The recession in Spain and its impact on the property market meant that thousands of people lost deposits on off-plan holiday homes that never got built. But there are legal procedures in place to help you reclaim your money if it happened to you.
Before taking any cash from investors, property developers in Spain need to be insured or to have a bank guarantee provided by a registered organisation. This law has existed since 1968.
Louise Reynolds, head of overseas property expert Property Venture, says: “It is the responsibility of the banks to ensure that deposits are placed in special accounts that are kept separate from any other funds belonging to the developer or promoter. It is in effect a type of developer’s escrow account, controlled by the bank.”
This means that if the bank in question received a payment that was explicitly labelled as a deposit for an off-plan property, or if the bank would have known that this was the purpose of the money had they exercised due diligence, they are legally liable to refund you.
However, Reynolds warns, suing a Spanish bank on your own could be expensive and it’s not necessarily the first action you should consider taking. Instead, speak to the other investors who lost money on the development and think about taking group action against the bank. This is likely to cost less and could also potentially get you noticed – and dealt with – more quickly.
It’s also worth noting that if you hired a solicitor to oversee the property purchase but no bank guarantee was given, a claim against the firm could be possible.
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