Law 57/68 was enacted to protect off plan buyers of property in Spain against the risk of the developer failing to deliver the property according to the contract.
The law is very short and very precise. It distributes responsibility not only to the developer themselves but to their bank.
Any developer wishing to sell off plan, required their client’s deposits to be safeguarded by a bank guarantee or specialised insurance company issued in the buyer’s name.
A significant number of Spanish Property Developers expanded their business to Morocco in the late nineties under the umbrella of that country’s second property market push that was sponsored by their government.
The marketing of off plan properties in Morocco was directed from Spain itself and conducted by the mainframe Spanish arm of the group. This opens a possible application of 57/68 as a viability.
We have obtained all the legal documentation to prove that there is a link between the two companies. Something of an exclusive.
Other legal firms have had terrible difficult difficulties in obtaining these documents and had to forego the possibility of applying this law.
The proposed procedure has two gradients:
A general precedent ruling proving the existence of the link between the Spanish and Moroccan Operations (Matrix Case)
Use that precedent to submit individual cases in a second stage.
All buyers are invited to participate in contributing towards the cost of this master case whether they are NHI clients or not.
Upon a successful ruling (will take around a year) the cost of the individual personalised cases will be reduced considerably.
We feel that the final hearing will be in under two years.
IMPORTANT: This is a totally separate case to the one you may be involved in the Kingdom of Morocco.
You can see that Law 57/68 was an attempt to stop the unscrupulous developers of the day from doing what they wished with other people’s money and the “hound” who were supposed to ensure this did not happen, were the banks themselves. So, a duty of care was established, banks had to ensure that constructors issued their clients with insurance policies or bank guarantees and supervise that (bank) finance was applied correctly. There is yet another angle that this firm has discovered and that’s not widely known. The law can be applied even if you haven’t got a bank guarantee. We need to prove that funds stayed in Spain, whether that is, funds went from client/lawyer to the developer’s Spanish account. This coupled with a positive ruling in the matrix case (link between the Spanish/Moroccan companies) will compose an excellent case.
Remember that the law requires the developer to open a separate account for day to day transactions. I simply cannot see a bank supervising the comings and goings of funds from an account prior to 2008. The bank was, simply caught when necessity came during the crisis.
Spain was one of the hardest hit countries during these years and specially it’s house market. Although the country was not officially “rescued” by the EU, a lot of money had to be injected into the banking sector, namely what were called “Cajas de Ahorros” or Savings Banks. These were usually public or semi-public sector institutions with a marked regional implantation and whose spirit was in theory to serve the public, in the sense of promoting social campaigns, and developing their, usually, rural environment.
Because of the consequences of the financial crisis, and the resulting and repeated failings of developers to deliver, the formerly forgotten law was revived with hundreds of people benefiting from it.
To be continued
The law is a pioneer, at least in Spain, before it, there was nothing to protect buyers off-plan, not that there were so many of them at them, but the signs of the times created a kind of gold rush por property.
The spirit of the legislation is to stop abuses committed by developers against, sometimes, vulnerable people who paid them deposits bona fide, and to stop “the justified social alarm in public opinion provoked by repeated misuses even with misdemeanour that are present” or so said the legislator of the day. The legal measure pretended to arm buyers with guarantees when paying considerable funds, sometimes their lives savings, to developers for an off-plan sales contract. These builders and promotors frequently delivered the product late, sometimes years, or not finishing it at all. It looks that things have not changed much.
Le Jardin de Fleur (Saïdia)
Le Jardin De Fleur was supposed to be the flagship development within the macro-complex Mediterrania-Saïdia in turn one of the prototype state-of-the-art resorts planned under the umbrella of the Plan Azur 2010 tourism and infrastructures programs designed to quadruple the number of tourist to Morocco.
LJDF was, indeed, an ambitious project that even won some prestigious design awards. It’s variety of apartments, townhouses, villas and Riad style villas all built over 11 different plots ascended to 1342 units. The project also made a provision for in-house facilities such as sporting infrastructure, spas together with cafés and restaurants in addition to that available at the overall resort per se. In those boom years of the first decade of the 21st Century it naturally attracted a good number of International Investors and Private buyers with considerable success.
