Large number of bank guarantees in Spain don’t exist leaving property buyers vulnerable

Designed to protect buyer’s money in the event that the property was not constructed in line with the contract, bank guarantees were seen as the ultimate in security by Spanish property investors.
 
But the discovery that many do not exist means many do not have the ability to get their money back, warns ReclainYourDeposit.com, a company set up to help disgruntled buyers.
 
 In its endeavours to recover lost funds on the behalf of investors, ReclaimYourDeposit.com has found many cases where the guarantee has been promised but not delivered. And it is not clear who is ultimately responsible for this failure, whether it is the bank, lawyer, notary or the developer.
 
‘Approximately 30% of enquiries received by ReclaimYourDeposit.com relate to Spain and, for many, the existence of bank guarantees alongside a fair legal system means a strong chance of deposit recovery,’ said director Daren Wallbank.
 
‘However, when these guarantees simply do not exist, we’re finding it difficult to apportion blame. Fault, we are told, does not lie with the lawyer, the notary, the bank or even the developer although all would have been aware of both the legal requirement and the clauses in the buying contract relating to it,’ he explained.
 
Lawyers are absolving themselves by saying that their responsibility ends with checking that the contract states there is a bank guarantee. ‘The fact that they could then oversee the sending thousands of pounds worth of client money into a non bank guarantee account seems to be irrelevant. Yet if there's no money in the designated bank guarantee account and it's all going into the developer's trading account, the bank will not issue the security,’ said Wallbank.
 
‘People put faith in their lawyer and it’s unfortunate that they’ve not been vigilant throughout. A quick phone call to the bank would have told them which account their client's deposit had gone into and timely alarm bells could have rung,’ he added.
  He believes the banks are at fault for not questioning why large amounts of client’s money was going into the developer’s trading account whilst the bank guarantee account remained empty. ‘Their defence is that they cannot be held responsible for the actions of their customers, merely facilitating the accounts. As for the notary, they simply checked the legality of the documents, charged their percentage, wielded a stamp and didn’t delve too much further,’ he explained further.
 
‘In short, everyone blames the developer. The wronged client is now stuck between a rock and hard place as had the developer still been in business and the project complete, the subject of bank guarantees wouldn’t have cropped up in the first place,’ he added.
 
The company is now hoping that it can put together a class action. If buyers have the original private purchase and reservation contracts, the bank guarantee or insurance bond certificate, proof of payments and finally a contract that has expired without the property reaching completion, then there is a chance of success, it believes.