Are Bank Guarantees worth the paper they’re written on?

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This topic contains 53 replies, has 10 voices, and was last updated by Profile photo of Anonymous Anonymous 8 years, 9 months ago.

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  • #52885
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    Anonymous
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    I’m asking this question because despite the purpose of BG’s supposedly being issued to safeguard your money in the event the developer fails to deliver or there is a breach of contract, I am hearing an increasing number of stories where banks are refusing to pay up.

    First they are making you go to court to claim on the guarantee which should not be necessary, then even when the judges rule in the purchasers’ favour – the bank then appeals, dragging the whole procedure out for another 6-12 months.

    A question for the legal-eagles: As the banks themselves are supposed to be covered for the BG by the developer, why are they so hell-bent in not paying up? I can only conclude they are corruptly in cahoots with the developer re. not paying up if at all possible.

    Developers are very quick to put stringent daily penalties for every day purchasers do not complete as in the case of one development I know, but it seems that when there are multi-breaches of contract, claiming on the Bank Guarantee is proving to be impossible in many cases.

  • #72087
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    Anonymous
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    A BG is a performance bond or insurance. Ever heard of an insurance company paying out a claim for a car crash, medical problem, etc., if they can get out of it?

  • #72088
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    Anonymous
    Participant

    Mark – is this subject worth looking into re. a possible article?
    Can suggest a good title: Spanish Bank Guarantees a Sham?

  • #72089
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    Anonymous
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    mg –
    Your example is not a good one. Insurance companies have to pay out of their own pockets.
    The difference here is, in the case of BG’s – it’s the developers’ money, not the banks. Which makes me feel there is some (corrupt) collusion going on between the two.
    It’s supposed to be a ‘Guarantee’ – not “You can have your money back but you’ll have to fight for it in court, and maybe you’ll lose – Ha Ha”.

  • #72090
    Profile photo of katy
    katy
    Spectator

    I am curious about the validity of the so-called guarantees. I used to assume that if the certificate would be cashed in at the relevant bank. I think the banks are in cahoots with the developers. Could also be that the developers have very large mortgages with said banks. Would be interesting to know the official line on this.

  • #72091
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    @katy wrote:

    Could also be that the developers have very large mortgages with said banks.

    Think you may have hit the nail on the head, Katy.
    A case of ‘support us on this or
    a) we may go under and you’ll ultimately lose out or
    b) we’ll simply change banks if you don’t.
    c) plus a few brown envelopes whizzing around?

    What is going on at the moment is definitely not in the ‘spirit’ of the Bank Guarantee law (law 57/1968).

    I know someone who has written an official complaint to the Bank of England, stating how Spanish Banks are not honouring Bank Guarantees issued to Brits in Spain, quoting examples.
    Will be interesting to see if it results in any action by the B of E – eg. making an official complaint to the EU?

    Maria de Castro, a lawyer who contributes to this forum, wrote a good synopsis of the BG law, which I think some banks and judges should re-read to refresh their memories:
    http://www.eyeonspain.com/spain-magazine/bank-guarantee-legal.aspx

  • #72092
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    Anonymous
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    “Your example is not a good one. Insurance companies have to pay out of their own pockets. “
    I think it is a good example.
    The BG is a form of performance bond, which is the same as any major contract in UK, that the contractor would have with the client. It is the norm for the contractor to put down a percentage of the value, in the form of a bond, or alternatively, if the bank agrees, they can take insurance, with the policy then offered to the bank.
    Either way, it is a form of insurance, where the developer/contractor pays a premium for the amount covered. Therefore, it is not the developer/contractors money at risk (other than the premium), but the financial institution, be it a bank or insurance company.

    “it’s the developers’ money, not the banks” So if this is correct and what you believe, say a developer has a site for 100 units at a development cost of 200.000 each. Do you believe that the developer has deposited with the bank the 20million?

    “It’s supposed to be a ‘Guarantee’ – not “You can have your money back but you’ll have to fight for it in court”
    As is a motor policy, a guarantee of your loss, unless it can be proved otherwise.

  • #72095
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    Anonymous
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    Hi,

    I have a bank guarantee here issued by Cam Bank. I know the developer pays an amount of money for it to be issued so its the banks money at risk not the builder.

    The wording is quite specific and states that if the development doesnt start, or finish or if the developer is unable to provide the clear escritura and first license of occupation the bank guarantee can be used to reclaim the stage payments. It also has the date of completion for the property and that if the license of first occupation is granted then the guarantee is no longer in force.

    Not sure how banks can wriggle out of them but maybe other banks use different wording.

    Bernard

  • #72096
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    Anonymous
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    “I have a bank guarantee here issued by Cam Bank. I know the developer pays an amount of money for it to be issued so its the banks money at risk not the builder.”
    So we at least agree that in the event of the BG being claimed upon, it is the Bank suffering the biggest loss and not the developer.

