Owners of Spanish properties who do not have a bank guarantee or an insurance bond from their developer should consider taking legal action, it is claimed.
Many Spanish holiday home dreams are turning to nightmares as developers are unable to finance their debts and complete projects. Some 170,000 companies in the construction sector, 23% of the total, went bust in 2008 and 2009 and the downturn is set to continue for the foreseeable future, according to Daren Wallbank, director of Reclaim Your Deposit which has been set up to help owners get their money back.
He has spent recent months looking into dozens of these cases. ‘The good news is that it is a legal requirement in Spain to provide a bank guarantee or an insurance bond to protect client monies in the event that the property is not constructed in line with the contract. Many buyers will therefore be able to contact their lawyer and reclaim their deposit on this basis,’ he explained.
‘The bad news is that we’ve discovered many cases where this guarantee has not been provided and it’s not yet clear who in general is ultimately responsible for this failure – the bank, lawyer or developer. We therefore recommend clients take action against their original lawyer for failing to ensure that legal requirement was in place at the time of transferring funds,’ he added.
Although Spain has this legal protection, albeit not watertight, many other countries, especially those outside of the European Union such as Turkey, do not offer the same level of bank guarantees or insurance policies, Wallbank points out. ‘In this case, clients are limited to the assets of the bankrupt developer from which to make their claim and these are often insufficient to cover their liabilities,’ he said.
‘One interesting solution could be an investigation into the activities of this developer to see if a criminal case against the directors is possible. Logic would suggest that all the deposit monies paid must have gone somewhere. If the developer is part of a group then it may also be possible to sue the related companies who still have assets,’ he explained.
‘Similarly, if a bank mortgage exists on the property, although this will give the bank priority over the developer’s assets before property purchasers can stake their claim, it may give potential to claim against the bank,’ he added.
The company has launched a no win, no fee, service for property investors in Spain who want to get their money back after a development has failed to be completed on time.
Wallbank said it is response to demand after it found that 20% of all enquiries it receives relate to Spain. To qualify clients must be able to satisfy four criteria; having the original private purchase and reservation contracts, having a bank guarantee or insurance bond certificate, having proof of payments and having a contract that has expires without the property being completed.
‘It’s often the legal costs that provide the biggest hurdle for people who have already invested their life savings into a Spanish holiday home and really have no spare liquid funds available to them,’ he explained.
‘The reason we’ve selected Spain for this particular service is that we feel it provides a large enough pool of claimants, has good client protection in the form of bank guarantees and insurance bonds and also a fair legal system which should give us a strong chance of deposit recovery,’ he added.