Builder has taken out mortgages on properties

Some people on my urbanisation are very worried because they have been told that the builder took out a mortgage with the bank while he was building their house. They are worried that he might be declared bankrupt and are concerned about what will happen to their house.

They have paid for virtually all the house in staged payments. In many case they moved into the house over 18 months ago. They are still on builder's supply for water and electricity but he has not paid the utility companies. The purchasers are caught in a vicious circle because they cannot progress to the escitura because of the outstanding mortgage on the property.

I have a few questions.
1) What sort of a mortgage would a bank give to a builder who is being paid in staged payments as the construction progresses? I cannot imagine that the mortgage would be for the full value of the house.
2) Does the payments of these staged payments mean that the purchaser owns part of the house?
3) If the builder has gone bankrupt what action is the bank likely to take?
4) Where does the purchaser stand in all this?

I think that many people on this forum will have experienced similar problems and their advice and help would be gratefully received. The people on the urbanisation are extremely worried and very stressed.
PaddyW

Hi there,

Just read your post on mortgagees. Where are you  please? any chance of talking?

Mel

Please don't forget the 2 petitions which are running:

The one started by Ruth is for those who have legally binding Bank Guarantees, but who find that the banks are refusing to honour them. It will be sent to the Governor of the Bank of Spain.  This petition can be signed at:

http://www.gopetition.com/petitions/spanishbankguarantees.html      I believe it will close at the end of January.

There is another Petition which aims to cover all problems with property abuses in Spain, and also welcomes supportive signatures, even if they have no property problems.  It will be going to Gordon Brown PM at No. 10, and also to the EU in Brussels.  Another couple of weeks (appx)  left to sign this one:

www.spanishpropertyscandalpetition.co.uk

Thanks to all who have signed so far, and if you haven't - PLEASE DO SO.

These two petitions may be our best chance of making our voices heard - please do not miss the opportunity you have to do so NOW. 

Thanks from Suzanne.
 

Grover:

I canot understand your situation clearly... initially every developer is financed by a Bank to build, They need to provide Bank Guaantees for the staged payments of consumers and the buyer can subrogate the mortgage at completion.

What is the problem? A lack of First Ocupation License?

Best,

Maria

Maybe Grover is referring to the situation where people have completed on their property, but are not named as the legal owners??

The last story on the  'Your Stories' page on Our Petition website, is typical:

http://www.spanishpropertyscandalpetition.co.uk/6.html

This reminds me of a situation in Tenerife about twenty years ago.

People had purchased and had lived in a block of over (I think) about 100 apartments for maybe five years. Then they were told they must vacate the properties becase the original builder had defaulted on the loan on which he had used the apartment block as collateral.

The owners could do nothing and TV news filmed them being evicted. I never thought of it anymore until I just read this. I wonder what happened?