    “Not sure how banks can wriggle out of them but maybe other banks use different wording.”
    That is something you can guarantee that they will pay out only is every clause and sub-clause has been adhered to.

    But is your BG for a specific time, or the duration of the project?
    Assuming a specific time of say 12 months, the bank does not have to agree to extending or issuing a new BG, as they have honoured their side in underwriting for the 12 months.
    I assume then is the worrying time, do you go along with the developer to safeguard your outlay to date, or play safe and take a hit.

  • #72099
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    Anonymous
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    Hi MG,

    The ones that we get for our clients from Cam Bank are always property specific and part of the guarantee is that the property must be delivered on its contracted date. Every property completion date we give is always long so the issue of a late delivery has never happened.

    I suspect other banks would use other wording and start to wriggle, particuarly if they are not sure of the developers ability to complete the project.

    Bernard

  • #72100
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    “The ones that we get for our clients from Cam Bank are always property specific and part of the guarantee is that the property must be delivered on its contracted date.”
    So is the BG open ended and no long stop date?
    Can it be that the completion date is say for 3 years and the BG is also valid for 3 years, without renewal and without charge.

    “Every property completion date we give is always long”
    So, how long is long,1,2,3,4,5…years?

    “I suspect other banks would use other wording and start to wriggle”
    Should think that the BGs from whichever Bank are similarly worded, many clauses and sub-clause and weighted in favour of the bank. Before you say oh no, it is their business to make money, not to pay out to whoever asks.

    “particuarly if they are not sure of the developers ability to complete the project”
    Don’t think this would vary the wording too much, but would affect the premium the developer has to pay.

    OK, you say “Every property completion date we give is always long”.
    But however long, let’s assume longer than 12 months, so, assuming the time goes beyond 12 month, the bank does not have to agree to extending or issuing a new BG?

    Are you saying that if the development date is say 3 years, the original BG remains valid and at no extra charge?

  • #72101
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    Hi MG,

    I can only talk about the guarantees we get from Cam Bank so here goes,

    MG. So is the BG open ended and no long stop date?
    Can it be that the completion date is say for 3 years and the BG is also valid for 3 years, without renewal and without charge.

    Its not an open ended agreement. Part of the guarantee is that it must be delivered on its contracted date. The maximum time we ever give for a property to be finished is 18 months and the guarantee will last this long and doesnt cost the client anything.

    MG So, how long is long,1,2,3,4,5…years?

    Every property is calculated to take around 12 to 13 months to be finished so putting 18 months into a contract give sufficient extra time for rain delays etc.

    MG Should think that the BGs from whichever Bank are similarly worded, many clauses and sub-clause and weighted in favour of the bank. Before you say oh no, it is their business to make money, not to pay out to whoever asks.

    Not sure if you have seen one from Cam Bank but it is a simple 1 page A4 document.

    MG Don’t think this would vary the wording too much, but would affect the premium the developer has to pay.

    I would agree

    MG But however long, let’s assume longer than 12 months, so, assuming the time goes beyond 12 month, the bank does not have to agree to extending or issuing a new BG?

    Answered above

    MG Are you saying that if the development date is say 3 years, the original BG remains valid and at no extra charge?

    Answered above

    As I said I only know of the guarantees from Cam so it would be interesting to know other peoples experiences with the other banks.

    Bernard

  • #72102
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    Anonymous
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    Unless it it copyrighted, ever thought of posting a copy (small print and all)on here so people can compare or comment?

  • #72104
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    Anonymous
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    The idea of the Bank Guarantee and why it was brought in was to cover purchasers’ monies until completion can take place. By that I mean it has been inspected by the Town Hall and deemed legally habitable by issuing an LFO. Legally, one is not obliged to complete without the LFO.

    However, if you have a lousy lawyer, they allow illegal clauses to creep into the contracts. For example by saying completion is when the Architect issues the End of Works certificate and even though it goes against the law, if you sign it you are snookered.

    Likewise with the Bank Guarantee. The idea was supposed to be that there should be no end date because it should cover you until the property is ready for the signing of completion at the notary. By putting an end date (which is not supposed to happen), and the development runs over time – you have to go cap in hand to the developer and try and obtain a renewed one. However, it is worth noting if the developer anticipates running overtime, he has to inform you in writing near the time and ask if you are in agreement to extend the completion date. If you are, THIS is the best time to demand a renewed Bank Guarantee – preferably without an end date!

    All this is against the spirit of the BG law which was brought in purely to give purchasers protection, but unscrupulous developers simply get round this by adding all these extra ‘illegal’ clauses. This is why it is so important to have a first class lawyer on your side who would not agree to these illegal clauses.

