Martinsa-Fadesa’s bankruptcy: Advice for buyers

By going into voluntary administration, Martinsa-Fadesa, Spain’s biggest private house builder by assets, has left 12,578 of its clients wondering whether they will ever see the properties they have partly paid for, and worrying what will become of their stage payments.

The company has issued statements vowing not to let down any of its clients, and promising to complete and deliver all the properties it has sold off plan or under construction. But with the company bankrupt, fine words may not be enough.

So where does Martinsa-Fadesa’s bankruptcy leave people who have paid money with no home to show for it? And what are the implications for those who have taken possession of a property built by Martinsa-Fadesa? With these questions in mind, the Spanish consumer rights organisation FACUA gives the following advice, at a special section of its website, for buyers affected by the Martinsa-Fadesa bankruptcy. The advice also applies to buyers from any other Spanish developers that have run out of money.

How can I be sure that Martinsa-Fadesa will finish building work on my development?

There is no way of knowing for sure, and although the company has said that it will do so there are no guarantees. It depends upon how the situation evolves, and the decisions taken by the court-appointed administrators.

Should I carry on making my stage payments even if building work has stopped?

Yes, because if you don’t you will be in breach of contract and lose your claim to the money you have already paid.

Have any other companies linked to Martinsa-Fadesa filed for administration?

Yes, so have Jafemafe, Inmobiliaria Mar Plus, Fecler, Inomar, Town Planning Consultores and Construcciones Pórtico, all of them owned by Promociones y Urbanizaciones Martín, now known as Martinsa-Fadesa.

What happens if they never deliver the property I purchased?

All developers are obliged by law to provide bank guarantees or insurance policies to protect their clients’ stage payments in just such an eventuality. You have the right to reclaim all your stage payments plus legal interest from the financial institution providing the guarantee.

When can I reclaim the money I handed over in stage payments?

Any time from the point where there is firm proof of breach of contract on the part of the developer. For example, if the developer overruns the delivery deadline stated in the private sale contract or marketing material – at which point you have to decided if you want to carry on waiting – or if the company, or its court-appointed administrators, announce that building work will not be finished, or not finished on time, or that planning licences will not be granted within the necessary timeframe.

How do you reclaim your money?

If the deadline for delivery has been missed, and you wish to reclaim your money rather than wait any longer, you have to communicate this in writing to the developer, ideally by burofax. Point out that they are in breach of contract, for which reason you are demanding your money back, with legal interest, and that you expect your refund within a reasonable timeframe (a week, for example).

If you do not get your refund within the timeframe specified, contact the financial institution – bank or insurance company – that underwrote the guarantee, providing a copy of your burofax to the developer, and documentation to prove breach of contract on the part of the developer (your private sale contract, for example).

If the developer or its administrators have publicly announced that building work will not be finished, or not finished on time to meet the deadline in your contract, you can also use this as proof of breach of contract for demanding a refund.

How do I know which financial institution has guaranteed my stage payments?

You, or your lawyer, should have a copy of your most recent bank guarantee. Furthermore, the company behind your guarantee should be stated in your contract or on your stage payment receipts. If not, you will have to ask the developer for this information. Failing this, you may have to go to court to get this information.

What if you don’t have a bank guarantee?

If the developer has not arranged a guarantee it will have broken the law. In this situation you may have no choice but to register a legal complaint, and then line up with the rest of the company’s creditors trying to get their money back in the bankruptcy process.

If I have moved into a property built by Martinsa-Fadesa, and find a construction defect, what do I do?

Given the company’s financial situation, it may not meet its obligation to correct construction faults at no cost to you. In which case you need to claim against the other companies or professionals (or their insurance companies) responsible for the building work, who should be listed in the end of works certificate (certificado final de obra).

What if my home suffers from structural faults?

In this case, you should be able to claim on your ‘ten year guarantee’ (seguro decenal), which all developers are obliged by law to provide.

Other words of advice

Other consumer organisations point out that, if you have the option of completing, it might be a good idea to do so as soon as possible, as you are better off with a property than an I.O.U from Martinsa-Fadesa.

Also, if you don’t have a bank guarantee, the first thing to do is send a burofax to Martinsa-Fadesa demanding one.

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