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LEY 57/68

The Shocking Truth

The Banks &
Savings Banks

Bank Guarantees
in Spain

LEY 57/68
English & Spanish

Explanation of
LEY 57/68

 
THE BANKS & SAVINGS BANKS

The banks clearly have a responsibility under LEY 57/68 to ensure that off-plan deposit funds are held in a Cuenta Especial (SPECIAL ACCOUNT) separate from other funds belonging to the promotor. The Cuenta Especial
may ONLY contain funds for the construction of dwellings.

The banks are fully aware of the status of funds they are accepting in a developers account. For example if you were buying at Roda - on your bank transfer document you would state - Mr Smith Plot 155 Roda Golf - or words to that effect, so that the bank and developer are able to identify from which purchaser the funds are from and which plot they are for. With even the minimum due diligence the Bank would know that the funds are for an off plan purchase and must be held in the Cuenta Especial. The final sentence of LEY 57/68 Article 1.2 states: "For the opening of these accounts or deposits the Banking institution or Savings bank, under its responsibility, will demand the guarantee to which the previous condition refers"

Therefore, the bank who has received the payment, clearly referenced as a deposit for an off-plan purchase, must then demand or verify that the Bank Guarantee is issued. If the Bank fails to demand the issuing of the Bank Guarantee or fails to ensure/verify that the Bank Guarantee is issued they are guilty of Gross Negligence as they will be allowing their client, the developer, to break the law. The Bank will be supporting this illegal activity, because without the Bank it could never of happened as according to LEY 57/68 Article 1.2 all off-plan deposit funds must be paid into a Bank or Savings Bank Special Account.

Taking the above scenario of Mr Smith again...... If Mr Smith was instructed to send his off-plan deposit to the developers bank and for some reason the developer instructed him to send the funds to the normal current account held by the developer (CUENTA CORRIENTE) then once those clearly referenced off-plan deposit funds arrive in an account which does NOT comply with the requirements of LEY 57/68 the Bank with minimum due diligence must either instruct the developer to transfer the funds to the CUENTA ESPECIAL, return the funds to the purchaser or freeze
the funds and report the developer to the relevant authorities for acting contrary to the requirements of LEY 57/68.

Let's face reality these Banks and Savings Banks who have received the off-plan deposits have been funding the developers for millions of Euros. With such huge investment in the projects the Banks would be monitoring the accounts and financial performance of the developer on a daily basis. The banks would be fully aware of the funds arriving in the developers accounts and what those funds were for.

However, for years the banks have turned a blind eye and allowed the developers to act illegally by failing to secure off-plan deposits and failing to issue the legally required bank guarantees.

The Banks & Savings Banks were the 'vehicle' through which the illegal activity operated.

The Banks & Savings Banks who were funding the developers were happy to use purchasers
'unsecured deposit funds' to lessen the Banks exposure to the various developments.

Many Banks have been grossly negligent and acted with a complete lack of due diligence. They have knowingly allowed the developers to act contrary to the requirements of LEY 57/68. Many Banks have been complicit in the illegalities committed by the developers.

Let us remember that without the funding and support of the Banks none of this could have happened.  Very few developers had the financial history or ability to have raised private finance and commence building
without using funds from the Banks.

Furthermore, LEY 57/68 clearly puts an obligation on the Banks.  Article 1.2 demands that the developers
"Deposit the sums advanced by purchasers through a Bank or Savings Bank". The reason the Banks have been mentioned so many times in LEY 57/68 is to give added security to the law.
The Banks are the guardians of LEY 57/68 and they have an obligation to guard against the potential abuse
of the law by the developers.  If the Banks were not the guardians of LEY 57/68 and did not have the
responsibility of ensuring the off-plan deposit funds were secured in a Special Account, then the 'potentially dangerous' developers would be guardians of themselves which would leave the law open to fraud and abuse.

Article 2 (c) of LEY 57/68 states that the Purchase Contract (Sales Agreement) must include the: "Name of the Banking Institution or Savings Bank and details of the account where the deposit funds will be held as a result of the celebrated contract"

Article 5 of LEY 57/68 states: "It is a prerequisite that any propaganda and publicity material issued by the promoter for the sale of housing containing information on the levying of amounts on account prior to the initiation of construction or during construction must meet the requirements of this Act, and make explicit reference to the guarantor, as well as the Bank or Savings Bank Special Account in which they will deposit the amounts advanced. The above mentioned must be specified in the text of the advertising that takes place"

So at many points LEY 57/68 puts the Banks very much in the spotlight and even any advertising material published by the developer must make explicit reference to the Bank or Savings Bank Special Account in which the off-plan deposits will be held and this must also be detailed in the Purchase Contract.

The Banks are the guardians of LEY 57/68 and they have a responsibility to protect the off-plan
deposits and ensure that they and their clients (the developers) are acting in accordance
with LEY 57/68 at all times.

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