    With regards to whether its the bank’s or the developer’s money that is paid out, I thought it was very clear in Maria de Castro’s explanation and from what I’ve also read and learned along the way.
    It says:
    “They (the developers) need to open a special bank account for your amounts (different from the general one of the developer) and have it expressly written in the contract.
    (In the contract) Specification of the Bank or financial institution and the account number where the buyer’s money is deposited”.

    The way I understand it therefore is the purchaser’s monies are held in this special account, but based on this a/c – the developer then borrows money from the bank for the building works. If the BG is paid out on, it is from the purchaser’s money, but the bank loses their collateral – thus creating a ‘risk’ situation. The bank therefore will need to obtain securities/personal guarantees from the Directors of the dev. company – something I believe happened with our particular Bank/dev. company.
    If the bank knows the Directors have got everything they own already put up as collateral (or refuse to), the bank is going to fight tooth and nail not to honour the Bank Guarantee.

    In this scenario, the purchaser is left in no-mans land – with one option open being to put an embargo on company accounts as per Aifos recently, or assets such as unsold apartments of the dev. All in all, by tailor-making the contract and the Bank Guarantee, it is the developer’s way of giving the Bank Guarantee the two fingers.

    Bernard – our Bank Guarantee (one page A4) had the illegal clause of an end date, one year after supposed completion!. The developer finally/reluctantly issued it nearly two years after we first signed the contract, and best of all……..they issued it knowing the building licence had been revoked. So instead of refunding our money, they kept quiet about the revoked building licence, and issued a Bank Guarantee.
    Wasn’t our original lawyer special!!…..Not 🙁

    Now what was the Bank doing issuing a Bank Guarantee for a dev. with a revoked building licence?????? We probably return to Katy’s original comment – they’re all in cahoots with each other.

    I’ve written a lot of things above that is only in IMO and what I believe to be true. I am not a lawyer and always happy to stand and be corrected. So anyone new to the forum reading this should always get their lawyer’s advice. And I’ll use my old sign-off signature which is:

  • #72106
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    Anonymous
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    @mg wrote:

    ……say a developer has a site for 100 units at a development cost of 200.000 each. Do you believe that the developer has deposited with the bank the 20million?

    Apologies mg, I overlooked your question.
    In your example, no I don’t believe the developer deposits the total cost of the development.
    He deposits the stage payments from the purchasers (average 25%-33% of total price depending on the individual arrangement).
    On our development, I think all our deposits gave our developer collateral for about 20 million euros. After not building a brick for 3 years, pleaded unable to return monies as they had had to pay a lot of agents’ commissions and print a lot of brochures (?).
    The bank refused to pay on the BG, they made us go to court. The judge found in our favour for monies to be returned and guess what – the bank submitted an appeal!

  • #72107
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    Hi Charlie,

    Without getting very bogged down as I’m sure all the banks do it differently all I can say is that in my area the developers have to pay for the guarantee. Its no more than an insurance policy in effect and the premium is based purely on the size of the amount to be guaranteed.

    I have never known of a developer to issue a BG, only the banks.

    The guarantee here states that the property is to be delivered by its contracted date with the LFO or if the property is finished early and the LFO is obtained it is considered completed.

    The ones from CAM always have a completion date which is the same as the completion date of the property. If the property isnt completed on its contracted day or no LFO is obtained then the guarantee can be called on.

    What I dont understand is if there is no completion date to when the property should be finished at what point can you demand your money back by saying its not been finished??

    Bernard

    Bernard

  • #72108
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    Hi Bernard
    Will attempt to reply to your questions this way. It’s easier.

    “Without getting very bogged down as I’m sure all the banks do it differently all I can say is that in my area the developers have to pay for the guarantee”.
    You are correct Bernard. By law the developer has to provide the BG, and by law they are to give it to you free of charge.

    “Its no more than an insurance policy in effect and the premium is based purely on the size of the amount to be guaranteed”.
    Again correct – and each new stage payment has to be accompanied by a new BG.

    “I have never known of a developer to issue a BG, only the banks”.
    Sorry, that was me not being specific perhaps when I wrote my post. When I say the developer must issue you with a Bank Guarantee, I don’t mean them personally – they arrange it through their bank and the Bank issues the AVAL (BG)

    “The guarantee here states that the property is to be delivered by its contracted date with the LFO or if the property is finished early and the LFO is obtained it is considered completed”.
    That sounds just as it should be. And I like the constant mention of the requirement for the LFO.

    “The ones from CAM always have a completion date which is the same as the completion date of the property. If the property isnt completed on its contracted day or no LFO is obtained then the guarantee can be called on”.
    Again, that sounds correct.
    But this is where other BG’s fall down – they don’t even mention the LFO. So completion is based on the developer’s illegal clause in the contract – that completion is due on issue of the Architect’s End of Works Certificate. Which goes against the law.

