British overseas property investors are starting to receive compensation from the aborted purchase of Spanish holiday homes that were paid for but never built.
Following the ruling in the Spanish supreme court in 2015, an estimated 130,000 British property investors have been able to claim compensation directly from the banks rather than Spanish property developers for off-plan properties that were never completed or sub-standard.
British property buyers are thought to be owed over £5 billion in compensation, and made up a large proportion of the estimated 500,000 people affected. Around 300,000 Spanish nationals were also included.
Until the landmark ruling in 2015 only around 5 per cent of buyers who lost their money had bank guarantees, so were therefore able to claim directly from the banks.
Many other investors who sought compensation from the developers often won their cases, only to see the developer declare bankruptcy and receive no pay-out.
However, the supreme court decided in 2015 that regardless of whether the property purchasers had guarantees, the banks had an obligation to safeguard buyers’ money.
CEO of Spanish Legal Reclaims, Luis Cuervo, stated: ‘Many people are so fed up they can’t face the idea of going to court again. What they need to understand is that they now have a good chance of recovering the money. It’s not property developers we’re up against now, it’s banks – and they have the money to pay.’
He continued: ‘People who took developers to court were badly advised because they all just went bankrupt. They spent more money, won the case but got nothing. Only a minority who had bank guarantees went to court and won.’
All cases must be filed within 15 years of the expected completion date of the property in question. Claimants must provide evidence of a contract with the developer, payments made into the developer’s or their lawyer’s account and the fact that the property was never delivered.
If you are planning to make a claim, you must be aware of the high cost of fees charged by Spanish legal firms.
Cases are generally fought on a no-win, no-fee basis, and legal firms will usually charge around 30-35 per cent of the claim. However, any compensation award is likely to include a large amount of accrued interest, so claimants may not end up out of pocket.
Banks usually appeal against the first decision so it is important to ensure that the no-win, no-fee contract covers the entire process.
Some judges will award legal costs. These will typically be 10% of the claim, plus a further 5% if the case goes to appeal.
Making a claim
Always seek independent legal advice before pursuing a claim. If you wish to claim you will need the following:
A signed contract between the client and the developer.
Proof of payment into the property developer’s bank account, or that of their lawyer if appropriate.
Any other supporting documents for the property purchase, such as paperwork or email exchanges.
If you have previously tried to take the developer to court then any details or judgements received should also be supplied to your legal advisor.
It seems that there is now a good chance of receiving money back that is owed, often including accrued interest to help cover legal fees.