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BANK’S RESPONSIBILITY FOR ADVANCE PAYMENTS NOT PROPERLY SECURED IN THE PURCHASE OF PROPERTIES UNDER CONSTRUCTION

Spanish legislation, both nationwide as well as in many of the autonomous communities, establishes the requeriment that monies paid on account for the purchase of properties off-plan or under construction shall be guaranteed. This requirements falls upon developers and takes effect through the provision of an individual guarantee or insurance policy in favour of each buyer for the amount paid in advance.

Due to the repeated failure to observe this legal requirement the responsibility has been directed more and more in recent times towards the banks who have participated in the developers' business even if indirectly, especially because of the insolvencies of property companies which have become so numerous in Spain since the financial and real estate crisis began in 2007.

This new route for recovering advance payments received a real boost because of the judgement of the Supreme Tribunal on 21 December 2015, confirmed by subsequent judgements, and a legal doctrine has been established that those banks which received advance payments on behalf of developer clients without the demanding the legally required guarantee are liable.

The application of the doctrine requires:

  • That the buyer was a private buyer on his/her own account.
  • That the monies paid ove on account were not guaranteed by a financial institution in which case it would be necessary to seek redress there.
  • That the monies were paid into a current account of the bank of the developer against whom proceedings will be taken.
  • Finally that the developer had failed in his obligation t deliver the property in the time stipulated.

BRAVO ABOGADOS was a pioneer in bringing this type of case several years ago and at the present time is representing many people affected against various banks, achieving a very high rate of success throughout Spain.

It is aso worth noting that in accordace with Spanish procedure regulation, if the claim successes the costs and expenses of the claim are charged to the bank against whom the claim was made which when taken together with the interest accrued from the advance apyments which the bank must repay means we are talking about complete reimbursement for the client.

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