    “What I dont understand is if there is no completion date to when the property should be finished at what point can you demand your money back by saying its not been finished”??
    If there is no end date on the Bank Guarantee, in other words is open-ended, it does not affect the fact that the developer is still tied to the completion date in the purchase contract. If the developer goes over this date in the contract then that is when you can demand your money back. From what I understand, the courts only look favourably on a demand for monies to be returned once about 3 months has passed after the contracted completion date thereby allowing a ‘reasonable’ time for unforeseeable delays.

    Did I just write ‘thereby’ ??- I’m beginning to sound like The Bible 😯

    Basically Bernard, CAM’s Bank Guarantees sound lovely and legal and within the spirit of the law…..and I wish I had had one of theirs!

  • #72109
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    Hi Charlie,

    Its just a pity that when it was decided that a bank guarantee would have to be given by law the wording could not have been standardised so there was no room for any developers/banks etc to flout the system and protect people as it was intended.

    I doubt that its too late for this to happen now but cant really see it happening in the near future somehow. If the Spanish government/legal system stepped in and wrote the standard bank guarantee which cannot be amended by anyone then those in the future would be safe, although this doesnt help anyone from the past.

    When you think of what needs to be included…..completion date…LFO….interest returned…..It really doesnt need to be a complicated document. I think that where the banks are able to add clauses this is where it all starts to go wrong.

    Best wishes

    Bernard

  • #72110
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    Anonymous
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    “If the Spanish government/legal system stepped in and wrote the standard bank guarantee which cannot be amended by anyone then those in the future would be safe”
    Do you honestly believe that in this day and age, in any Country, the Government could dictate to banks/insurance companies what should be written into their contracts?
    UK Government could not control its own funds, let alone the pension funds.

    Why not nationalise the Banks, the Developers and leave the Goverment control all?

    “When you think of what needs to be included…..completion date…LFO….interest returned…..It really doesnt need to be a complicated document.”
    Both the Bank and Developers are out to make as much money as possible and despite documents being weighted in their favour, there are still people prepared to sign the dotted line, despite the current publicity.
    Are they likely to kill the golden goose?

  • #72111
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    Bernard – well said.
    Your post not only echoes our sentiments exactly, but how sad that commonsense couldn’t prevail and that Bank Guarantees have been allowed to be ‘tinkered’ with (most probably on the diktat of the developer).
    As we often repeat on this forum, for a purchaser who does not have the experience of what goes on, it’s absolutely essential to have that decent lawyer by your side (of which there are many, it’s just finding them!!). A good lawyer would simply not accept these clauses and demand they are amended appropriately.
    If with a lawyer recommended by the developer, you can be tied up in knots legally without any protection for your monies paid if things go wrong. All you can do is pray.

    If your company’s BG’s are all as you say, it shows they have nothing to hide, nothing to cover – and are open and honest.
    But most importantly they are fully protective of your client – which is the reason they were originally introduced in the first place.

  • #72112
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    @mg wrote:

    Do you honestly believe that in this day and age, in any Country, the Government could dictate to banks/insurance companies what should be written into their contracts?

    mg – The difference is, this is a law with a very clear intention that they are playing around with. This is not simply a company’s own document.

  • #72113
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    Anonymous
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    “The difference is, this is a law with a very clear intention that they are playing around with. This is not simply a company’s own document.”
    Same as Pensions in UK then!!!!
    Or were the innocent supposed to lose money?

  • #72114
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    I really don’t know what you expect me to say to such a statement,mg.
    Of course no innocent people should lose money – but not knowing a lot of detail about the pension fund scandal, I’m going to bow out gracefully of getting involved in that discussion.
    All I do know is that a law was brought in in 1968 (Ley 57) with a very specific criteria which all Banks are supposed to adhere to when they issue a BG. And they are not doing that.

    But hey, who gives a damn – certainly not the developers who often don’t even issue a BG (which is a criminal offence punishable by fines and even imprisonment), not the Banks who issue lousy BG’s, then make you fight in court to claim on them, not the corrupt lawyers who allow their clients to sign biased contracts and/or fail to obtain a BG in the first place, not their watchdog – the Colegio de Abogados who doesn’t think it ‘goes against their rules’ if this is how a lawyer behaves, not the judges involved in cases these last few weeks of people I know who allowed the purchaser to receive nothing but injustice etc. etc.

    Just this week, there was an appeal hearing (yes, another case of someone winning their case in court to get their money returned on a breach of contract and of course the bank appealed). And surprise, at this appeal, the bank introduced a new argument that had not been introduced at the original hearing – the fact this is illegal and not allowed is obviously neither here nor there – and hey ho, the judge didn’t seem to care. And guess what, based on this new (inadmissable) argument the judge overturned the original ruling.

    Someone wrote this week on the forum that justice is getting better in Spain. I’m sorry, but I can’t agree – and until Bank Guarantees are worth the paper they are written on, all these so-called professionals in the property and legal field can continue to make a mockery of the law.

