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LAWYERS IN MALAGA FOR ENGLISH LEGAL ADVICE ON BUYING, SELLING OR INHERITING IN ANDALUSIA

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RELEVANT RULING FOR HOMEBUYERS OF NON-COMPLETED PROPERTIES WITHOUT BANK GUARANTEES

Ruling for non-completed Spanish properties without bank guarantees

Ruling for non-completed Spanish properties without bank guarantees

In the last few years, it has become quite common the significant number of homebuyers who have purchased off-plan properties and paid large sums of money on account for their future homes, however, the developer has never completed nor handed them over. Consequently, the advanced money has been lost in many cases, because the developer may have gone bankrupt and lost all assets to refund these amounts to them.

Spanish Government passed in 1968 the Law 57/1968 dated 27th of July on the receipt of sums paid in advance prior to the construction and sale of homes. This was aimed at stopping several cases of homebuyers who lost their money paid for properties which never were built.

Spanish Law 57/1968 is still in force and solicitors, who are specialised in this issue, know the regulations for homebuyers’ protection in respect of sums paid in advance to developers for off-plan or under construction properties prior to their completion. However, the most relevant point at this moment is the judgment argumentation set out for the court proceedings where 46 homebuyers without bank guarantees securing advanced payments, made a legal claim jointly and severally to the bank and the developer demanding the total amounts paid, because the construction works were never completed. The judgment was pronounced by a court of first instance of Albacete on the 08/06/2012 and was confirmed by the Provincial Court on the 11th of February of this year.

The aforementioned judgment ordered the bank to refund all amounts of money paid by the homebuyers, considering that it was jointly and severally liable together with the developer, pursuant to the interpretation of Articles 1 and 2 of the abovementioned Law of 1968, Article 4 of the Spanish Ministerial Order of 1968 and the First Additional Provision of the Law 38/1999 on building regulations.

Although the bank was not a party on the sale agreement and did not either issue bank guarantees for homebuyers’ payments on account, the main line of argument of this judgment to consider the bank to be jointly and severally liable is that this bank knew about these payments in the developer’s account and was aware that these amounts were paid for the purchase of homes in a property development. As a result of that, the bank did not comply with the obligations provided by Law 57/1968 and committed a banking malpractice, pursuant to the interpretation of Article 1.2 of this Law, as the developer should have been required to open a special account where depositing its funds apart from any other amounts aimed at the construction of the properties. In addition, the bank should have not permitted these deposits in ordinary accounts, and particularly when this bank was the only financial entity financing the development and profited from this real estate business.

This judgment entails a court action to recover the money for those homebuyers without bank guarantee securing the amounts paid on account to developers, because, if appropriate, they could bring an action for joint and several liability against the bank where the developer’s loan was granted, where the payments were deposited and where the developer operated. Thus, homebuyers will have better chances to recover the sums paid, considering that there are already many judgments where developers has been condemned to pay, but court orders cannot be enforced because of their insolvency, while banks are always solvent.

 

 

Author: Gustavo Calero Monereo, C&D Solicitors (lawyers)
Torrox-Costa (Malaga/Costa del Sol/Andalucia)

 

DRAFT OF THE DECREE ON THE LEGALIZATION OF HOUSING ON NON-DEVELOPABLE LAND OF ANDALUSIAN REGIONAL GOVERNMENT

Three weeks ago, we received in our offices a copy of the draft implementing Decree of 20th of June 2011, which regulates building and scattered rural settlements on non-developable (non-urbanizable) land in Andalusia.

This draft is supposed to be created as an attempt to regulate the situation of a large number of properties located on non-developable (non-urbanizable) land in Andalusia, where criminal or administrative proceedings cannot be filed against them for land development liability, because the offense or infringement is extinguished by prescription. The Andalusian Regional Government is partially responsible for this situation, as they have not protected or controlled the legality regarding land developments of municipalities for many years. Meanwhile, they have collected the profits from the transfers of title ownership by means of the transfer tax.

Regarding the draft of the Decree, the concept of constructions assimilated out of ordination is not understood. The use and enjoyment of these constructions can be exercised, but a complex administrative procedure is established, so that the city councils certify the security and necessary facilities for the use and enjoyment of these properties. However, the resolution to this procedure shall never mean the grant of the First Occupancy License, neither the owner’s rights shall be recognized to be exercised before any administrative or criminal proceedings (article 7, section 6 of the Decree).

If the use of housing is recognized and regulated to preserve the rural area, the environment and the scenic value where the construction is located, then, why the First Occupancy License is not granted when the owner is enjoying the property? What does “non-recognition” mean before any court proceedings? As a result, it could be understood that in the event of court proceedings, this recognition of assimilated housing shall not have any legal “value” for these proceedings, that is to say, legalization or regulation does not exist.

