buying off-plan comes more risky. Law 20/2015 abolishes Law 57/1968 and modifies Law 38/999

On these develoments they are on phases 3 & 4 so there have been many successfull completions already

Rule one take a look at what the developer has already delivered

The lwyers , prior to contract check the legallity of the company and licencesm before the customer pays a single Euro

Every month in Spain hundreds of buyers complete on new build contracts with reputable agents and builders but of course nobody wants to talk about that, only the problems

We assist the buyers so that they know and understand the law and ALWAYS get a valid BG

Nothing naive about the statement at all, use a good establshed deveoper, use a good independant lawyer, with the attitude of many people on here no new properties would be selling and they are in their hundreds again

Thank you Lucas Asociados for your honest appraisal.

To ensure adequate accountability and effective disincentive [whether this be against Banks, agents, or lawyers], where/how do you envisage pressure for enforcement against bad practice or negligence should come from?

In the case of legal professionals for instance, if the Bar Associations are not taking action, then should action be taken from a more senior source within the Justice System? Should good legal firms who are in possession of witnessing a pattern of compromising negligent actions from their clients' data, be reporting this in writing to a higher level?

In the case of Agents should the Government be calling for a professional overseeing body to regulate their members?

In the case of Banks, if the Bank of Spain are not effectively regulating their Banks against malpractice, then is there a reporting/monitoring mechanism in place to report instances to the Spanish Government? Again is this the responsibility of good legal professionals who are in a position to witness (from their clients' data) a pattern of Banking negligence/malpractice occurring?

Also I wonder if you could provide an answer to the following:

Does the current system allow a bank to benefit from the sale of repossessed property BEFORE they have fully recognised/discharged their legal obligations and repaid offplan deposits associated with that property, if a legal ruling has already fully proven developer breach and the contract has been cancelled? Where is this outstanding debt  associated with that property for return of deposited monies  recorded in the interim (taking into account banks' responsibilities to safeguard and return deposits, according to all articles of  ley 57/68).

What is a Bank's legal position regarding properties that still have a deposit placed against them but the offplan purchaser has not received return of their monies? If they resell those repossessed properties, who becomes legally liable for return of associated deposited monies?

Many thanks.

Thanks Ads for directing me back to this thread.

So, let me get this straight. This new law will only affect those who purchased BEFORE 1st january 2016? It doesn't mean that I need to take legal action against the bank before this date?

Thanks

http://www.costaluzlawyers.es/blog/recent-supreme-court-rulings-regarding-ley-571968/

Maria provided the above detail, which may help to clarify the changes...

Also if you look to the start of this thread Lucas Asociados clarified the situation but I am unsure if there are now time (or other) restrictions applicable to placing claims against the Banks under the original !ey 57/68. Perhaps Maria or Lucas Asociados could advise?

This message was last edited by ads on 18/09/2015.

This message was last edited by ads on 18/09/2015.

Thanks again Ads.

I couldn't see much of significance in that link, just seemed to be about a recent won case.

Surely, though, those that bought a property off plan under the Ley 57/1968 would be protected still even when the new one comes into effect? I suppose you don't apply logic to the Spanish law.

EDIT: If the new Ley was to over rule the 57/68 law, then surely Maria and the other solicitors would be all over this and promoting this fact, to gain more business (this isn't a criticism by the way)?

I have been reading Law 20/2015 again today. I honestly find it very right and same protective as Law 57/68.

The only weaker point for the buyer might be that deadlines are reduced to 2 years after breach of contract by developer. But, considering buyer is someone who has advanced payments for his own dwelling or holiday house, as he will be constantly monitoring the building process, two years will be more than enough for the request to be made after the breach.  

Positive aspects:

- It establishes that Guarantees come into force from the moment Work License exist. This is clearly disausive for buyers to risk money before Work License exist.

- It keeps maintaining Banks as safeguards of the system as if guarantees do not exist, they are liable

- It gives 30 days to both developer and guarantoor for the refund of amounts since these being requested by buyer.

- It keeps publicity obligations about Insurer/ Guarantoor and Special Account ( Publicity has contract nature)

- It keeps administrative sanctions to developers due to lack of guarantees

In my opinion it is very  healthy that every financial transaction made prior to existence of Work License is left out of the guaranteeing system. Healthy for Banks, developers and buyers all together.