  • #72117
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    charlie

    very well put, how i hate this idea that just because a system has always worked in a corrupt way, that we should sort of accept it as being ‘Spain’
    It’s just wrong whereever it is, and should be forced to change ASAP.

    What about our situation though and many more who bought on some Aifos developments, we never even had a BG issued! Oceanview Properties recommended lawyers, assured us everthing was in place, and told us when we asked to see the BG, that we didn’t need one as our money with them was insured?, it was only 4 years after paying our deposit and many questions that they admitted that Aifos refused to issue a BG. So who is to blame?, the agents, the lawyers, the developers or all three.

    Anyone else reading this that thinks we asked for it, don’t forget this all started 5 years ago, before the agent/lawyer/developer scam thing was common knowledge and most people thought recommended lawyers were to be trusted!

  • #72118
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    “i hate this idea that just because a system has always worked in a corrupt way, that we should sort of accept it as being ‘Spain'”
    But assuming they changed the laws tomorrow, lawyers and accountants would be working ways around as they know there is a market out there who are waiting to sign up.
    A comparable being a change in the tax law in UK. Immediately it is announced, accountants are working to work around for legal tax evasion purposes.

    It’s just wrong whereever it is”
    Agreed, if illegal, if the party is working within the law, despite if we agree with it or not, they have the upper hand and if judges make a ruling, it is probably based on the law of the land at the time, despite us saying no, it is wrong.
    We may believe it to be wrong, but as in any country, there are many who work to the limits of the legal tightrope.
    Some of the reason why despite owning a couple of properties, I would never have or will consider buying off plan.
    The saying “if it is too good to be true…….” comes to mind.

    “Anyone else reading this that thinks we asked for it”
    I for one don’t believe that many, if any “asked for it”, but still maintain that for whatever the reason, maybe greed, maybe a must have, contributed to their own downfall by being too eager to sign up for such a large sum, in a foreign country, where they may not know the legal system or speak the language.

    “most people thought recommended lawyers were to be trusted”
    But recommended by who, the seller or their agent?

    It is just like someon going to Japan to buy a car, not speaking the language and being shown the plans of a new model to be available in 2 years time, then asked to part with 30,000 without even knowing the financial background of who they are giving their money to.

    5 years ago, perhaps “the agent/lawyer/developer scam thing” wasn’t so common knowledge, but all the more reason that extra care was needed.
    Remember, despit the media reporting on things now, people are still going to promotional exhibitions, still going on the 3/4 day inspection trips and still signing on the dotted line. Maybe not so much in Spain now, but Bulgaria, Cyprus, etc., are attracting buyers, and similar problems exist there.

  • #72119
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    @mg wrote:

    It is just like someone going to Japan to buy a car, not speaking the language and being shown the plans of a new model to be available in 2 years time, then asked to part with 30,000 without even knowing the financial background of who they are giving their money to.

    mg – I love your constant attempt to draw a parallel, but come on – this one is a bit off the wall.
    Firstly, if I went to Japan to buy for example a Toyota Landcruiser that was to be available in two years time – who would I be dealing with? A Toyota-appointed dealership who without doubt has been through rigorous checking on all areas by Toyota before being appointed, and like Spain where we bought – the sales people who I would be dealing with will speak fluent English. My (secondhand) landcruiser was bought this way direct from Japan by the original owner (an English judge!) with lots of unique spec. so had to wait 9 months – and he said the whole procedure was tied up beautifully by Toyota financial-wise so that there was no risk re. his deposit should they have been unable to deliver for whatever reason.
    And let’s face it – Toyota are not going anywhere, especially not jail!

    Come on, let’s have another one.

  • #72120
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    @mg wrote:

    5 years ago, perhaps “the agent/lawyer/developer scam thing” wasn’t so common knowledge, but all the more reason that extra care was needed.

    ❓ ❓ ❓
    Can’t you see the contradiction in your statement?
    If you acknowledge the corruption wasn’t such common knowledge, why would we have felt a need for that extra care?

    Most criticism we purchasers receive here on this forum – and I’m not necessarily including you in this, mg – for example: we should have done more research, stupid to trust a lawyer (?), we deserved everything we got, our greed got us into this…..blah blah, comes from EA’s who had the advantage of living and working in Spain for many years.

    Hindsight (or ‘inside knowledge’) is such a wonderful thing…..

  • #72123
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    @charlie wrote:

    A question for the legal-eagles: As the banks themselves are supposed to be covered for the BG by the developer, why are they so hell-bent in not paying up? I can only conclude they are corruptly in cahoots with the developer re. not paying up if at all possible.

    Developers are very quick to put stringent daily penalties for every day purchasers do not complete as in the case of one development I know, but it seems that when there are multi-breaches of contract, claiming on the Bank Guarantee is proving to be impossible in many cases.

    Because it’s normal.

