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Hello all,
Has anyone bought into or know of someone who has bought into the same off-plan scheme as me (near Fuengirola, Malaga)?
I’m currently at a cross roads whether to ride out the continued delay (currently at 6 months) and accept the compensation offer on the table from the developer (10%) or progress with court proceedings… Hence this message to see what your thoughts are or what action you have taken and why? Maybe you are undecided??
Hope to hear from you…
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Hello Pippiedan,
We have around 10 clients at Arana de Mijas and all of them have now decided to not complete, for obvious reasons. This puts us in a position where we have had to make a legal appraisal of the situation, which I am copying below. I hope it is useful!
Current Situation with Arana de MijasIn respect to the situation with contracts which have been signed with Promociones Arana Sur S.L. for units at the development Arana de Mijas developers we have decided to prepare a FAQ list to answer most, if not all, the queries which may arise in respect of how to proceed from here in view of the situation.
How serious is the developer´s contractual default? There is a standard used by Courts to determine whether a default is considered to be serious enough to merit the cancellation of a transaction and this standard refers to a default that will impede the economical objective or becomes a hindrance to the legitimate expectations of the buyers. In practice it is difficult to establish a specific delay period but, after say 6 months, most judges will consider that a default has existed.
What happens with the bank guarantees/insurance policies? Banks and insurers can refuse an claim on these documents. These reason are varied but generally speaking they consider that they if the delay is not substantial they are not bound by law to pay on these documents. Conversely to what many property buyers believe, these documents are not first call guarantees which can be acted on when the transaction is no longer interesting but a form of guaranteeing an investment in the event that a default has occurred that, as said above, is of such a nature that it frustrates the expectations of the buyers. We have tried to enforce the insurance policies we have on your behalf, underwritten by Asefa, but they have rejected the claim.
What are my options? The options are really 2, as a third one, which is not doing anything, is not recommendable. Option 1 relates to completing the transaction, with the new conditions the developer is offering (10% discount). Not much more has to be said about this one. Option 2 relates to going to Court to cancel the property transaction, against both the developer and the insurance company, jointly. Option three means that the developer will enforce completion.
What are the costs of a Court case? A court case of this nature can cost anything between 6 and 10 thousand Euros, depending on the sum claimed (which always includes interests). The fees cover barrister, procurator and legal fees, and VAT.
How long does the Court case take to be resolved? The average time for a Court ruling, in the first instance, is of 12 months.
What are the implications of a Court case? A Court case will interrupt any other action taken on the transaction. If the case is won the insurance company and the developer, jointly, will be obligated to refund the deposit plus interest. If the case is lost you will be in the same situation as when starting the case and open to a claim from the developer to complete. It is possible that whatever the result costs will be awarded on the losing parties and therefore this has to be factored in.
How will the developer defend its position? They will argue that the delay is not substantial and that buyers want to pull out because the investment is not as good as it was initially made out to be (due to changing market conditions) and may even say, in respect of UK claimants, that the exchange rate makes it a very profitable move to repatriate funds to Sterling based bank accounts.
What would we do if we were in your situation? Many of our clients ask us this question. It is difficult to give a sweeping answer but unless there is a desire to complete one has to be proactive and make decisions in pursuit of, ultimately, obtaining the funds back, and this decision necessarily involves litigation against the developer. We do not encourage private purchase contract holders to litigate unless a)there is a significant chance of success and b) clients have been informed of the implications, but if these 2 conditions are met then we are happy to take on the matters. Another element of the Court case, or rather a consequence of it, is that if we can delay an outcome for say 12-15 months it may be possible that the market changes, the developer gets buying offers from buyers and consequently opts for an out-of-court settlement as all the while they are not allowed to sell the units.
Is it best for all claimants to join in one Court action? Definitely yes. A judge will be more inclined to listen to the grievances of 10 claimants than to 1 and there will be a tendency to give more credibility to such claim. Individual claims will also be heard and ruled on but the same claim will be stronger in the eyes of the ruler if a few claimants are together.
