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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.
Email:
fpag@btinternet.com
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