Spanish banks may be liable for UK home buyers&#39; lost money

Spanish banks may be liable for money lost by UK holiday home buyers during the 2008 financial crash. Since 2008 many small banks have been taken over by larger lenders, however the new bank will still be responsible. Cases taken by Spanish Legal Reclaims are on a no-win, no-fee basis. Spanish banks such as Banco Santander and CaixaBank have refused to comment on the matter.

Surrounded by mountains but half an hour’s drive from Costa Blanca’s beaches, the old fortress town of Castalla offered the best of life in Spain for Gary Wainwright and his wife Lesley.

But when they put down a deposit of €66,875 (£53,200) on a three-bedroom apartment in the town at the end of 2007, it was the start of a nightmare which continues to this day. After the credit crunch struck the following year, work ceased on the new-build and everyone involved in the transaction, from estate agents to lawyers, stopped taking calls.

Still trying to retrieve their deposit, the Wainwright’s tale is familiar to many Britons who tried to buy holiday and retirement homes in Spain, but were left high and dry by the global financial crisis or unwittingly bought illegally built homes.

However, after almost a decade of frustration some hope has emerged for the couple and other investors who lost their deposits on unfinished off-plan properties. In December, the supreme court in Madrid issued a landmark judgment stating that Spanish banks are responsible for missing money deposited in their accounts, with interest on top.

Now lawyers in Spain believe this offers hope to thousands of Britons who lost deposits ranging from £20,000-£70,000. The Wainwrights are among a group who have taken fresh steps to reclaim their money.

Gary, who ran a ticketing agency in London and is now semi-retired, could do little when the work on the apartment ceased in September 2008.

“I knew the builders, they weren’t bad guys, and the project was almost complete – but the bank would not give them the rest of the money to finish it off,” he said.

Gary fell seriously ill with cancer and spent a year fighting for his life in hospital in Valencia. After recovering he was told the project had restarted, and it was finally finished in May 2014. But while the apartments are finished, they are boarded up and he still has not got his money back.

“I wouldn’t move in if you paid me. After all the stress I never want to see it again,” he said. Now living in a caravan park near Herne Bay, Kent, it is a far cry from his planned apartment overlooking the olive groves of Alicante.

He is focusing on a bid to reclaim his money as a result of the supreme court ruling and is pursuing his case through law company Spanish Legal Reclaims. Its chief executive, Luis Cuervo, says the judgment could force Spanish banks to hand back up their money to Britons.

While some UK investors took their property developer to court after the crash, it was to little avail.

“Most firms were in administration and buyers were at the bottom of the list of creditors,” said Cuervo, adding that the difference now is that the banks that held buyers’ deposits may be liable for their loss, he said.

“When somebody puts down a deposit, it should be held in a separate bank account but this wasn’t done.”

Gary and Lesley Wainwright at their home in Kent: ‘the bank would not give the builders the rest of the money to finish’. Photograph: Lisa Claytan

Many smaller lenders have been taken over by larger banks, but the new bank will still be responsible, Cuervo said. “Claims can only be filed once, and must be defended one by one in court.”

Cases taken by Spanish Legal Reclaims are on a no-win, no-fee basis, although problems have arisen that some people have lost track of their paperwork over the past decade.

“This means we will only take on strong cases that we think we can win,” said Cuervo. Somebody who put down a €50,000 deposit in 2006 could claim around £72,000 including interest, he added. “Our fee would be around €15,000, so you would get back your deposit and a bit more.”

Mark Stucklin, founder of expat homes website Spanish Property Insight, says those seeking redress through a lawyer should ensure there are no payments in advance.

“If anybody asks you to, say, put down £5,000 to win back £50,000, that should ring alarm bells,” he said.