With the onset of the World Financial Crisis building works stopped in 2009 as it seemed that some of their funding partners went bankrupt and nothing has been done on the building front since then as the developer have found it difficult to raise finance despite impressive associations with leading players in the field and subsequent near misses. 2009 was also the very same year the King of Morocco, HM Mohammed VI, officially opened the rest of the macro-project which had and still has his backing. You have to feel for the Moroccan authorities who have fervently supported the launch of their country as a first class tourist and residential destination and to see some foreign developers, as it is not the only case, start and stop in mid-flight leaving thousands of bona-fide investors stranded coupled with the cost in image for the country as a whole.
Developers Property Logic had a clever marketing strategy, we all thought it a masterstroke at the time getting high-profile premiership players such as John Terry and Rio Ferdinand amongst others to do promotional work for them in return for discounted properties at LJDF worked at first but backfired later. It must have proven very embarrassing for the players so much so that the story was featured in an article in the Daily Mail in April 2013. The developer also collected considerable sums from off-plan deposits paid by buyers, a good number of them British including 25 footballers mentioned but there were other nationalities too. All of them are now with nothing to show for their investment and a great deal of frustration.
Property Logic published their last update also in April 2013 in all probability provoked by the newspaper article. This humble blogger has also tried to contact Sean Cusack, one of the directors there without success. The only information I have is what it’s published together with what I see on the ground in Saïdia and comments made by investors and buyers.
In the newsletter the developer admits that about 50 buyers have taken legal action in Morocco against them and insist that they are going to finish the development. They claim to have invested 10.5 million Euros with 60 or so million provided by the buyers in off-plan deposits. Two thirds of the 70 million went towards land purchase, construction and licenses with the rest going into design, marketing, sales and agent’s commissions.
The 10.5 million euro said to have been invested by the developer, was according to the update, invested by Estonian businessman, Margus Reinsalu through his company KC Group who are also active in other developments in Brazil. There are two further partners involved in Property Logic according to the April 2013 newsletter, the aforementioned Sean Cusack and one Joop Huisman. As KC’s initial loan was not repaid they took over the majority of the shares according to a certain 2009 agreement when building stopped. However Cusack and Huisman appear to still have the option of to reclaim their original equal 2.6 million euro stake in the venture. Property Logic Invest (Spain) also has equal interests in the project with KC, Cusack and Huisman as members of the board.
The Mediterrania-Saïdia resort as a whole is about 45% complete as we write in October 2013. It is now under the control of CDG an important Moroccan Company specialized in the field who intend to finish off the resort including the 9 luxury hotels originally planned. At present there are only 3 hotels operating but they have not fulfilled their intended grand role to cater for the international jet set with many that would have arrived in their luxury yachts at the Marina from places like Monaco and Marbella. Just one look at the hotels gives an indication of how things have changed for the worse. They close their doors in winter and its summer clientele are tour groups and civil servant from nearby Melilla on weekend outings. 50 or 60 euro all in will give you a stay in a supposedly five star grand luxe, gin tonics in plastic cups notwithstanding.
At the very least both Reinsalu and CDG are saying that they intend to finish off their respective projects. Obviously CDG have it easier as they are one of the biggest operators in Morocco and still have the backing of the government and the Monarch. Nevertheless Property Logic are keeping their clients informed from time to time even if it is to say that they have nearly missed yet another important funding scenario or that they have joined up forces with some big fish investor from a far off land. Credit has to be given to them though which is more than you can say for other foreign investors/developers.
If you are a disgruntled investor in LJDF what are your options?
1.) Sit pretty and hope that PL’s messages become a reality that is to say you are going to finally get the property you’ve bought. Better late than never as they say.
2.) Politely ask for a refund that you are not going to get. No money.
3.) The logical antidote for this type of situation, not the panacea but at least you will be protected is to take legal action and get a Moroccan Court to allow for a lien to be inserted against the assets of Property Logic Morocco. This is a type of preventive embargo that will secure your rights if there are any negative official movements against PL, exactly what the 50 or so people that the newsletter mentioned did, they will not get their money back immediately but they have their name officially recognized as a creditor. For more information about legal action see my articles of August 2013 at the beginning of the blog.
The worst case scenario would be that any potential negative official movements bypass the original buyers. A lien will safeguard your interests as the hypothetical new owners would need to take creditors legally into consideration before they do anything else. Let’s hope that this doesn’t happen, for everybody’s sake including Property Logic themselves.
Property Logic Newsletter 05.04.2013
The Daily Mail