It is also healthy that claim deadlines are shorter as this will discriminate, real, attentive buyers to those who are not.

We agree that, taking the relevant precautions, buyers should not be in risk.

In fact, from our point of view and our working schemes, we would be, more or less, in the same scenario than before Law 20/2015: no money is paid without getting a BG.

The problem these years has been that some people (wrongly advised) paid amounts without getting a BG from the developers. So that, we have now to plead for the banks liability for the failures in delivering these BG, which was a legal obbligation. In this sense, if the legal obbligation just comes after the Building Licence is issued, the term covered by this "umbrella" is smaller, as before Building Licence (and we've had several cases) no legal obbligation is intended, and no legal coverage is expected.

But, as said, the solution is not weird. It's just doing what it should have been done these years: require ALWAYS a guarantee against any payment.

Thanks for both of your replies.

Just to clarify, do you mean building license or working license? Or are they the same thing? 

Building license or working license meaning the same

Thank you Maria and Lucas Asociados for your clarification. Maria, where you make reference to "discriminate real attentive buyers from those that are not" , hasn't it been the case that for many who suffered developer breach without legal BG's in place, or even those with BG's, that they were awaiting good case law to be established before they dared to place a claim? It would be wrong for the judiciary to generalise and assume that those who waited did not have honourable intentions, would it not?

Sadly I have just come across this forewarning on Spanish Property Insight forum regarding a promoter bynok

and an offplan  development in Estepona namely la boladilla village resort 

https://www.spanishpropertyinsight.com/2022/01/15/by-nok-promoter-of-la-boladilla-village-resort-in-estepona-leaves-investors-in-the-dark-and-fearful/

https://one-marbella.com/en/development/show/129/la-boladilla-village/

Given there was a change in Bank Guarantee law back in 2015 involving the abolishment of Ley57/68 for those who purchased offplan after 1st January 2016 as explained in this EOS archive blog below, highlighting the risks, this begs many questions.

https://www.eyeonspain.com/blogs/rightinspain/15129/buying-off-plan-gets-more-risky.aspx

Who were the conveyancing lawyers involved in this development in Estepona?

Did they demonstrate all legal due diligence by ensuring that building licences were in place PRIOR to purchasers making any deposits. Note the above blog stresses

"should you be interested in buying an off-plan property, you shouldn't make any payment until the building licence is granted to the promoters, unless you want to risk to be unprotected for the advance payment."

Did the promoter identify that failure to have proof of building licence would leave purchasers deposits unsecured under this new law?

Note on the promoters website it makes mention of a guide to buy property in Spain but there appears no reference to the requirement for building licence to be in place prior to purchasers making deposits.

https://spain-real.estate/construction-companies/bynok/

C/ Ortega y Gasset, 6 piso 1º Izquierda. 28006 Madrid

Camino de La Boladilla S/N. 29680
 

And a more general question ..

Under the new law governing bank guarantees with regard to off plan new builds, if a BG has been issued without a building licence in place, does this make the BG worthless?

Are there any automatic restrictions in place to prevent a BG being issued under these circumstances to act as regulatory control from the outset?

Or will the purchaser be left with no alternative but to litigate, and who would be responsible for this failure that leaves the purchaser at risk of their deposited monies being left unsecured? The conveyancing lawyer or bank or promoter, or all  (joint and several liability)?

Perhaps Maria de Castro could advise?

So sad to see continuing loopholes that continue to place purchases at risk in this way, especially as there appears to be a recent increase in the marketing of new Spanish developments. 
 

Ads, I have to give you enormous respect for your practically one-man assault on the Spanish property legal system. Very well done.

Also what role does the notary play in this scenario if a required licence is not in place at point of Puchser deposit?. Would they be in a position to check from the outset if a licence is not in place and refuse to authorise the purchase contract?

Would they then also be culpable of lack of due diligence along with the conveyancing lawyer, bank, and promoter if this was allowed to proceed thus placing the purchaser's monies at risk of being unsecured ?

Hi Ads!

