SPANISH OFF-PLAN PROPERTY
BANK GUARANTEES - AVALES BANCARIOS

       

"There are obligations imposed by LEY 57/1968 on financial institutions - some banks have not acted with diligence"
Source: Banco de España Memoria del Servicio de Reclamaciones 2008 & El Pais Newspaper - August 2008
"New solutions tailored to the present-day problems must be sought"
"Good supervisors should not limit themselves to analysing the present, but should also anticipate possible scenarios
of non-viability that might arise in the future and attempt to reduce problems to a minimum before they emerge"
Source: Miguel Ángel Fernández Ordóñez - Ex-Governor of Banco de España - Speech at Fundación de Estudios Financieros, Madrid, 1 December 2011

“Come here calmly, and trust in the system that we have and the transparency we provide”
Excelentísimo Señora Beatriz Corredor Sierra - Ex-Spanish Housing Minister - February 2011

“Spain's voice must be respected again in Brussels and Frankfurt.  We will stop being part of the problem
and will be part of the solution"
November 2011
"You have before you a President of the Government who will face up to issues and not hide himself away" Interview EFE Agency January 2012
Excelentísimo Señor Mariano Rajoy Brey - Presidente del Gobierno de España - November 2011

Ex-Spanish Prime Minister Mr José Luis Rodríguez Zapatero said in THE EU PARLIAMENT ON 6 JULY 2010:
"My country is based on the rule of law and it respects and ensures that laws are respected.  The courts are responsible for the application of law. 
We stand shoulder to shoulder with those people who, maybe, have had the wool pulled over their eyes in the property sector"

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BANK GUARANTEES IN SPAIN FOR OFF-PLAN PROPERTY PURCHASES

It is a legal requirement in Spain that the developer must provide a Bank Guarantee or Insurance Certificate
to the purchaser covering ALL payments made in advance for the purchase of a property.
The Bank Guarantee or Insurance Certificate must be issued immediately the funds are received in
the developers Bank or Savings Bank account.

Being issued with a Bank Guarantee or Insurance Certificate is the purchasers legal right and
although there are costs involved in setting up these guarantees the developer must not make a
charge to the purchaser for the Bank Guarantee or Insurance Certificate.

Off-Plan deposit funds paid in advance for a property must be held in a Bank or Savings Bank
Special Account (Cuenta Especial).

The Special Account must be separate from any other account held by the developer and must
only contain funds to be used for the construction of the property.

Details of the Special Account together with the name of the Bank or Savings Bank must be detailed
in the Sales Agreement / Purchase Contract.

All advertising and promotional material published by the developer that refers to amounts being
paid in advance must state in which Bank or Savings Bank the deposits will be held and give details
of the Special Account in which the funds will be secured and protected.

The Bank or Savings Bank must demand and ensure that the Bank Guarantee or Insurance
Certificate is issued.  It is the responsibility of the Bank or Savings Bank who accepts the off-plan deposit
to ensure that the Special Account is opened and the Bank or Savings Bank must either issue
the Bank Guarantee, demand that the Bank Guarantee is issued or verify the existence of a Bank Guarantee
or Certificate of Insurance to fully cover the off-plan deposit funds held in their custody.

The Bank or Savings Bank are the guardians of LEY 57/68.  If the Bank or Savings Bank
accept funds paid in advance by purchasers and fail to protect those funds in a Special Account
or fail to verify that the Bank Guarantee or Insurance Certificate is issued then they are guilty of
Gross Negligence and action may be taken against them for lack of Professional Due Diligence
according to LEY 57/68 Article 1.2
 
A Bank Guarantee or Insurance Certificate must not have an expiry date and does not have to
be 'renewed'.

The Bank Guarantee or Insurance Certificate only expires when the Certificate of Habitation
(Licence of First Occupation) is issued by the local Town Hall.  At this point the Bank Guarantee
is no longer valid and it is therefore in the purchasers interest to complete the purchase as quickly
as possible after the issue of the LFO / COH.

If the construction does not commence or finish by the deadlines set out in the Purchase
Contract then the purchaser has the right to execute the Bank Guarantee or Insurance Certificate
and receive a full refund of the deposit together with the addition of interest at the Legal rate
as detailed in the General Building Act 1999 LEY 38/99.

The Lawyer acting for the Purchaser has a duty to ensure the account to which the deposit
funds are paid meets the strict requirements of LEY 57/68.

The Lawyer acting for the Purchaser has a duty to ensure that the Purchaser's deposit funds
are only paid to the Developer's Special Account after details of the Bank Guarantee or
Insurance Certificate have been confirmed by the developer and guarantor.  Once the funds are
transferred to the developers Special Account the Lawyer must make every effort to obtain the
Bank Guarantee or Insurance Certificate.

If the Purchaser pays the property deposit to the Lawyer's client account and the Lawyer
forwards those funds to the developer without securing the Bank Guarantee / Insurance
Certificate and without establishing that the developers account to which they are sending the
funds complies with the strict requirements of LEY 57/68 then the Lawyer may be negligent
and guilty of acting with a lack of due diligence.

The Purchaser may then have a right to make a claim to the Lawyers Legal Indemnity Insurance
for the loss of deposit.


The Bank Guarantees Website is a free voluntary service providing information regarding LEY 57/68
and Bank Guarantee Abuse.  Under no circumstances can the Bank Guarantees In Spain Website provide advice
on an individual basis or give an opinion on specific individual cases.

Before making a decision or taking any action with regards to your personal situation we must strongly advise that
you take independent legal advice.

The Bank Guarantees In Spain Website and Petition does not endorse the services of any Lawyer or Law Firm.


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