    You seriously cannot expect to walk in a bank and claim on a bank guarantee for a breach of contract for say 150.000 Euros, that comes out of the bank’s coffer incidentally not the developer’s, and have the bank manager ask you if you rather want it in 500 euro notes or if it’s ok through a bank transfer. Come on…of course they are going to put a fight over it. It’s the bank’s money we’re talking of regardless if they later on go against the developer for it.

    Sadly, this isn’t the case otherwise why would you need to pay a lawyer to do this when it can be so easily achieved ?

    Banks/Insurance Companies will claw, fight and shout back at you (the lawyer) so as not to pay and will hold on to anything they can to avoid it. It is only obvious they will appeal any ruling, it’s absolutely normal to do so.

    But that’s part of our job to recover the secured funds/stage payments of our clients. Yes, it takes some time; nothing is ever easy in life is it ? But it works.

    We haven’t had any case in which we haven’t recovered a client’s money providing there was a BG in place. It takes some time (many months), perhaps even a year but we recover it.

    I have been warning people ad nauseam over the years in this and other websites regarding these BGs or IPs because if the developers go broke you will lose your stage payments -period-.

    I can say it louder but not clearer.

  • #72126
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    Hi MG,

    I think the pension debate is a bit off topic and for another forum. However the bank guarantee in Spain was decided by the government to become a law. If the government had then written the guarantee in a water tight way and not let the banks and builders do it we would not have the problems we see in some parts of Spain now.

    In my opionion the easier it is written the harder it would have been for the banks to refuse to pay up. The more complicated something is, the easier it is to find a loophole.

    All the guarantee needs to say is

    Builder A will deliver to Client B the property C with LFO on X date for X price. If its not delivered, Client B is entitled to money back plus interest or to accept delay and be paid daily compensation. Any modifications to dates etc are for client B to authorise in writng.

    And yes maybe a couple of other things need to be added but in general it could be so easy for the banks etc to clean up their act, …..but will they??

    Bernard

  • #72127
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    Participant

    @Drakan wrote:

    ….. claim on a bank guarantee for a breach of contract for say 150.000 Euros, that comes out of the bank’s coffer incidentally not the developer’s.

    Drakan – I stand totally corrected then on that one. Bernard and mg, you were both right 😳

    @Drakan wrote:

    You seriously cannot expect to walk in a bank and claim on a bank guarantee for a breach of contract ……
    Sadly, this isn’t the case otherwise why would you need to pay a lawyer to do this when it can be so easily achieved ?

    Drakan, with respect – I have never intimated the above as a procedure to claim on a Bank Guarantee.
    Having been through it myself, I know very well there is a correct procedure (via one’s lawyer), obtaining the correct documentation, making the appropriate requests to developer/bank via burofaxes etc. and the required time-scale that these events involve.

    I would never advocate trying to claim on a BG without a lawyer on-side handling the whole legal procedure – it’s worth every penny the lawyer’s costs involve. 😉

  • #72128
    Profile photo of Anonymous
    Anonymous
    Participant

    Just to set the record straight, there are many ways on doing this. Some developers actually deposit a sum of money etc…many ways. But as a general rule it’s the bank’s money, and the bank’s lawyers will in turn repeat against the developer for said amount.

    Nah Charlie, you’ve misunderstood me, I never meant to say that you defended claiming on a BG/IP a without a lawyer -you are much too sensible for that-, I meant that it isn’t as simple as it seems and that’s why a lawyer is required, it’s not a starightforward issue and it involves negotiation.

    Anyway, as long as you have a BG it can take long but you recover your money plus official interest rate.

    If you have no BG/IP you have nada.

  • #72129
    Profile photo of Anonymous
    Anonymous
    Participant

    Drakan

    …… to answer my question, who do you think should be responsible for the fact we were never supplied a BG? The bank/developer, the first two lawyers who never made sure it was in order, or the agents who advised us to use the two lawyers?

  • #72142
    Profile photo of Anonymous
    Anonymous
    Participant

    I would also be interested to know this, but am guessing it is ultimately the developer’s responsibility.

    Quote Devwatch:
    ‘The verbal guarantee given to you by the salesperson is simply no good. In this country, whoever builds has to guarantee, this is a MUST, and not doing it is putting the developer as well the client on risk:
    the developer, subject to fines of up to 25% of the amount which should be guaranteed, and the buyer, exposed to losing the funds invested if the developer encounters financial problems.

    If the developer has not been fined so far, it may be a matter of time before they are.’

    I also have no BG, & was told by my original lawyer that it was “not necessary”.