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Hello Pippiedan,
We have around 10 clients at Arana de Mijas and all of them have now decided to not complete, for obvious reasons. This puts us in a position where we have had to make a legal appraisal of the situation, which I am copying below. I hope it is useful!
Current Situation with Arana de MijasIn respect to the situation with contracts which have been signed with Promociones Arana Sur S.L. for units at the development Arana de Mijas developers we have decided to prepare a FAQ list to answer most, if not all, the queries which may arise in respect of how to proceed from here in view of the situation.
How serious is the developer´s contractual default? There is a standard used by Courts to determine whether a default is considered to be serious enough to merit the cancellation of a transaction and this standard refers to a default that will impede the economical objective or becomes a hindrance to the legitimate expectations of the buyers. In practice it is difficult to establish a specific delay period but, after say 6 months, most judges will consider that a default has existed.
What happens with the bank guarantees/insurance policies? Banks and insurers can refuse an claim on these documents. These reason are varied but generally speaking they consider that they if the delay is not substantial they are not bound by law to pay on these documents. Conversely to what many property buyers believe, these documents are not first call guarantees which can be acted on when the transaction is no longer interesting but a form of guaranteeing an investment in the event that a default has occurred that, as said above, is of such a nature that it frustrates the expectations of the buyers. We have tried to enforce the insurance policies we have on your behalf, underwritten by Asefa, but they have rejected the claim.
What are my options? The options are really 2, as a third one, which is not doing anything, is not recommendable. Option 1 relates to completing the transaction, with the new conditions the developer is offering (10% discount). Not much more has to be said about this one. Option 2 relates to going to Court to cancel the property transaction, against both the developer and the insurance company, jointly. Option three means that the developer will enforce completion.
What are the costs of a Court case? A court case of this nature can cost anything between 6 and 10 thousand Euros, depending on the sum claimed (which always includes interests). The fees cover barrister, procurator and legal fees, and VAT.
How long does the Court case take to be resolved? The average time for a Court ruling, in the first instance, is of 12 months.
What are the implications of a Court case? A Court case will interrupt any other action taken on the transaction. If the case is won the insurance company and the developer, jointly, will be obligated to refund the deposit plus interest. If the case is lost you will be in the same situation as when starting the case and open to a claim from the developer to complete. It is possible that whatever the result costs will be awarded on the losing parties and therefore this has to be factored in.
How will the developer defend its position? They will argue that the delay is not substantial and that buyers want to pull out because the investment is not as good as it was initially made out to be (due to changing market conditions) and may even say, in respect of UK claimants, that the exchange rate makes it a very profitable move to repatriate funds to Sterling based bank accounts.
What would we do if we were in your situation? Many of our clients ask us this question. It is difficult to give a sweeping answer but unless there is a desire to complete one has to be proactive and make decisions in pursuit of, ultimately, obtaining the funds back, and this decision necessarily involves litigation against the developer. We do not encourage private purchase contract holders to litigate unless a)there is a significant chance of success and b) clients have been informed of the implications, but if these 2 conditions are met then we are happy to take on the matters. Another element of the Court case, or rather a consequence of it, is that if we can delay an outcome for say 12-15 months it may be possible that the market changes, the developer gets buying offers from buyers and consequently opts for an out-of-court settlement as all the while they are not allowed to sell the units.
Is it best for all claimants to join in one Court action? Definitely yes. A judge will be more inclined to listen to the grievances of 10 claimants than to 1 and there will be a tendency to give more credibility to such claim. Individual claims will also be heard and ruled on but the same claim will be stronger in the eyes of the ruler if a few claimants are together.
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I was very interested in the question from Pippiedan and Antonio’s extremely helpful reply. I am in a similar situation. I saw the beginning of the Spanish property collapse – I received no communication from the developers at Arana de Mijas for nearly a year – the construction was 8 months over schedule and I withdrew from the purchase. I had paid a 20% deposit (about 60,000 euros) to Andalucian Dream Homes who are now liquidated.
