Court in Cantabria rules in favour of buyers on question of bank guarantees

A court in Cantabria ruled last month that banks cannot use small print to wiggle out of honouring bank guarantees made to off-plan property buyers

Some banks have included expiry dates in their guarantees and used them as an excuse to avoid paying out when buyers are left with no home to show for their stage payments.

According to Spanish law, developers have to arrange for bank guarantees or insurance policies to cover all stage payments they take from off-plan buyers.

After a developer in Cantabria breached contract by failing to deliver on time, a buyer took it to court, along with the local savings bank Caja Cantabria, demanding repayment via the bank guarantee. Caja Cantabria won the first round arguing the guarantee had expired, but lost when the buyer appealed to a higher court.

The higher court ruled that bank guarantees cannot expire whilst buyers still have no home to show for their money. The court also ruled that stage-payments must be returned in full.

Given the parlous state of the Spanish legal system it is difficult to say what this means for off-plan buyers fighting to get their money back in other regions. Nevertheless, it is an encouraging precedent which one has to assume that other courts around Spain will take into account.

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About Mark Stücklin

Mark Stücklin is a Barcelona-based property market analyst and consultant, and author of the 'Spanish Property Doctor' column in the Sunday Times (2005 - 2008). He can be reached by email on ms@spanishpropertyinsight.com.