COMMENT by Antonio Flores
WHAT do the following have in common?
An electrical company from Alicante, a cement subcontractor from Valencia, a real estate company from the Balearics, the Spanish Inland Revenue, the Spanish Social Security, six banks and 65 employees, and 150 consumers who were hoping to acquire Spanish off-plan property.
You guessed right: they are all registered with the courts, hoping to get some money back after the voluntary administration of a large Alicante property developer, San Jose Construcciones.
The above scenario, however normal it appears to be these days, hides a fundamental legal flaw that brings into question, once again, a system that has routinely failed to protect the ones deserving the utmost protection: consumers.
Such flaws can be inferred from the fact the first group of creditors are hoping to get paid with the monies of the second group – the buyers – who should have had their deposits bank-guaranteed or insured pursuant to a Franco time law, the 1968/57 Act, that was specifically enacted to avoid the situation they are now in.
In this case study, the irony (or irritation) is that BBVA, the second biggest Spanish bank, is queuing up to try to grab a chunk of the money it is supposed to have guaranteed in the first place.
This because it provided a collective bank guarantee to underwrite deposits on a 120-unit development – deposits on which it has already profited handsomely with the developer’s mortgage, as well as various commissions.
Crazily enough, this bank will only agree to ‘voluntarily’ comply with its mandatory obligation after some arm-twisting involving lawyers and legal action.
Another surprising aspect is that criminal case law states no developer can use consumers’ down payments for anything else but building the property, and this excludes real estate commissions, and staff salaries.
As there is not one brick on the plot, helping consumers get their deposits back should be a priority of any developer, particularly where many lawyers have found the criminal route renders results (many developers are serving prison terms for this) – and especially where the developer has broken the law so blatantly.
That said, ailing developers are probably too traumatised by what has happened and can only hope the market will recover one day (and that lawyers will not press too hard).
The real bad guys are the banks, shirking their legal and ethical responsibilities towards trusting buyers.
This must now come to an end, particularly where abundant bank guarantee case law is invariably favouring consumers, and banks are seemingly receiving unlimited funding from the Spanish state.