  • #72143
    Profile photo of Anonymous
    Anonymous
    Participant

    Ley 57/68

    Artículo 1º Las personas físicas y jurídicas que promuevan la construcción de viviendas que no sean de protección oficial, destinadas a domicilio o residencia familiar, con carácter permanente o bien a residencia de temporada, accidental o circunstancial y que pretendan obtener de los cesionarios entregas de dinero antes de iniciar la construcción o durante la misma, deberán cumplir las condiciones siguientes:

    Garantizar la devolución de las cantidades entregadas más el 6 por 100 de interés anual, mediante contrato de seguro otorgado con Entidad aseguradora inscrita y autorizada en el Registro de la Subdirección General de Seguros o por aval solidario prestado por Entidad inscrita en el Registro de Bancos y Banqueros, o Caja de Ahorros, para el caso de que la construcción no se inicie o no llegue a buen fin por cualquier causa en el plazo convenido.

    ……

    That’s the reply.-

    The wording of the law is very clear: the physical or legal persons who develop (build houses).
    Your lawyers are responsible for negligence on their professional duty but the ultimate responsibility is always the developer’s as the Law clearly states it’s their compulsory duty to secure stage payments.

  • #72144
    Profile photo of Anonymous
    Anonymous
    Participant

    Thank you very much Drakan.

    If only The ‘Illustrious Colegio de Abogados’ did something about the lawyers whose neglligence is reported to them. In my own experience & listening to the stories of others, they do not.

  • #72146
    Profile photo of Anonymous
    Anonymous
    Participant

    Someone on this forum (last year I think, can’t remember who) said they made an official complaint/report about their lawyer to the Colegio for failing to obtain them a Bank Guarantee (as well as lying for a year or so, making out they had got one).

    After several months of waiting, finally the reply came back from the Colegio: “We do not deem that your lawyer has broken any of our rules”.

    Nice to see you back by the way Drakan. Been on one of your 3 month holidays……?
    Who would have thought, here we are about two years on and still discussing Bank Guarantees 😯

  • #72149
    Profile photo of Anonymous
    Anonymous
    Participant

    @charlie wrote:

    your lawyer has broken any of our rules”.

    Nice to see you back by the way Drakan. Been on one of your 3 month holidays……?

    And this means what 😕 ….? Normally I only write when someone posts some legal query and there haven’t been many lately.

  • #72151
    Profile photo of Anonymous
    Anonymous
    Participant

    Just means I’m having a little tease, Drakan.
    I hope you realise that your contributions are always valued.

  • #72153
    Profile photo of Anonymous
    Anonymous
    Participant

    I’m losing my sense of humour. I think I need a break soon. 😉

  • #72157
    Profile photo of Anonymous
    Anonymous
    Participant

    And to think……I nearly wrote:
    “You’ve been away so long, was beginning to worry you were one of the lawyers picked up in the Malaya case”.

    whew!

    I know, I’m pushing it….

  • #79199
    Profile photo of Anonymous
    Anonymous
    Participant

    Can I stick my nose in this very interesting string and ask a question.
    I have asked my solicitor to resolve the bank guarantee due non-availability of LFO. He has informed me that an additional legal fee payment of 2500 euro plus vat is required if the above is carried out.
    Can anybody explain to me is this is above board??. The initial deposit of 3000 euro (bought through AmbaSun) is not included in the BG and was wondering if there is any way to recover this.??
    Thank you.

  • #79200
    Profile photo of Anonymous
    Anonymous
    Participant

    Hi manus1234
    I am wondering if this payment of 2.500 eur is for an out-of-court running or is required by your lawyer for suing bank.
    Why do you know that the initial deposit is not included in the BG ? It means that for example if your house costs 200.000 eur your bank guarantee is just for 197,000 ?

  • #79207
    Profile photo of Anonymous
    Anonymous
    Participant

    The BG only indicates my first payment to builder only. My solicitor says the additional 2500 + vat is for “legal fees and Notary fees for the resolution”.
    The BG is from CAM. The house is finished after two BG extensions, however the certificate of Habitation is not forthcoming from the Town Hall so we have decided to call it a day.
    Can you confirm that amount I have paid to the builder earns interest up to the day it is sent from CAM to my account, irrespective how long it takes?
    Thanks again.

  • #79220
    Profile photo of Anonymous
    Anonymous
    Participant

    I am terribly sorry Manus but I am afraid I don’t dare to answer your questions because I have not seen your BG and your contract. It is a very delicate matter and I don´t want to confuse you. Anyway I think and I hope everything´s gonna be ok in your case

    Felix

  • #79227
    Profile photo of Anonymous
    Anonymous
    Participant

    Felix
    Thank you for your input. Maybe somebody out there might
    throw some light on this??

    Manus

  • #79234
    Profile photo of Anonymous
    Anonymous
    Participant

    Bank Guarantees !!!!!!!!!!!!!!!!!!!!!! grrrrrrrrrrrr. Ive been trying for the last 3 years to get one (Draken advised me to ask) I did and was refused was told don’t need one the house is built so why bother! I kept nagging and was ignored by the builders etc and then finally told I could have one if I paid for it , so I asked my then solicitor to go ahead and said we would pay. Nothing !!! Just ignored by the builders who aren’t interested. Our situation is now still no guarantees , no licences, a built house (illegal) half the cost of the house paid and have been waiting for the so called decision from the Junta .

