Bank´s liability on custody of off plan funds

Gosh this is complicated.....

Is this correct Maria

"When are Bank Guarantees Issued?

Bank guarantees are issued normally 30 to 40 days after you make a down payment. Naturally a bank or insurance company cannot issue a bank guarantee if you have not paid the stage payment. In other words, a bank guarantee cannot be issued prior to handing over the stage payment to a developer as some people are advocating publicly. This just shows a lack of understanding, however wishful, on how the system works in practice.

Advice such as: “do not make any payments to the developer without a bank guarantee” are flawed. First you pay, only then will you be issued a bank guarantee. Obviously if you’ve already made one payment and several months have elapsed and there is no bank guarantee forthcoming and you are shortly expected, under binding contractual terms of the PPC, to make further payments you should be wary and seek legal advice. It is risky to keep handing money over if your first stage payments have not been guaranteed yet."

What then happens in the event that the contract is drawn up and signed, single large deposited monies ( not staged payments) are presented to the lawyer ( placed into client account) and subsequently forwarded by the conveyancing lawyer in the form of a cheque made payable to the named developer, but following several subsequent requests for the developer to present BG by the conveyancing lawyer, the developer failed to provide this ( thus denying provision of secure account details)? As monies have already been presented to a developer account, would the conveyancing lawyer be considered exempted from liability having requested and been denied BG with accompanying account details, would the developer Bank then remain liable in the event of proven developer breach and developer insolvency? Or would both conveyancing lawyer and  developer Bank be severally liable?

And then what happens if a general guarantee exists? Given the above scenario where the developer failed to present BG after several requests thus denying ability to recognise secure account where monies were to be placed, and the recent SC rulings relating to "impossibility of control", would this then exempt the Guarantor Bank of liability if a General Guarantee existed and the conveyancing lawyer had made reference to this Guarantor Bank in the contract ( without any account reference), and without any cross reference to purchaser and property in the cheque made payable to the developer? Would this then leave the purchaser, in the event of proven developer breach, and having been denied guarantee and secure account information, without any possibility of making either the Bank or conveyancing lawyer liable???? Doesn't this then act as proof why the latest SC ruling fails to protect the purchaser and respect their inalienable right under Ley57/68, given the Guarantor Bank has responsibility for all due surveillance and administrative duties associated with developer accounts from the outset?

Or perhaps I have misunderstood?

This message was last edited by ads on 31/12/2019.

You have not misunderstood. It’s just too much hit and misses. 30 to 40 days translated into Spanish means forever. What happens if the developer goes bust before a BG is issued (if one was ever going to be issued). The BG should be handed over at the same time as the money is paid. Just imagine you go to the bank and get a personal loan for €40,000 can you have the money there and then and promise the bank you will come back in 30/40 days to sign the paperwork.

Almost everything in Spain is too complicated with loopholes everywhere and always a detriment to the consumer. The banks are saying nobody told us it was an off plan deposit, and the lawyer says they asked for a BG, and life goes on while Sandra waits another 12 years paying more money to Spanish lawyers.

Sandra:

I would ned to see all related documents and offer to you my opinion on the suing of lawyers.

Ads: In regards to:

As monies have already been presented to a developer account, would the conveyancing lawyer be considered exempted from liability having requested and been denied BG with accompanying account details, I would say it would-- as liabililties of General Guarantoor and Depositer bank work in that situation-- but it can still be deffended that money should have not been entered the developers´account before the lawyer receiving the inidividual policy of guarantee/ insurance contract would the developer Bank then remain liable in the event of proven developer breach and developer insolvency? Or would both conveyancing lawyer and  developer Bank be severally liable? An action for several liability is possible.

As Law 57/68 make depositer bank legally liable of this custody, our strategy has always been to act against them,  but, it is true that there are associated costs which are not covered by this Bank´s/ Insurer´s liability and therefore-- litigation costs, poa, travelling, plus all moral damages described by Kavanagh, and an action against Lawyer is possible then.

would this then exempt the Guarantor Bank of liability if a General Guarantee existed and the conveyancing lawyer had made reference to this Guarantor Bank in the contract ( without any account reference), and without any cross reference to purchaser and property in the cheque made payable to the developer? No, Guarantoors are always liable, they have, by Law, the possibility of controlling both developer´s accounts and guarantees and therefore always liable once it is proven money entered a developer´s account ( Supreme Court has recently rectify its interpretation of this) Would this then leave the purchaser, in the event of proven developer breach, and having been denied guarantee and secure account information, without any possibility of making either the Bank or conveyancing lawyer liable???? No, if General Guarantee is known or is possible to obtain through Preliminary Diligences. Doesn't this then act as proof why the latest SC ruling fails to protect the purchaser and respect their inalienable right under Ley57/68, given the Guarantor Bank has responsibility for all due surveillance and administrative duties associated with developer accounts from the outset? Both Guarantoor and Depositers have those surveillance duties.

