Are property buyers protected without bank guarantees ?
The massive fraud in Spain according to Ley 57/68 is well-known by everyone. The legislators drafted the Act to avoid fraud, but after all and due to a void development of the Act, fraud has not been avoided.
The matter was simple. The Ley 57/68 establishes that it is mandatory to guarantee all the deposits paid on account by buyers whose properties are under construction. In other words, this means that any property buyer, who pays a deposit in advance for building his or her property, has to have the deposits guaranteed because in the event that the property is not built, the deposits will be returned.
The problem is that if the buyer didn’t know about this Act, or didn’t hire a lawyer, who was in charge of requesting the guarantee, sometimes the builder didn’t request the bank guarantee and saved the commission that the builder has to pay for the bank guarantee.
The logical thing should be requesting to the builder the insurance or guarantee before granting the licenses for building, but this matter was left in the hands of the builders themselves. The result is this Dantesque situation where thousands of property buyers are victims because their properties were not built and their deposits were not guaranteed.
The Provincial Appeal Court in Alicante stood up for consumers who wanted to buy only one property and transferred the liability to the banks and not only developers, in order to give some hope to those buyers who didn’t have bank guarantees.
We will know very soon if the Spanish Supreme Court will confirm the fraud or if it will support the Judgments delivered by the Provincial Appeal Court in Alicante; if the Supreme Court is side with the Provincial Appeal Court in Alicante, many investors will recover their deposits and the banks will be liable for not issuing the bank guarantees for property buyers.