Spanish Bank Guarantees dishonoured!

By Ruth Genda

I am one of many caught up in a property scandal in Spain. My case involves a lying agent, a duplicitous firm of lawyers, a corrupt developer and a bank that will not honour its guarantee. It is almost six years since we attempted to purchase an off-plan apartment in Elviria. Our first mistake was to believe the agents when they persuaded us of the desirability of the development. Our second was to trust the highly recommended firm of female Spanish lawyers who undertook the research required before drawing up a contract. A third error was made by signing the contract with the developer and accepting the bank guarantee issued by them through a reputable high street bank. On the face of it all was legally in order and we did everything as it should be done.

Shockingly, nothing was.

The build was illegal and had never had a full licence. Only a month after we paid our deposit and received our guarantee the developer had been ordered by the Town Hall to cease building. We discovered all this only when we thought we were about to complete two years later.

Our case was taken through the courts in Madrid by a second Spanish lawyer no less than three times. In the first case we won and the bank was ordered to pay our deposit monies into the court. This they did but they also appealed the resolution. When it was heard again, with no new evidence submitted, the very same judge changed her mind and ruled for the bank ‘on a technicality’. We wonder why. Our lawyer took the Town Hall architect with him as a witness to prove the build was illegal and that no LFO would be granted. He swore this on oath seven times. But he hadn’t written it on paper! That was the technicality.

A counter-appeal followed but a second judge upheld the negative decision. Finally, magistrates reviewing the case found for the bank arguing that due to ‘administrative silence’ on the part of the Town Hall the development should be declared legal. The Town Hall insists that at present there will be no LFO issued.

We are in limbo. A completion already three and a half years overdue? An illegal build? A build that is not as promised at the outset (but that’s another story)? A Town Hall and a Junta at odds with one another about the final outcomes for these builds? What more evidence is needed to show that a bank guarantee should be honoured? When we were unable to complete at the contracted time in July 2005 or again after the four month period of grace in November of that year the bank guarantee should have kicked in automatically. That is what a guarantee does – it guarantees.

I am 73 years old and the anger inside me is almost unbearable.

This is why I have instigated a petition to the Governor of the Bank of Spain urging him to take action against the miscreant banks by invoking the Banking Discipline Law. This allows the Bank of Spain to apply pressure and, in some cases, sanctions against banks who are not following the law to the letter. At the present time that means most banks. The Petition demands the return of monies paid.

Legalising a build after a contractually agreed completion date does not resolve the abuse of the bank guarantee. It sends out the message that the developers can renege on their contracts with impunity. Enforcing a bank guarantee, however, sends out the message that the law must be respected and obeyed.

Our faith in the Spanish banking system has been lost. We need it to be restored, which is why I have organised a petition to the Bank of Spain.

We demand that our guarantees be honoured.

Ruth Genda

Add your voice and support at our petition to the Bank of Spain



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