Many in the Spanish expat community were dealt a crushing financial blow in light of the 2008 Spanish property crash brought on by the US mortgage crisis. It is well documented that many expats from around the world invested in off plan property developments which were either built without the relevant permissions or never started at all. As many of the underlying developers went out of business in light of the 2008 crash so, it was thought, compensation claims for those who suffered could no longer be pursued. However, a new landmark Spanish ruling has given many expats hope in their fight for compensation.
The case of Malcolm Young
Malcolm Young invested in off plan holiday and retirement homes on the Spanish Costas just prior to the 2008 worldwide economic collapse. Initially he put down a £110,000 deposit on two apartments which were subsequently built without the correct Spanish planning permissions. Despite the fact that Malcolm Young won four court cases demanding that the property developers repay his £110,000 deposit in full the company subsequently went bust and with it, so he thought, his chances of any compensation.
However, a recent court challenge has reinforced an old Spanish law which makes banks jointly liable with developers when deposits for off plan properties are lost. This means that if it can be proved the deposits were paid into the Spanish banking system then the bank is jointly liable with the developer. If the developer has subsequently gone bust then the original investor can pursue the bank for compensation.
The case of Malcolm Young will reverberate around the expat community as eventually, after a ten-year battle, he was awarded the equivalent of £200,000. This figure is obviously boosted by the significant exchange rate movement over the last 10 years although it is also net of his legal costs. So, how many other British buyers are out there seeking compensation for similar losses?
The Centre for Economics and Business Research believes there are in excess of 130,000 British investors owed anywhere between £10,000 and £500,000 each from failed off plan property developments. This equates to a potential £5.3 billion compensation package which will need to be paid by the Spanish banking community. In many ways this is payback for the Spanish banks, many of whom withdrew deposit guarantees when it became evident the Spanish property market was in trouble. However, the Supreme Court in Madrid upheld a law dating back to 1968 which reiterated that banks must give guarantees on deposits.
Paperwork to prove your case
Many property investors who thought they had lost any chance of compensation will likely have disposed of valuable paperwork which will be needed to pursue any case under the new ruling. There are also time restrictions which apply to compensation claims which as a general rule tend to be around 15 years after the developer has failed to deliver on an investment.
If you are in a similar situation to Malcolm Young it may be worth taking legal advice but beware that many fraudsters are already targeting this particular group of investors. It will be interesting to see how many cases are successful and how much of the forecast £5.3 billion compensation package is actually paid out.