Kavanagh: In my opinon, despite the fight is still on. Justice is being made as a general rule: still corners to be conquered.

The shorter/ easier version it was requested from you. This below is specifically on depositer´s banks.

Law 57/68: it is clear that banks had to control off-plan deposits paid to developer’s bank accounts, but when does that obligation start?
The Supreme Court has said in at least 2 Sentences that this obligation starts "once the bank realises the possibility of off-plan amounts being deposited in a developer’s account".

So is that once a developer opens a bank account different to the account linked to a developer’s mortgage?
Yes, in our opinion. That is enough for the bank to realise the possibility, as the Supreme Court has defined.

What is the Supreme Court saying about when a bank can realise that funds are for off-plan property purchases?

The Supreme Court is saying that a bank can realise that the funds are for off-plan property purchases when the property details and buyers names are identified in the bank transfer and when the money is paid to the developer’s bank account stated in the purchase contract.

Was that established by Law?
No, that is not part of Law 57/68.

Was it clearly warned in the contracts?
No, it was not either.

So how can the Supreme Court make those requirements a requisite for the protection to be provided to the buyers?
It should not.  That is against Law 57/68 and its protective nature, Consumers Law and Contract Law.

Does the Bank need to prove what it did to meet this duty?
The Supreme Court has affirmed that the burden of proof of active surveillance is that of the bank as it is the bank that must prove the measures taken in order to protect the amounts deposited into the developer’s accounts opened in its branches

Should the bank monitor amounts received by property developers for other reasons?
Yes, the Money Laundering act of 1993 established that financial entities are obliged to control the amounts they receive from both property developers and estate agencies, as well as amounts from abroad, in order to know who was behind each operation.

Maria, you have all our documentation. We are your clients.

During our meeting with you at your office in Algeciras in June 2008, my husband reminds me that, you quite clearly stated that the conveyancing lawyer (who at the time we deemed liable) could be sued once it could be shown they were negligent and there was no problem in doing so because their insurers would cover their cost. 

Kavanagh,

“Just imagine you go to the bank and get a personal loan for €40,000 can you have the money there and then and promise the bank you will come back in 30/40 days to sign the paperwork.”

Yes, just imagine!

I have come to the conclusion that the banks dictated the the Supreme Courts latest ruling.

Thank you Maria. 

So now, moving forward and given you have identified in detail how the recent SC's rulings and their suggested pre requisites have been against Ley57/68 law and its protective nature, consumer law and contract law, is this not of sufficient concern for all good lawyers in defence of their clients and faith in the justice system, to make coordinated and concerted representation to the SC, and request in the interest of good faith and in accordance with the rule of law, that they reconsider their ruling, given its immediate impact on not only innocent offplan purchasers but also on trust in the justice system in Spain?

Ads, It would be great. I have actually offered our continued updated Case Law research to all lawyers involved in this fight. As lineral professionals, this type of commun endeavours are not too frequent, at least in  Spain. Most likely to be carried out by Consumers Associations,  I will be sending some notes to the most prominent ones in the New Year.

Lawyers in this fight, on a nice earner. If lawyers had done their duty correctly that they were paid good money to do in the first place there would be no fight.

Sandra are you sure who your current lawyers are, and are they aware you are clients. 

Sandra, your comment on this thread on the 30/12 appears to mirror exactly how my wife and I feel about compensation, not only on the financial loss, but to the physical and mental stress we have endured since this fiasco started.

The recent Spanish Supreme Court reversal of my previous win at the first instance and appeal, have made me feel as if I'm the criminal here, having the audacity to ask for my money back! Being herded into taking further legal action, and the costs involved, or throw your hands up and give up, just don't seem fair. 

Maria,

Is this questionable SC ruling in some way compromising the principle of legal certainty?

Does it also raise a question re the use of arbitrary power i.e. without due consideration for the harm it could do to others?

How are legitimate interests and expectations protected if a questionable SC ruling can undermine inalienable rights in this manner?

———————

Legal certainty according to Wikipedia

https://en.wikipedia.org/wiki/Legal_certainty

“Legal certainty is an established legal concept both in the civil law legal systems and common law legal systems. In the civil law tradition, legal certainty is defined in terms of maximum predictability of officials' behaviour. In the common law tradition, legal certainty is often explained in terms of citizens' ability to organise their affairs in such a way that does not break the law. In both legal traditions, legal certainty is regarded as grounding value for the legality of legislative and administrative measures taken by public authorities.”

Putting this into context with what is happening here appears to be as follows:-

In terms of citizens ability to organise their affairs that does not break the law......

