CGPJ? Perhaps you can educate us as to their responsibilities and identify what powers they have to effect change. Is the CGPJ a politically independent organisation? Are you aware of this council, Faro, and if so what is your opinion of it? So many questions!

It appears that the impetus for change is coming from clients rather than the legal profession themselves (you being the exception Maria!) A bottom up approach you might say! Or perhaps I am doing the legal profession a disservice by that statement??? In other words do lawyers have a vehicle to express their concerns and new ideas and debate practical solutions to an ever growing list of problem areas? Surely with their inside knowledge of the system they are best placed to identify practical solutions? I would ask however, are they sufficiently motivated to find solutions to better protect the consumer, their clients? I would be interested to know if the day to day difficulties relating to court delays, to delays from the judiciary re outstanding developer appeals, to the instance of Banks reneging on their Bank Guarantee obligations, to the abusive tactics of developers who asset strip, to the impartiality of the courts, to the apparent complexities and time constraints relating to complaints against the Banks (get out clauses), etc etc are being reported by lawyers. Or are we solely depending on clients' petitions to effect change?

Sorry for all the questions Maria, but it is all part of the equation when learning about the workings and failings of the Spanish legal system.

 Initially CGPJ and Defensor del Pueblo are the best instances to report failures of Courts organisation and functioning

Yes, Lawyers can report defficiencies of the System to the CGPJ and I assume they shoud be motivated for the change as in every ocassion the system does not work at the required level, we, lawyers, are also damaged in our work.

I am sure all the syetem around off plan purchases is beon revised at present moment due to mainly, great claims as Keith´s

Just found this thread and so excited I did...Kieth how are you getting on with this fight, I am with you all the way as I put down a substantial deposit also in 2006 without ever getting a BG.

I did get an email from Maria recently about the case won against the bank...you think this is a goer Kieth ?

Happy Christmas everyone, lets keep faith in 2011 and getting justice for ourselves and our hard earned money.

Mark