Spain opens the door for UK holiday home buyers to reclaim lost money
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.
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.”
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.”
“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.”
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.”
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.
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.”
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