The depositor places their monies with legal representatives or agents, with reassurance that a protective Bank Guarantee law exists, which affords them inalienable rights in the sound knowledge (legal certainty) that all protective measures are in place to ensure that Banks, from the outset, correctly administer and safeguard those deposited monies proven to have been placed into their care, such that in the event of proven developer breach their deposited monies will AT ALL TIMES be effectively protected with rights of return and backdated legal interest. 

Thereafter according to the rule of law, surely the legislative are expected to respect and honour this legal certainty, and not attempt to retrospectively change the conditions upon which legal certainty was provided to law abiding citizens in the first place.

To help you understand.

https://www.investopedia.com/terms/b/bankguarantee.asp

With respect Angeleyes the questionable aspects relating to this SC ruling are with regard to the finer details of interpretation of an existing law Ley57/68 and at what point the Bank control of offplan deposits start.

 SC ruling has previously stipulated that responsibility starts " once the Bank realises the possibility of offplan amounts being deposited into a developer account".

Its being argued that control therefore commences at the point that the Bank opens a developer account and should not depend upon  property details and buyers names being identified within a bank transfer to a named developer account, since this is not stipulated in protective law Ley57/68.

The inference therefore is that the latest SC ruling that makes reference to prerequisites of this nature is "against Ley57/68 and its protective nature, Consumers Law and Contract law".

No doubt Maria will confirm if the above is a correct understanding, but I would also hope that the aspect of legal certainty could be clarified in this ongoing fight for justice and inalienable rights.

This message was last edited by ads on 11/01/2020.

The developer pays the bank an insurance premium to guarantee the funds he receives. However no one expected the financial crash of 2008 and the banks became unstuck and did not have enough funds to be able to pay out. The banks have ducked and dived to avoid paying most depositors, and they have been aided by the Spanish justice system despite what any law says. The key here is to understand ‘’Spanish Justice vs Spanish Law’’.

Ads: Your comments are fully right. 

We mustn't lose sight of the fact that the majority of appeal judges and the Supreme Court have been providing supportive rulings and Doctrine no less which was ironically resulting in re-establishing trust ( albeit this had taken an inordinately long time to establish!)....that is until recently .... which is exactly  why this recent questionable SC ruling is being investigated and challenged.

All eyes should be focused on strict impartiality and adherence to legal certainty which forms part of the rule of law and plays a significant part in trust in the Spanish Justice system going forward.

Let's hope however that the Supreme Court are given an OPPORTUNITY to re-assess this recent ruling given the wide implications, which ultimately  depends upon ALL good law firms to make a concerted effort to come together and request an opportunity for a fair reassessment in this regard, if trust is ever to be regained.

If we are honest and left unresolved this has far wider implications than just offplan purchase. 

It has the potential to be resolved with strong concerted commitment by those legal professionals genuinely seeking a fair and trusted justice system in Spain.

Ads you have to realise the difference between your fantasy of a world of fairness and justice and the real world of reality.

And perhaps you could consider progress made to date by those who have pioneered for change to effect return of monies,  and how those such as  yourself suggested it was a lost cause. You should not ignore those who have benefited by pioneering endeavours to date and achieved return of monies. Nor should you underestimate the endeavours of those within the justice system who have challenged the Banks and bravely whistle blown many professional failures within that process...

Outstanding complexities now being identified are yet another attempt by the Banks to thwart SC doctrine and case law  established to date. To repeat they are trying to    override supportive case law and undermine SC doctrine achieved to date. And to repeat nothing will be achieved by ignoring the latest uncomfortable realities  

The fight and educative process continues.

It seems that you are confused with your rule book believes and the true realities of Spanish justice. When are you ever going to learn that XYZ law is worthless? Or explain to off plan depositors why they are still waiting after 10 years trying to get their money back whilst being milked by Spanish lawyers who were party to all this.

Angeleyes 

Please do not undermine those who pioneered and continue to pioneer for rightful justice by your generalisations that imply all law firms are in the same boat, so to speak, intent on " milking their clients".

Also sadly you do a disservice to the fight for justice so long as you fail to recognise and under estimate the many complexities involved in achieving successful final rulings and the impact  that the Banks proliferation of appeals have had on a justice system overloaded and under resourced. You appear to fail to recognise the Banks manipulative attempts to delay enforcement, to delay supportive SC doctrine, and the impact this has had on those who still await final rulings.

There are so many lessons to be learned from this scenario, not least that the Banks in Spain have much to answer for, but so too do the Bar Associations who sadly failed to regulate those members who undermined their profession and lost the respect and trust of so many. 

But also support should be given to those who continue in all good faith to endeavour to gain greater accountability and enforcement of this Bank Guarantee law just at the point where it has now become necessary to overturn a highly questionable SC ruling according to the legal reasoning identified by Maria earlier in this thread.

Sadly, these are the uncomfortable ongoing realities that require far greater comprehension.