A holiday home in the sun is often a much sought after luxury for UK residents unhappy with the somewhat erratic climate of the British Isles. Among British citizens, Spain is a popular destination both for holidays and expatriating, and prior to the financial crisis of 2008 the market rapidly expanded as the value of real estate increased dramatically from the late 1990’s onwards.
Whether as an investment, retirement plan or holiday home, many Britons bought into Spanish property developments only to lose significant sums when the property market crashed in 2008. Thousands of construction projects were abandoned when developers folded and deposits that were not properly held were lost, leaving buyers with limited opportunity to recover their money, which for some meant significant losses.
A ruling by Spain’s Supreme Court late last year has provided significant support for buyers who lost out when the Spanish property bubble burst, continuing a trend of legal decisions which have sought to assist consumers who were subject to unfair contract terms. The decision itself made Spanish banks liable for the full value of the deposit placed by property buyers, allowing those who have lost the deposits they placed on new developments which were not completed to bring proceedings directly against the bank where their deposit was held. When many of the property developers involved in the Spanish property bubble became insolvent the low creditor ranking of the buyers meant that what value was left in the company did not provide adequate compensation for the deposits paid.
In allowing the issue of proceedings against banks which held the property deposits, Spanish law is offering an improved opportunity to recover the money lost by many buyers from an entity that would actually be able to provide a refund and the appropriate compensation. A sign of confidence in the legal change is the provision of ‘no win, no fee’ claim models for recovering off-plan home deposits.
Although this development is good news for many who previously tried to invest in Spain’s property market, there are a number of obstacles to making a claim and success is by no means guaranteed. A significant barrier is that the bank involved must have been aware that the deposit was being held in relation to a property purchase – even if the legally required guarantees were not completed by the developer. Additionally, the change is aimed at helping buyers rather than investors, who are seen as being more aware of the risks surrounding property investment as opposed to holiday home buyers who unwittingly became party to unfair contracts. Taking legal advice regarding your potential claim is therefore essential, both to know if you meet the criteria to pursue a claim against the deposit holding bank and to gain a realistic idea of your claim’s success.
If you face this issue, or are looking to purchase property within the UK or abroad, please get in touch with Mackrell Turner Garrett’s experienced team of Property solicitors, who can also connect you with 90 other firms around the world for local advice.