Spanish property ruling spells security for buyers

Published 01st Feb 2011

A Spanish court has upheld the right of investors in a failed property development to have their deposits returned to them, after a local bank attempted to shirk their responsibilities under the country's guarantee laws.

The Caja Cantabria bank tried to claim that the guarantee period had 'expired' on an investor's funds, after they paid a deposit off the plan on a property that was never built. Under Spanish law, developers can use an 'aval bancario', or bank guarantee, to protect buyers whilst the development and construction of the property is in progress.

Whilst they obtain funds from their particular bank of choice to fund the property development, the bank holds all deposits in a separate safe account until construction is complete. If it doesn't complete in a set amount of time, the deposit plus six per cent interest is returned to investors.

Despite Caja Cantabria's attempts to implement a 'small print' to the terms of their guarantee, the court still upheld this national guarantee law, and stated the guarantee period could not expire whilst the investor still had no property to show for their funds. Although Spanish law is not based on precedents like that of the UK, this decision should still reassure off the plan buyers that their money is safe as long as they have a concrete bank guarantee issued to them.

Source: ' TMC '

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