Spanish lenders Banco Santander and CaixaBank refused to comment on the matter.Juan Valdés Castelló, director of communications at Banco Sabadell, said the bank faces a small number of cases arising from failed housing projects started by Caja de Ahorros del Mediterraneo, an Alicante-based bank it bought in 2011 for €1 (83p). “We are only involved in a few cases and this is a matter that we must solve with our clients,” he said

Spanish property lawyer Raymundo Larraín Nesbitt says the recent change is just one of a long string of positive supreme court rulings which favour off-plan buyers. However, he warned buyers against being over-optimistic and is sceptical of suggestions that up to 100,000 UK payers could be due compensation. Claimants face a lengthy battle first.

“Knowing lenders, they are going to put up one heck of a fight, supreme court rulings or not,” he said. “Do not expect a swift out-of-court settlement on this matter – it won’t happen.”

Legal redress

Thousands of Britons who bought in southern Spain several years before the financial crisis found they had poured their money into an overseas property only to be told it was illegally built and must be demolished without compensation.

In 2002, Maura and John Hillen invested almost £200,000 in a property in the Almanzora valley, Andalucia, when they discovered it had been illegally constructed and faced demolition.

“The case never went to trial and, though we did incur legal fees, it was a small amount compared to some,” Maura said. Afterwards, they joined campaign group Abusos Urbanisticos Almanzora (AUAN), which was fighting for Britons and other nationalities in a similar position.

Meanwhile, Robert Marsh and his wife Gillian, both in their 70s, sold their Kent home in 2005 and invested more than €300,000 on a three-bedroom villa in Albox, Almeria, that was subsequently declared illegal.

Maura, now president of AUAN, says it has successfully worked with a network of similar associations in Axarquia, Cantabria and Valencia. “We took our case to the Senate of Spain, which, after much wrangling, ruled that if a buyer had bought their property in good faith they should get compensation if it is demolished.”

A second ruling regularised the position of thousands of illegal Andalusian properties, while another impending change will help buyers who bought properties built on illegally divided parcels of farming land.

AUAN has around 500 members who have contributed over €160,000 to the campaign over 10 years.

The Andalusian regional government estimates that 300,000 properties have been illegally constructed.

“If you are well organised and stubborn you can eventually get things done, even in Spain where everyone told us it was impossible,” Maura said. “But it has taken years to get this far and many people have given up or died before getting redress.”

AFTER EL BREXIT

For anyone hoping to buy a holiday home in Spain, the vote to leave the European Union has raised uncertainties about the future and whether they will retain the ability to live and work - as well as own a property - in an EU country.

New arrivals could face stricter residency requirements, while existing expats could face new administrative arrangements, possibly including residency and work permits, or higher property taxes. However, whatever the reality is for British people hoping to live abroad, it is not likely to be ascertained until the terms around Britain’s exit are finalised.

Seek specialist advice from an English-speaking solicitor who is not connected to your seller, estate agent or developer Clare Nessling, Conti

Fluctuations in currency - the pound dived against the euro - will be the most immediate concern for homebuyers as properties in Spain will immediately be more expensive as a result.

Clare Nessling at Conti, an overseas mortgage specialists, says buyers should ensure whatever contracts are signed are clear. “Ask your solicitor to confirm that the English version is a true translation, to ensure it doesn’t contain errors, omissions or extras,” she says. “Lawyer’s fees, local and national taxes and insurance can add at least a further 10% to the purchase cost, so confirm exactly how much you will have to pay.”

Buyers should get an independent valuation of the property to highlight defects such as subsidence, damp, dodgy wiring or boundary disputes. They should also confirm that all required permissions, licences and planning consents have been obtained, and that they are registered as the official owner.

“Seek specialist advice from an English-speaking solicitor who is not connected to your seller, estate agent or developer,” says Nessling.

If buying a new-build property, buyers should check how long the developer has been trading and seek references from previous buyers, she says, as well as looking at the transport alternatives which are available.

“Your property may be served by a budget airline today, but there is no guarantee these cheap flights will continue indefinitely.”