Banks cannot sidestep their liabilities when not issuing individual warranties.

Declaración de incapacidad en España.

As is known by most home buyers and investors in Spain, Law 57/1968, of July 27th concerns ‘the sums of money given in advance for the construction and sale of properties for living purposes’ despite being a very brief Law, with only 6 articles, it is an important guarantee for any buyer when purchasing an off-plan property or a property that is already under construction.


Under this Law, any developer who receives sums of money from the purchasers before the construction is started or whilst the construction is taking place, has to guarantee the repayment of these amounts plus the legal interest, through an insurance contract, or by way of a bank warranty.


Thus, should the works not commence on time, or not be delivered on time, the buyer must be treated as a ‘consumer’ who can choose between terminating the contract and asking for a refund, or can choose to extend the contract. The refund should be requested to the developers, bank or insurance company that has warranted it.


This law also states in its Article 7 that ‘the rights granted by this Act to the transferees (purchasers) is obligatory and cannot be waived’.


Now, contrary to the above scenario, there have been cases where banks have refused to honour the guarantees, on the grounds that the buyer’s money was to be deposited into a Special Bank Account that the developer should open only for this purpose. Some others banks have refused to pay by alleging that the warranty had an expiry deadline and had expired.


The majority of these cases have been solved by a court order ruling that these circumstances are beyond the control of the buyer, and as such are not dependent on him; it is the developer and the bank who should fulfil the law and not attempt to make  the purchaser lose his warranty and his money. Thus most court rulings have ordered the bank to return the money to the purchasers.


There are other cases when banks have approved a general bank guarantee for a certain amount for a particular property promotion or for a particular developer but NO guarantees are given to the individual purchaser(s) for the money delivered. This has happened with many promoters, with one example being the case of DESARROLLO DE ACTIVOS INMOBILIARIOS S.A., known as DETINSA ( which is currently in bankruptcy proceedings), concerning its building promotion at RESIDENCIAL LA VÍA, in Denia, Alicante. In this case it was BANK CAJA MADRID who approved a general warranty for this promotion but did not give guarantees to some individual buyers.


In these cases, although the developer has not delivered the property to the buyers, the bank is refusing to return the buyers’ money, claiming that there is only a general endorsement or guarantee in existence, and maintaining this is not enough to merit return of the monies since the buyers do not have an individual guarantee.


Our legal opinion is that this attitude and answer are contrary to the Law, since the buyers were informed that a warranty or an endorsement line had been approved. Indeed, this appears in writing on the buyers’ contracts and hence they believed that their money was safe and guaranteed. But the bank did not comply with its obligations and did not issue individual guarantees, and is later on claiming the lack of these to try to escape liability.


Court verdicts have been issued in this regard; in a similar case the Court of First Instance and Instruction number 1 of Velez Malaga in its Order of 1st September 2010, ruled that in the claim against MALAGA HAENDEL S.A. and BANCO DE ANDALUCIA S.A., even though the bank had not provided individual guarantees to the purchasers, it was still responsible for returning the money plus the legal interest, even though the general guarantee was insufficient to cover the amounts paid by the buyers, and did not permit BANCO DE ANDALUCIA to waive its obligation or make the consumer’s rights disappear. I would like to thank my colleague and good friend from Marbella, Mr José F Criado Sanchez who supplied me with a copy of the said Order.


Conclusion: With all the above in mind, you should be aware that if you have made a purchase where the promoter has not completed it, has not delivered or has not given you the money back, even though you may not have an individual warranty for the money paid, you are likely to be able to file a claim against the bank if an endorsement line or a general endorsement-guarantee was approved by them.


The information provided on this article is not intended to be legal advice, but merely conveys general information related to legal issues.


*This article is available in English and Spanish at our Web site:


White & Baos

Carlos Baos (Lawyer 5756)

Tel: 966 426 185


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