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BFCSA: UK victims of Spanish (800,000) "off the plan" property crash, hope to recover funds

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The £4bn battle on Costa del Claims: New hope for thousands of British buyers who lost fortunes in Spanish property crash

By Laura Shanon for the Mail on Sunday

Published: 04:33 +10:00, 12 June 2016 | Updated: 20:25 +10:00, 12 June 2016 by the Supreme Court in


Madrid points to a reversal of fortune

Spanish banks that held their deposits are to be held to account

Stephanie Davis lost more than £60,000 when Spanish purchase collapsed


British investors who lost big deposits in the Spanish property crash have been given fresh hope of getting back their money.  Around 100,000 people in the UK are thought to have paid big sums towards ‘off-plan’ properties in Spain – ones which were yet to be built.


Demand was high a decade ago, when around 800,000 holiday homes a year were being built in Spain.  But after the financial crisis of 2008 many property developers went bust, leaving buildings unfinished. Many home buyers lost all their money.


Now a ruling by the Supreme Court in Madrid points to a reversal of fortune for disappointed buyers, because Spanish banks that held their deposits are to be held to account.   Estimates for how much British buyers could claim are in the order of £4billion.  Louis Cuervo, chief executive of Spanish Legal Reclaims, which is taking on buyers’ cases, says: ‘The whole industry collapsed.


Developers in administration first needed to pay employees, then the tax office, social security and anyone else who had a right to claim from the company ahead of others in the queue. In the end most of the property buyers didn’t receive anything back.’


Charles Purdy, chief executive of currency specialist Smart Currency Exchange, says: ‘You can protect the price of your property and your budget by using a forward contract. It is an invaluable tool provided by currency specialists that can be used up to a year in advance to lock in a rate at a time that suits you.’


Spanish law states builders and developers receiving deposits had to put the money in a separate account and provide a bank guarantee.  This would ensure money was returned if the developer failed to finish building a property.  But in the heady excitement of a seemingly booming market, this law was not always observed. When constructions were left incomplete, developers did not have the capital ring-fenced and ready to repay their customers.


As of last December, the Spanish Supreme Court upheld that banks which held deposits were equally liable for refunds.  Spanish Legal Reclaims is now preparing to present cases before the court on customers’ behalf – on a no-win, no-fee basis.


Claims must be filed, fought and won individually, and the team expects to file the first wave this week. A court decision may take eight months, but if banks appeal the fight could stretch to between 18 months and two years. Refunds would include the original capital lost plus interest.



Stephanie David lost more than £60,000 when her Spanish property purchase collapsed – but is one of many investors who now hope to secure a refund.  Martinsa Fadesa agreed to buy back the property and refund what they had paid within 60 days.  They signed over the property but just months later, in the summer of 2008, the company went into administration, leaving the couple with no property or refund.


Stephanie, a community first responder with the ambulance service lives in Edgeware, North London.  She says they got back £700 in two years.  Martinsa Fadesa went into liquidation, the formal process of winding up a business last year.  But thanks to the clarification in the law, Stephanie has the opportunity to try to make a claim.  She said ‘if I can get my money back, that would be amazing.’



Lawyers will charge different fees and the sum could vary between individual clients depending on the complexity of each case.  But as an example, Spanish Legal Reclaims says for a lost deposit of £50,000, plus interest to make a total claim of £70,600, the fee for a successful claim could amount to £17,085.  This is a 20 per cent charge, plus Spain’s VAT rate at 21 per cent. It means that the client pays fees out of the interest recovered and still takes away more than the original capital lost at £53,515.



Claimants must have the relevant paperwork so they can prove to the judge what they say is true. Investors who fought in the courts years ago and failed will not be able to bring the same claim a second time.  Cuervo also warns investors to be careful about the lawyer they select to handle their claim. He adds: ‘We’re fighting the powerful banks of Spain, which have all the money and resources needed to defend themselves.


‘What investors are facing is not a job for an ordinary lawyer in the local towns of the Spanish coast. The lawyer must also be neutral and unconnected to property developers or the banks.’


Investors buying holiday homes in Spain, Bulgaria, Cyprus, Greece, France, Italy and Portugal were all affected by the global credit crisis.  Off-plan developers went bust before homes were completed or property prices plunged – leaving owners with a mortgage debt larger than their property value, or an asset they could not sell, which was worth less than they paid for it.  These dangers are always present, but buyers have returned to the holiday homes market and interest is strong.


Peter Robinson, boss of the Association of International Property Professionals, promotes high standards among developers, lawyers and agents working in the field.  Ten years ago, he says poor business practices were rife with self-styled British ‘entrepreneurs’ cutting corners and taking big commissions for selling property to British customers. Buyers were also making rushed decisions.  But people thinking of making a purchase now must be led by their heads, not their hearts.


He says: ‘The pendulum has swung back and people are returning to buy a holiday home or retirement property. Pause and consider why you want to buy, what you will use it for and what the exit strategy is.  Take legal advice early, rather than at the conveyancing stage when you are already emotionally down the track. And take proper, regulated financial advice.’


As well as useful buying guides, Robinson’s association offers free legal advice to UK investors purchasing overseas. For more information visit and click on the ‘LWG’ section of the website – which stands for Legal Working Group – where you can fill out an enquiry form.  Anyone buying through a member of the association who later wants to make a complaint has recourse through the UK Property Ombudsman scheme, an independent mediator.

Free guides for buying property abroad, covering the most popular destinations, can also be downloaded from the PropertyGuides website. Customers can call its resource centre for support at all stages of the buying process by calling 020 7898 0549.


Elaine Ferguson, the centre’s boss, advises sticking to a budget, factoring in all costs and taxes, and finding reputable professional help from solicitors and estate agents.  Ferguson recommends setting aside between ten and 16 per cent of the total property cost to cover legal fees, survey costs and both local and international taxes.  She says: ‘Choose an English-speaking, independent solicitor, to act in your best interests, and yours alone.’



Currency conversion also demands careful thought. A home worth €350,000 would have cost £261,194 at an exchange rate of 1.34 which prevailed at the start of this year.  But a subsequent fall in the rate to 1.26 – as happened recently because of uncertainty over this month’s EU referendum – means a buyer would need to find an extra £16,584 for the purchase.

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