Overseas buyers who placed deposits on off-plan properties in Spain during the boom years of 1998 to 2008 now have an opportunity to recover some of their losses.
Finally, a ruling by the Spanish Supreme Court in 2015 is being acted upon and it means that financial institutions will have to refund deposits made for off-plan properties.
During the years 1995 – 2008, numerous foreign buyers, some 60,000 of them Irish citizens, put down large deposits on off-plan properties. However, as the property market took a dive in 2008, a majority of the developers were declared bankrupt.
When this happened, property developers, or builders, were required under law to place the deposits in a special bank account and provide a bank guarantee to buyers. The ‘special’ bank was supposedly obliged to ensure all this was in place. However, what actually happened was that the bankrupt developers couldn’t return deposits, and the banks declined to return the money as well.
The 60,000 Irish buyers, for example, lost their deposits and never took possession of the properties they had paid deposits on. But, the good news is that overseas buyers are now starting to force the banks to repay the deposits and follow the Supreme Court ruling.
Claims for refunds are being won
A number of Spanish law firms have already successfully won claims, but as yet the numbers are low, perhaps because few foreign buyers are aware that they can file a legal claim to have their deposit refunded. And, although the Courts ruled that deposits should be refunded, there is still no automatic right to reimbursement.
Therefore, legal counsel is required. Foreign buyers who lost deposits when the market went bust should find a Spanish lawyer who is expert in these types of claims, and at the moment, Spanish banks are facing something of a tsunami of claims, as mortgage holders ask for ‘floor clause’ and mortgage set-up fee refunds.
In the spirit of “nothing ventured, nothing gained”, this could be the moment off-plan buyers of the boom period have been waiting for: they might get their deposits back and be able to reinvest in a market that is booming once again.