Maybe, the problem is based in the creation of the concept “assimilated to out of ordination, which was incorporated by the Decree on Urban Discipline of Andalusian of 2010 and its implementation.

Furthermore, an additional problem arises, as the Land Registry jurisdiction belongs to the Spanish Government. As a result, the State legislation should firstly include this legal concept of “assimilated out of ordination” within its rules in order to authorize the registration in the Land Registry of any administrative action which establishes a construction under the consideration of this concept. Nowadays, the only existing concept is “out of ordination”, but nothing is referred to constructions “assimilated” to these ones. Then, the Regional Government is not authorized to establish the access or registration in the Land Registry, as this jurisdiction belongs to the Spanish Government.

Lastly, in many Andalusian municipalities as the Axarquía region, thousands of isolated houses have been built on non-developable land under the corresponding construction permits. Then, it does not seem coherent that differences in treatment are not considered for these owners acting in good faith, regarding these municipal permits they were granted. This draft of the Decree does not include any reference to them; therefore, the legal situation of the constructions with permits equates with these other constructions without permits.

In conclusion, regarding the content of the draft, legalization or regulation of properties located on rural land is not incorporated; no legal novelty is provided to solve out the problem resulting from the lack of control of Public Administrations regarding the use of land; this law only complicates even further the current situation of this issue.

 

Author: Gustavo Calero Monereo, C&D Solicitors (lawyers)
Torrox-Costa (Malaga/Costa del Sol/Andalucia)

 

CURB ON “FLOOR CLAUSES” IN MORTGAGE LOANS

Nullity floor clauses mortgages Spain

Nullity floor clauses mortgages Spain

On the 30 September 2010, Court no. 2 of Seville gave judgment declaring the "floor clause” introduced by the respondent entities Spanish bank BBVA, Saving Banks Cajamar and Caja de Ahorros de Galicia in the mortgage loan deeds formalised with them abusive and therefore null and void, for considering that the minimum threshold interest rates set by them are abusive and detrimental for the consumer.

Although the judgment has been appealed by the three financial entities mentioned, the Court has ordered the provisional application of the resolution. Therefore, as from 27 January 2011, they will not be able to include the said clause in their mortgage loans, and from 11 April, they will not be allowed to charge the clients with the difference between the minimum interest rate as per Euribor plus the interest rate agreed with the client, and the minimum threshold interest rate or  “floor rate” set by the said bank entities in their mortgage loans.

The so called “floor clause” means that in times of low mortgage interest rates, such as the ones we have lived through and are living through at present, the client is committed to pay a set minimum interest rate, which means that even if interests go down, their mortgages cannot benefit from lower interest rates

According to ADICAE (Association of Banks, Saving Banks and Insurance Companies of Spain), in Spain, there are currently 3.8 million clients who have this “floor clause” included in their mortgage loans and have not been able to take advantage of lower mortgage interest rates over the last years. The said association considers that in 2010, Banks and Saving Banks obtained a revenue of 7,000 million euros thanks to these clauses. These results show the importance and relevance of this judgment.

Therefore, as from 11 April, the entities BBVA, Saving Banks Cajamar and Caja de Ahorros de Galicia are obliged to recalculate repayments in all loan agreements taking into account a variable interest rate according to the Euribor benchmark rate, plus the interest rate negotiated with the client, and not according to the minimum threshold interest rate or “floor rate” established in their mortgage loans. This means that, since the interest rates applicable will be lower, the monthly repayments of those clients who have a mortgage loan with any of these entities will decrease.

Commercial Court no. 11 of Madrid has currently admitted the biggest joint action filed in Spain against 45 bank entities for the application of these “floor clauses”. It is likely, that before the end of the year, we know if such a number of saving banks and banks have to follow the path of the other three mentioned, which will be the most logical and coherent outcome.

However, whichever the result, it is likely that this issue of "floor clauses” reaches the High Court, who will then be in charge of taking the definitive decision about these provisions being abusive or not.

In the meanwhile, I would advise you to check your mortgage loan deeds , so that you may see if you have benefited from this judgement and if from 11 March, your bank is applying the resolution.

We will keep you informed on new updates.

 

Author: Gustavo Calero Monereo, C&D Solicitors (lawyers)
Torrox-Costa (Malaga/Costa del Sol/Andalucia)

 

 

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C&D SOLICITORS S.L.P.
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Our law firm is located 40 km East from Malaga capital and 10 km West from Nerja.

Ariane Wijk
wijk@cdsolicitors.com
T: +34 - 952 532 582

Gustavo Calero Monereo
calero@cdsolicitors.com
M: +34 - 677 875 078

Francisco Delgado Montilla
delgado@cdsolicitors.com
M: +34 - 659 218 470

Guillermo Arenere Ruiz
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T: +34 - 952 532 582

Paula Ludewig
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T: +34 - 952 532 582

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