Please, have some comments/ answers below in bold green: 

Under the new law governing bank guarantees with regard to off plan new builds, if a BG has been issued without a building licence in place, does this make the BG worthless? We would need to see the wording of the contracts and of the Bank Guarantee,

Are there any automatic restrictions in place to prevent a BG being issued under these circumstances to act as regulatory control from the outset?

Or will the purchaser be left with no alternative but to litigate, and who would be responsible for this failure that leaves the purchaser at risk of their deposited monies being left unsecured? The conveyancing lawyer or bank or promoter, or all  (joint and several liability)? It would be great if there is a located bank account but still, depending on contract wording, this guarantee --- of the special account--may not work for amounte before license.

Perhaps Maria de Castro could advise?

So sad to see continuing loopholes that continue to place purchases at risk in this way, especially as there appears to be a recent increase in the marketing of new Spanish developments. The contracts I am seeing lately are again, risky for off plan buyers: a good independeny lawyer is necessary.

Also what role does the notary play in this scenario if a required licence is not in place at point of Puchser deposit?. Notary does not intervene at the deposit contract. Would they be in a position to check from the outset if a licence is not in place and refuse to authorise the purchase contract? That´s a conveyancing lawyer´s role.

Would they then also be culpable of lack of due diligence along with the conveyancing lawyer, bank, and promoter if this was allowed to proceed thus placing the purchaser's monies at risk of being unsecured ? Notaries do not intervene at that stage of the off plan purchase.

Thank you Maria for your responses.

Just to expand, it would appear from a little background research the following concerning scenario….

“Problems have been detected in several promotions that Bynok is currently undertaking, in particular la Boladilla Suites Resort and La Boladilla Village developments. These problems consist, fundamentally, in the impossibility of Bynok to undertake and execute the works committed to its buyers, as well as in proceeding to the return of the amounts contributed by clients, denouncing, also, the state of abandonment in which these works are.

The clients affected by Bynok, express their concern about the non-execution of the works and the lack of concrete answers to this situation by the promoter, thus generating important doubts about the viability of the project and the solvency of the group itself.

Likewise some have become aware of the existence of contributions of plots securitized by the developer on behalf of the clients to another company of the group, without the knowledge or consent of the same and without the Bynok Group having offered any explanation of the reason that assists such corporate operations.

Grupo Bynok advertises itself as the fifth largest developer in Spain in square meters and units sold and first on the Costa del Sol, as well as selling the best and most exclusive products on the market.

 Last year it announced the opening of an office in Dubai and investments for a total amount of 550 million euros, which generates an image of solvency that clashes head-on with the concerns and doubts expressed by the clients.”

So the question then arises Maria, if monies have been deposited by clients without the security of building licence or Bank Guarantee under this new Spanish Law, does that inevitably mean that their monies remain unsecured in the event of developer/ promoter insolvency?

And does it then follow that if this “ risk “ was not identified by the conveyancing lawyer to their client from the outset, without their knowledge or explicit agreement to such in the purchase contract, that this would be deemed a lack of legal due diligence, and the conveyancing law firm can be made liable for return of clients’ deposited monies? ( presumably evoking the law firms’ legal liability insurance)?

Anwers below in bold green:

So the question then arises Maria, if monies have been deposited by clients without the security of building licence or Bank Guarantee under this new Spanish Law, does that inevitably mean that their monies remain unsecured in the event of developer/ promoter insolvency? It does. They will just have the commun claim actions against developer but no against any guarantoor.

And does it then follow that if this “ risk “ was not identified by the conveyancing lawyer to their client from the outset, without their knowledge or explicit agreement to such in the purchase contract, that this would be deemed a lack of legal due diligence, and the conveyancing law firm can be made liable for return of clients’ deposited monies? ( presumably evoking the law firms’ legal liability insurance)? It does. Who were conveyancers here?

Maria asks...Who were conveyancers here?

I do not know Maria. Perhaps the Bar Associations can play their part in investigating???

This change in law to leave offplan purchasers’ deposited monies unsecured in this way appears to have been a disaster waiting to happen. 

