Martinsa-Fadesa, one of Spain’s largest residential developer, not to mention largest ever business failure, has won a reprieve from its creditors after a judge in La Coruña accepted the company’s request for voluntary administration. But whilst Martinsa-Fadesa struggles on like a zombie, kept alive by the administration courts, stories are starting to emerge that Martinsa-Fadesa did not go by the book when selling its properties.
A recent article in the Spanish daily ‘El Pais’ reports that Martinsa-Fadesa sold properties without building licences, and failed to provide some buyers with bank guarantees to cover their stage payments, which is against the law. It may be illegal, but the hapless buyers will do all the suffering: They may be looking at big potential financial losses, whilst Martinsa-Fadesa only has to worry about a slap on the wrist for an ‘administrative infraction’.
And whilst Martinsa-Fadesa enjoys a break from paying its creditors during the administration process, individual buyers have to keep making their stage payments for properties that nobody can guarantee will ever get built. “Voluntary administration helps companies in distress, but does nothing to protect the interests of citizens,” the notary José Ignacio Navas Olóriz told ‘El Pais’.
“Bank guarantees should be provided and updated immediately, as required by law,” Navas Olóriz went on to explain. But sources at Martinsa-Fadesa told ‘El Pais’ that it takes one or town months to arrange bank guarantees.
Martinsa-Fadesa also claims it did its best to rectify an unforeseen problem with building licences that it inherited from Fadesa when Martinsa took over the company in 2007. Of the 16,000 properties Fadesa was selling in December 2007, Martinsa withdrew 4,000 from the market for not having appropriate licences. The developer also says that, once it had taken over Fadesa, it gave buyers of properties without licences the option of backing out.
Now that it has gone into voluntary administration, Martinsa-Fadesa 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.
Juan Carlos Gamboa, a Spaniard who bought a villa off-plan from Fadesa in 2005, is one of those clients. Gamboa has paid 96,000 Euros in stage payments for a villa that has not yet been built, and has spent 3 years asking for a bank guarantee without success.
But even buyers lucky enough to have a bank guarantee are finding they are far from in the clear. The article reports that, in some cases, the financial institutions providing the guarantees are trying to wriggle out of honouring them. It’s a familiar story.
With or without bank guarantees, Martinsa-Fadesa’s clients face months, perhaps years of not knowing what will happen to their money. Meanwhile, buyers who have taken possession of properties on one of Martinsa-Fadesa’s half finished developments will have to get used to their views of a building site.