It is unlikely that many of our clients are familiar with Spanish Law, but, just in case there are one or two out there that have read about how legal cases can have a “sell by date” here, I’d better explain all this business about expiry dates that in Spanish law is called prescripción and in Common Law as “Statute of Limitations”
Under the Spanish Civil Code, a case can “prescribe” within a certain period if it’s not mentioned specifically by the law used.
Law 57/68 doesn’t mention time limits
So, something called “plazogeneral”, plazo in this case means deadline, is used.
The “Plazo General” has a shelf life of 15 years.
That’s all right then, still got a couple of years, I bought the “property” in 2006.
But hey, I’ve read that in 2015 (7th October) the Spanish Civil Code Article 1964 was changed and that for these types of cases, the “expiry period” was now only going to be for five years.
So, If I paid my money through the Spanish Banking System in 2006, with this new scenario my case was null and void back in 2011.
OH NO, NO… The change in the article carries something that it’s called a régimen transitorio (that more or less translates itself…). This means to give all five years starting 7th October 2015to to have another bite at the cherry if they haven’t done anything yet. So, your sell by date is now 7th October 2020.
Another bite at the cherry indeed… Nobody knew anything about this law until a few years ago. That’s why I like to call it the “great unknown”
So, there you have it, Ladies and Gentlemen, just under 13 months… And I still have four more Spanish/Moroccan developers to do.
There a lot a technical stuff here and I had my doubts if I really wanted to publish it and bore people to death. But I’d rather have that than someone coming to me because they had been given wrong and alarming information.
Talking of information… If you’d like to receive more, don’t hesitate:
Second – Receiving the sums advanced by purchasers through a Bank or Savings Bank, which must be deposited in a Special Account, with separation from any other funds belonging to the promoter, which may only contain funds deposited for the construction of dwellings. For the opening of these accounts or deposits the Banking institution or Savings bank, under its responsibility, will demand the guarantee to which the previous condition refers.
(For the law to be applicable)
Monies for off-plan house purchased MUST be credited to a Bank account (or Savings Bank). In Spain these are/were called “Cajas de Ahorros”
This account MUST be separate from that used for the day to day of the developer.
The funds deposited in the special account MUST be used to finance construction.
(The interpretation we are pushing forward which is backed by the law): The Bank MUST insist that these funds are spent on construction and only construction)
NOTES TO BACK UP OUR CASE:
Did the developer’s Spanish bankers supervise the above?
Was, the developer’s Spanish bankers aware that these funds were destined for Morocco where the only way you can register an investment from abroad is by channelling funds through their banking system.
Why did the developer in, some cases instructed, Moroccan Real Estate investors to remit funds to a bank outside the country?
Was the developer properly advised in Morocco about the nature of their investment laws?
Why did Spanish lawyers (who should have known better) transfer their clients funds to the developer’s bank in… Spain.
Did the developer know that in order that their buyers could repatriate funds in future the only way to do so is by individually declaring the investment in Morocco?
Were any funds transferred by the developer done so in bulk or under individual names? If the former took place, the developer and the client’s lawyers were jeopardising any future prospect to repatriate funds.
The case is against individual banks and NOT against the Spanish arm of the operation of the different developers involved. Under the clauses of the law, banks are obliged to reimburse ALL funds channelled through its books plus interest at 6% per annuum.
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.
As stated beforehand, we are operating as in common law countries, we have explained that the law permits precedent, in other words, a favourable ruling in the matrix case, will be the guide for winning the subsequent individual cases.
(One Example – Of Many) – Developer X
In the last two years we have established links between S.A.R.L’s (Morocco) and S.L’s (Spain). The extract of the documents we hold, that is the Moroccan Subsidiary’s full legal documentation for Morocco that will eventually be presented to a judge in Spain and hopefully establish the matrix ruling that will create precedent.
We also know that, at least in my experience, that considerable amounts of money invested in Moroccan Property, were indeed, channelled through Spanish Banks.
Quite a number of law firms have tried to apply law 57/68 in respect of properties in Morocco. With some developers, specially, those who did not furnish their clients with bank guarantees, it has been specially difficult to obtain and prove the link between the Spanish and Moroccan arms of the operation, not because these links do not exist, but because to obtain any detailed official documents is practically impossible to those who are not on the ground. With one developer in particular, it has taken us over three years to obtain that proof, all with considerable expense. Obviously, these documents are worth their weight in gold and will be presented to the court for the matrix case in Spain. A favourable resolution here will lead to all hope for the subsequent presentation of individual cases, this time with an extremely high percentage of success.
A potential favourable ruling on the link between the S.A.R.L and the S.L (A general matrix ruling)
Individual case by case (Each client individually).
What is a Matrix Ruling: (In this particular case) It is a case won by the accusers at the first instance court that will create a precedent, Law 57/68 is one of those pieces of Spanish legislation that admits precedent. Spain is a civil law country and not Common Law, as for example the UK. However, in some instances the civil code admits precedent which in Spanish is called “jurisdicción” (jurisdiction has a different meaning under, say, English Law). What are we trying to achieve with this? – Very simply… We are trying to prove that the S.A.R.L (Morocco) and the S.L (Spain) companies are one and the same. If that ruling comes through, it will be taken into consideration by a judge when the time comes to take to court each individual case. According to my legal sources, if this is established there is an 80 to 90 percent chance that the defendant will win each individual case. The Matrix case will take less than a year to come through.
Armed with precedent, each individual client will take “their” bank to court in order to claim the deposits originally transferred and to win a compensation package. This is the second stage.
For the Matrix Case there is no need to send any personal documents, we will only require a signed mandate form and a Power of Attorney. Both documents we will prepare.
For each individual case: If you are an existing NHI client, we will have all the information on how you paid the developer. Eventually, you will need to notarise and apostille the following documents:
Sales Contract (French Version Only)
Proof of Payment (Very Important)
Power of Attorney (Spanish Version Only)
Copies of Passports (No need to Notarise nor Apostille this)
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.
It is composed of very few articles, seven in all, but has the moral superiority of legal precedent behind it.
It established certain responsibilities for developers and builders who sold off plan, one of these responsibilities was the opening of separate bank accounts to receive customer deposits only, keeping this well apart from day to day transactions. Disposal of funds only had one aim, the progressive funding of construction.
Another interesting disposition, specially, for the time, was the necessity for (the developer) client’s funds held at the developer’s bank, to be fully protected by an insurance policy and/or a bank guarantee. It, therefore, created a responsibility upon the bank or insurance company who were now responsible for reimbursing the deposits to the buyer should there have been a breach of contract on the part of the developer.
This new burden for the bank or the insurance company made it harder for the developer to obtain finance as conditions were hardened. It meant that only the most reliable / reputable developers managed to obtain funding as the bank would in turn ask for guarantees or collateral.
This naturally and accidently lead to the bank or insurance company to be extra zealous when it came to be supervising the application of funds by their developer clients.
As things settled into place and the house market consolidated, this supervision was somewhat relaxed and there was a time during the various boom years that nobody gave this law any thought at all, although banks and insurance companies were still required by law to issue guarantees to individual buyers.
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.