Not only has it exposed the re- emergence of lack of legal due diligences by conveyancing lawyers failing to protect and forewarn clients of the major risks associated with handing over their monies prior to provision of building licence and Bank guarantee, but it has also left corrupt developers with an ideal opportunity to exploit a major loophole via effectively asset stripping, when for whatever reason things don’t go to plan prior to completion of works. 

It only goes to prove how removing such essential financial protection that Ley 57/68 afforded innocent purchasers from the outset, has now undermined and exposed a legal system sadly not fit for purpose. 

The message now must be under no circumstances invest in Spanish offplan purchase until such time as this major compromising legal loophole and lack of essential regulation of legal conveyancers has been fully recognised and addressed.

But the bottom line, if any lessons are to be learned, is to look to the far wider perspective of the last decade and beyond, where innocent purchasers and good litigators pioneered in the most extraordinary of circumstances, where under resourcing and compromising legal delays led to all manner of manipulative ploys by all too many financial institutions who refused to accept their legal obligations according to law Ley 57/68 and provide secure safe haven for depositors monies.

And yet for those willing to stay the course and put their faith in the Spanish justice system  with all its many challenges and then actually achieve successful and supportive judicial rulings with rightful financial protection and accountability ( requiring all manner of Supreme Court supportive rulings along the way) has been and continues to be an extraordinary accomplishment. 

But look to what has happened since then…. The Supreme Court started to remove their support with questionable rulings ( Maria can explain the complexities no doubt) and now going forward we are left with yet another law for those who purchased offplan beyond January 2016,  which in one foul swoop  appears to have done irreparable damage to the progress made, and undermined purchasers trust yet again with the potential to sadly leave an already over stretched real estate industry reeling in its wake.

For pioneering litigation leading to good supportive case law and fair accountability to be completely undermined in this way by introduction of another law now proven to be not fit for purpose says it all…… Spain sadly appears to have shot itself in the foot.

How any of this can serve any purpose to Spain’s best interests appears beyond comprehension.

The message buyer beware in Spain once again needs to be heard even more loudly, but this time the Government and litigators need to take a cold hard look at their legal and real estate systems and recognise the uncomfortable failings. 

It doesn’t have to be this way….

It would seem that the law has now been changed to ‘’you pay your money and take your chance’’. Probably changed for public awareness ‘’BUYER BEWARE’’ and also an admission that the Spanish justice system is not fit for purpose.

It beggars belief how a foreigner can go to another country and part with upfront money to buy a dream nonexistent property from a picture book from a slick unknown salesperson.

No one is forced into buying anything with an upfront payment, but as the saying goes ‘’a fool and his money are soon parted’’.

What’s the point of having any law that can take up to 15 years to try and enforce through the Spanish justice system at your own cost?  

Only ever pay anything upfront with a credit card and not a debit card or bank transfer.

My simple understanding of the change is that it is a prevention for buyers to pay amounts before a Work License is in place.

Of course, lawyers hired to advise anyone in a purchase in Spain should not allow anyone to pay any sum before a Work License is in place.

I am currently seeing clients being pushed to pay large sums against a project with work license in process, under the pressure of other ones willing to but that way.

M

Yes interesting conclusions Kavanagh but just a few additional observations to your posting.

Backdated Interest and costs have been achieved by those who had strong and experienced litigation arguments and pioneered for justice where supportive SC rulings had been achieved. Albeit these were hard and lengthy struggles given the postcode lottery re delays and the like, but justice nevertheless via good case law and accountability was being achieved. 

To generalise by inference that these were all foolish purchasers does a disservice to those who considered that Bank Guarantees and marketing literature with frequent onsite viewings of existing show apartments ( as should be the norm with new purchase) should be honoured and should not be overlooked.  Especially where great emphasis was placed upon existing law in place to protect. If a law exists and is consistently used in the marketing process which is subsequently and purposefully challenged in an attempt to deny legal responsibility then rightful questions remain. 
 

Where this stands now places emphasis on not only the legal system but a real estate  system that equally fails  to demonstrate any enforceable regulatory structure or moral authority to the extent that it significantly undermines purchasers'  trust and the endeavours of those within the industry who are genuinely striving for reform .
 

This message was last edited by ads on 1/18/2022.