All the defence arguments put forward by Banco Santander & Banco Popular    
are rejected by the Judge. 
Law 57/1968 is a perfect solution for illegal developments and a way to resolve
off-plan property problems in Spain.

Cortijo de Torreblanca is a failed off-plan housing project from the renowned developer Aifos.  It contravened the Fuengirola PGOU (General Urban Zoning Regulation) and was stopped when it was near completion.  The buildings, now looted and vandalised, stand as a reminder of the urban excesses of the boom and bust years.

The Supreme Court is now extending the application of Law 57/1968 to illegal property developments, which is an effective solution to resolve planning corruption in Spain.

The buyers originally filed a Lawsuit against Aifos for purchase contract cancellation and obtained a favourable Sentence in 2009.  Aifos did not refund the money.

Aifos went into administration in 2009 and the former legal representatives of our clients registered their credit in the insolvency procedure but took no further action.  The only benefit of registering your credit in the insolvency procedure is that you are then an official unsecured creditor of the developer, but you will not receive any refund from this procedure.  However it can be used as strong evidence when claiming against the developer’s banks, either the guarantor bank or the bank receiving the off-plan deposit, which may be a different bank.

When the clients contacted CostaLuz Lawyers in 2015, we advised them that there was no way of obtaining a refund through the insolvency procedure and that best course of action was to use the resources of Law 57/1968.  At that time we had already won our landmark Finca Parcs Action Group case in Hellín, spearheaded by Keith Rule, and case law for Law 57/1968 was starting to be established in favour of off-plan buyers.

However, in this Aifos case we had to begin with the Preliminary Diligences Court procedure to obtain further evidence for a Lawsuit against the developer’s bank.  That procedure was completed fairly quickly and in November 2016 we filed the Lawsuit against Banco Santander & Banco Popular.

This latest Sentence won by the CostaLuz Lawyers-DeCastro team is interesting as it rejects all current defence arguments being used by Banks to protect themselves against these actions:

Classification of the property and speculative character of the purchase or investor status of the buyers: Dismissed by the Judge, for two different reasons, firstly, Law 57/1968 applies as the parties agreed on protecting the risk according to Law 57/1968, which means that Law 57/1968 is applicable even if the off-plan project was classified as an apart hotel and not only for residential use. Secondly with reference to the speculative purchase the Judge stated, 

“Applying previous doctrine, we must conclude that in the present case there is no evidence that the buyers were acquiring the property for speculative purposes. The burden of proof rests on the party that alleges it.  The defendant bank has not provided any proof of such a speculative purchase.  At the trial the buyer’s stated that they bought the house with the idea of using it as a holiday home for vacations”

Proof of payment of the off-plan deposit: The Judge stated, 

“The off-plan payments were proved to have been paid and this is consistent with the evidence provided by the Aifos Bankruptcy Administration and the First Instance Sentence in the case against Aifos in which the purchase contract was cancelled and Aifos condemned to refund the buyers”

Responsibility of the guarantor: The Judge stated, 

“In accordance with Supreme Court jurisprudence this Court concludes that the General Guarantees issued by the Banks guarantee the repayment obligations of the amounts advanced by buyers in compliance with the provisions of Articles 1.2 & 1.3 of LEY 57/1968, even if the individual guarantee has not been issued in favour of each buyer.  The General Guarantor assumes co-responsibility with the developer to guarantee the eventual return of the amounts paid as off-plan deposits by the buyers in case of non-compliance by the Developer”

Expiration of the time limit to claim against the developer’s bank: The Judge stated,

“The time limit for this action has not expired as this is an action based on a special law, LEY 57/1968 which is subject to a general limitation period of 15 years”

Bad faith of the claimant: This is an argument that is regularly used by Banks these days, trying to allege bad faith against the buyers due to the time taken to file the Lawsuit.  The Judge affirms in this Sentence that there is no circumstance that demonstrates the existence of bad faith on behalf of the buyer based on the time it has taken to file the Lawsuit. 

A contract cancellation procedure against the developer, the subsequent insolvency procedure and a Preliminary Diligences procedure clearly demonstrate the reason for the delay.

Interest payable by the Bank: The Judge confirms that the bank must pay interest at the ‘legal rate’ from the date the buyers paid their off-plan deposit to the developer’s bank account.  Legal costs are also imposed on the Bank.