I feel after reading Antonio’s post that:
a. I should do something to recover my deposit as the developer was guilty of a breach of contract (as verified of course by my solicitor) and the failure to communicate anything to me at all either by the developer or Andalucian Dream Homes was appalling
BUT
b. I feel my money might well be wasted if I resort to law. I note well Antonio’s points about changes in the exchange rate (they did benefit me in the end) and perhaps that waiting 8 months would not be regarded by a Spanish court as long enough.Knowing that Antonio has other clients taking legal action against the developer, could Antonio or Pippedan or any other of the Arana de Mijas litigants or interested parties please update me on develoments and lend me their advice? Many thanks.
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Hi,
I’ve just received my 10% deposit plus interest back (minus the lawyer costs)!
Like you, I was frustrated with the poor communication from the developer and what action to take.My lawyer (from Lawyers of Spain), took action [litigation letter] to recover my deposit directly with the insurance company
who issued the bankers guarantee. Their litigation partner visited the development site with a surveyor to assess the amount of
time required to finish the development.I hope this helps.
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To Pippiedan and Claire,
Many thanks for your messages. Your success has given me great hope and I have contacted Antonio who has already been a great help.
It appears that ideally I need to have the original insurance policy so that a claim can be made against Asefa. I am sure that I never saw or received one.
Could you help me by telling me if you received an insurance policy? From your solicitor?
Many thanks. -
@nickscott wrote:
It appears that ideally I need to have the original insurance policy I am sure that I never saw or received one.
Nick, take a look through all your paperwork and see if you can find a paper with ‘AVALA’ on – with a bank’s name as a header.
Avala is the Spanish word for ‘Bank Guarantee’ which acts as your insurance policy.
Your lawyer should have ensured you had one. All developers have to issue a Bank Guarantee by law.
Any mention of a Bank Guarantee in their correspondence with you? -
We did not have an insurance policy per se. It was a Bank Guarantee. On it , it had the names of me and my husband, our passport numbers, the amount of money covered and the precise property that we were buying + relevant dates. We took the original document from the ( c**p) Lawyer when we discovered there were problems. We also changed Lawyers..twice. (3 in total)
If you are instructing new Lawyers to act for you, they wil need the original document.
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in my contact (English translated version) it states bond/ guarantee policy (which i learnt means insurance).
My lawyer from (Lawyers of Spain) were dealing with the insurance company called ASEFA. I’m happy to share with you my contact details of the Lawyer i used. Hope this helps. I know the pain/ hassle you are going through. -
To Charlie, Claire and Pippiedan,
Thank you so much for your quick and very helpful replies. I’m afraid I placed far too much trust in my Malaga lawyer last year (but well, I was paying the firm a lot of money to protect my interests!). I was very disappointed with their performance despite the firm being ‘highly rated’ both in England and Spain (a bad joke). Like pippedan my contract mentions the bank guarantee and ASEFA by name and I shall certainly be using Lawyers in Spain from now on. I thought that Antonio’s reply to pippiedan’s original query was exemplary.
Claire and Charlie, I received nothing at all from my lawyer in the way of paperwork about bank guarantees/insurance. I have contacted the law firm by email today and I will telephone on Monday.
I could whinge on for a long time about how disappointing my lawyer was but there’s no point. Suffice to say that I am expecting that they will demand a fee for providing a copy of the policy.
I will add a further post later.
My appreciation again and kind regards. -
I would urge any purchaser suffering from Bank Guarantee problems – either having not being issued with the legally required Bank Guarantee or having been issued with the Bank Guarantee you are now finding the Bank will not honour it – to go to: http://www.bankguaranteesinspain.com and join the BANK GUARANTEE PETITION.
Make your voice heard.
Kind regards
Keith
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