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Bank guarantees - when things go wrong

- Updated: 14/01/2013
Bank guarantees - when things go wrong

... And What to do if the developer has not complied with the contract...

Provided you have a bank guarantee, if the developer has not built your property within the timeframe stated in the contract, you are legally entitled to either:

A. Rescind the contract and have the deposits returned (plus 6% annual interest)

B. Extend the deadline, allowing the developer to complete the property.

If you want to rescind the contract, it is advisable to seek independent legal advice. Once you have consulted a lawyer, the first step is to write to the developer to explain that due to non-compliance with the contract, you want to rescind the contract and request that the deposits paid so far are returned, as well as the 6% annual interest. You should include any relevant documentation (e.g. a copy of the contract, copies of payments made, copy of the bank guarantee) and state a timeframe by which you want the amount to be reimbursed. It is advisable to write to the developer via Burofax, which enables you to prove that you have sent a specific document, and that the recipient received it.

If the developer does not respond to you within the specified timeframe, you should contact the bank/savings bank which is responsible for the guarantee to request a refund of the payments made. Again, it is wise to make contact via Burofax and attach copies of all relevant documentation, including a copy of the bank guarantee, a copy of the complaint submitted to the developer, a copy of the developer’s response (if any) and copies of any documents which indicate that the developer has not complied with the contract.

If you are having difficulties executing your bank guarantee and getting your deposits returned from the bank you can complain to the bank/savings bank’s complaints department. The Banco de España website enables you to search all banks and savings banks for contact details of both their customer service departments (Servicio de atención al cliente) and complaints department (Defensor del Cliente).

Once you have contacted the bank’s customer service/complaints department, if two months on you are still not satisfied, you are then entitled to complain to the Claims Service of the Banco de España. You can complain to the Banco de España about any financial services provider which is authorised to operate within Spain. You can download a copy of the complaints form online and information in English about the documentation you need to include and the complaints process is available on the Bank of Spain website. However, it is important to note that the reports issued by the Claims Service are not binding.

The Banco de España’s Claims service is a member of FIN-NET, a financial dispute resolution network of national out-of-court complaint schemes in the European Economic Area countries.

If you are not satisfied with how both the bank providing the guarantee and the Bank of Spain have dealt with your complaint and you believe you are entitled to a refund of payments made, it is advisable to seek independent legal advice regarding taking legal action against the bank/developer.

This article can be read in full on the UKinSpain official website by clicking the link Here.

Comment on this Article

Thank you for this article. I have been fighting for 3 years to recover 175.000 Euros from Bankrupt developer and bank with no success just more expense until I am now penniless. We were actually living in the apartment for three years before bank put it up for auction because developer owed them money on the project. It was bought off plan. It was sold without the bank consulting us and we were threatened with eviction by the new owners. The stress was too much and we were forced to leave. The law 57/68 is laughed at by the banks...what other laws do they break on a daily basis without fear of conviction?
Barbara Jago - Thu 28th Feb 2013