    Our initial deposit was made in 2003 all this time and now we have new solicitors and are hoping to go down the legal road now enough is enough. We were told everything was in order at the very beginning , just feel desperate now to try and recoup all of our monies paid.

    So as I said Bank Guarantees grrrrrrrr 👿

  • #79253
    Profile photo of Anonymous
    Anonymous
    Participant

    axwhale

    how many times have we read similar stories. It’s just so wrong! There are sadly some ***eholes on here who will blame you, and say ‘ why didn’t you check it first, it’s your own fault, and no good blaming anyone else’. That attitude of several on here, is really no better than the liars who are cheating us in the first place! As far as i am aware, having given no BG is an offence by the developer, we are up against a similar situation, but the BG is one of several breaches in our contract, with a court case coming up soon.

    Will you get justice in court?, i don’t think anyone will be able to tell you confidently for sure?, that’s just how poor the system is in Spain. Even when you know you are in the right, justice seems to be a lottery?

  • #79254
    Profile photo of Anonymous
    Anonymous
    Participant

    Developers who do not supply these BGs on off-plan purchases are breaking Spanish Law (in place since 1968). They can be fined up to 25% of the amount which should be guaranteed if they break this Law, but I haven’t heard of one case where this has happened. Has anybody on here ❓

  • #79256
    Profile photo of katy
    katy
    Spectator

    No, it is just another example of spanish laws that are ignored. Even with a BG it seems people have still to pay high lawyer fees just to implement it. I do not understand if someone has a BG why the banks don’t pay-up if the developer has not built 😕 Perhaps the banks are another layer in the corrupt system.

  • #79257
    Profile photo of Anonymous
    Anonymous
    Participant

    Unfortunately it is common in Spain for Bank Guarantees to be issued after you make a first payment. But then you are in the ‘Hands of the Gods’ as to whether one is in fact forthcoming.
    A good lawyer will hold your first payment in an escrew account, prove to the developer your monies have been paid, and ask for a Bank Guarantee to be issued at which time the monies would then be released.

  • #79258
    Profile photo of Anonymous
    Anonymous
    Participant

    I think in many cases the money has not been kept in a ‘protected account’ as it should have been etc etc 🙄

  • #79261
    Profile photo of Anonymous
    Anonymous
    Participant

    Katy – of course some banks are “another layer in the corruption system”. Our Bank Guarantee was issued a year after our building licence was revoked.
    The bank knew that nothing was ever going to be built, the developer knew it – but the purchasers didn’t. Most of us didn’t find out for another year and a half, and only then by chance rather than the developer officially informing us. It was just a ploy to perpetuate the deceit and the retention of our monies to aid their cash flow for as long as possible.

    You’re absolutely right Suzanne. In our case we know for a fact that Bank Guarantees were issued on the ‘personal’ guarantees of the directors – hence pressure from them on the bank not to pay, and thus resulting in us having to fight for our money in court.

    We often talk about the corrupt triangle of agent-lawyer-developer, but I believe in many cases the triangle has four corners that include the bank. I suppose a ‘square’ in which many of us were nicely ‘boxed’ in.

    Note: The above paragraph does not include all agents. 🙄

  • #79279
    Profile photo of Anonymous
    Anonymous
    Participant

    Hi all , Goodstich44 our situation sounds similar to yours our builders in breach of contract on several grounds as well. So our case soon to go to court as well. Have to think positive or Id crack up. I think we did everything right and we trusted our solicitor, agent and builders and believed what they told us , why should we not, it was our first experience and dealings in Spain and having a legal representative etc we felt satisfied with things. It wasn’t till the final payment was due that it came to light that site had no licences etc, then our solicitor said don’t pay last payment as the paper work is not in place and correct , since then the saga has gone on and on , it wasn’t for the trying to get bank guarantees I can tell you . I just feel let down by the professionals we trusted. Would I buy off plan again NO knowing what I know now from forums like these things would be done so differently.

    Lets hope there is some light and good news for all the people caught up in the illegal builds fiasco . If the Junta don’t get a grip and sort out this mess things will go from bad to worse.
    🙄 🙁

  • #79281
    Profile photo of Anonymous
    Anonymous
    Participant

    axwhale

    i really hope it all goes well for you. Just what body can you turn to in Spain, to say ‘excuse me, iv’e been swindled, what can be done’, they all seem to be part of the same scam! The situation seems to be, ‘tough luck, you are now on your own, get yourself a good lawyer, and hope that when your case eventually reaches court, that the judge is not corrupt and can be bothered to make the right common sense decision.

    What a farce!

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