My questions are:
1. Can the developer to do this to me?
Developers have no rules. They do what they like and seem to get away with it
2 If I take the developer to court should I engage a litigation specialist, or should use my current lawyer who essentially specialises in conveyencing?
You will need to engage a litigation lawyer as they are familiar with Court procedures.
3. If I’m going to the hassle of court should I pursue the developer for the return of my entire investment on the grounds of delayed completion (should have been finished 6 months ago)?
6 Months is not a long time to be overdue in Spain. Definately sue for the full amount if you go the route of suing the developer. IMO not the best way to go.
4. If the developer goes bust what are the chances of me receiving anything (I have a bank guarantee at the moment but I’m not sure how long this is valid for).
You should sue the Bank under the terms of your BG not the developer. Your BG is there for precisely this reason, that you are protected if the developer goes into liquidation or does not deliver the goods. ( I’m not sure you would have a strong case at this juncture in the eyes of a Judge, whatever the law may say, if you are suing because of a 6 month delay, but you need to be guided by a really expert lawyer) Even if the developer does not go under, still go for the Bank using your BG. They have the money. Your BG is valid until completion, ie. when the property is ready for occupation.
I am not an expert but this is just knowledge that I have picked up from going through a similar procedure and from other people that I have been in contact with..