Your contract gave a completion date of Jan 06. What clauses are there in the contract regarding extensions to the contract period? Were you advised at any time of the delays in completion, in writing or verbally, and the causes of the same? It sounds as if you gave your implicit agreement in Nov 05 to an extension in contract period to take you to March 06. Then again in May? Did you put your concerns/wish to cancel the contract in writing to you lawyer? If not, your ongoing “silence” on the matter could be seen to be your tacit agreement, based on your previous reaction (“we didn’t mind”).
The “problem” with the valuation/mortgage is a separate one, nothing to do with your contract with the builders. There are a couple of other threads going at the moment on this very topic.
The bank guarantee issue is yet another. The developer is obliged to provide this and your lawyer should be able to provide you with the details. Have you expressly asked for it? Check the dates on it. Has it “expired”?
The property is now “complete” and available, with all paperwork in order, yes? When were you first advised of this? Assuming last month (Oct ?), your property has been delivered to you just 6/7 months late (assuming one extension of contract period – to March) which, for Spain, is pretty good!
You sound as if you have, understandably, lost faith in your present lawyer?