Santa Ana del Monte. A story of successful recovery of deposits paid to an insolvent developer in Spain

Construction site photo




Litigation is never an easy thing.

When I was a trainee lawyer in Spain, my boss, who was a walking enciclopedia and knew every single law in Spain, used to tell me:

“Antonio, it is always better to reach a bad settlement than entering into a long but good case in Court because litigation is, regardless of the outcome, always exhausting and some times frustrating”.

I always followed that advice and tried to settle where possible (provided that the client was happy with the settlement reached, of course) but sometimes a settlement is not possible because there is no intention to settle from the other party or simply because there is no money to settle. This is what happened with a development that I know quite well in Spain. The development was called Santa Ana del Monte in Jumilla and it was supposed to be a very interesting development with nice properties and golf courses until the recession put a halt on the construction and the developer had to file for administration, then eventually after 5 years of failed negotiations, liquidation.

When I say that I know the development quite well is because I had more than 100 clients who instructed me and a barrister litigator that we use in Spain called Emilio Lucas Marin (another very well versed lawyer who receives my admiration) to represent them in the insolvency procedure and try to get their money back. After 5 years of talks, legal writs, claims, appeals and some eventual sleepless nights the developer filed for liquidation and the clients were left with barely no chances to get their deposits back, deposits that ranged from 30,000 Euro to 100,000 Euro. We then explored a possibility that had been explored in only a few cases which consisted of issuing legal proceedings against the bank that had received the deposits. This kind of action could be taken on the basis that Spanish law 57/1968 seemed to state that when a bank receives the payment made by an individual towards the construction of an off-plan property, that bank could be held jointly liable if the developer does not supply a bank guarantee to guarantee the safety of that deposit. This is exactly what happened in Santa Ana del Monte. Purchasers paid their deposits into a bank account of a Spanish bank, the developer used the money and in most of the cases failed to secure the deposits with a bank guarantee. On this basis, we studied the possibility of taking action against the said bank. Other law firms did the same and others opted for issuing legal proceedings against all the banks that had provided bank guarantees for that developer in the past.  We decided to take action solely against whichever bank received the deposit in that particular case and it worked.

3 years down the line we have received more than 20 positive judgments where the Judge has ordered the bank to repay the deposit in full. Very often those judgments also order the bank to pay legal interest and legal costs. In other cases the Judge has been more prudent and not awarded legal fees but generally there is an order for payment of interests attached to the order for full refund.

We still have several clients who are litigating against the bank but looking at the current trend of Judges ruling in favour of the purchaser/client the odds are clearly in favour of the client.

What is the moral of this story? Well, first of all I still believe in the advice given by my first mentor in the legal profession. When dealing with a dispute always try to settle if possible. When this is not possible then litigate but make sure that you have sufficient legal grounds to win. And if by any chance you have paid a deposit for an off plan property and this was never built you may have a case against the bank that received your deposit. If that is your case, speak with a lawyer to see if you have a strong case against that bank as this may be your only chance of getting your money back.

In memory of Miguel Viladés (R.I.P), a superb lawyer and a gentleman who, together with his son Alberto, mentored me and initiated me into the legal profession.



European order for payment procedure


A debtor is always a debtor, both in Spain and in Britain. Whether is an outstanding invoice or a debtor who does not want to pay, the usual way to ensure payment is going through the legal route.  Sometimes matters can get more complicated if the creditor and the debtor live in different countries or the debtor has assets in another jurisdiction.

When it comes to Spain, some national laws have implemented an order for payment procedure called monitorio. The basic aim of this procedure is to avoid complex procedures when dealing with uncontested debt claims. The Court becomes a sort of intermediary which receives a form from the claimant asking the debtor to pay.  Then, it issues an order for payment which is sent to the debtor.  If the debt is uncontested, the order remains in force and becomes a judgement. If the debtor contests the claim, the matter will be examined in an ordinary Court hearing.

Today this procedure can be put into practice in cross-border cases within the European Union thanks to the EC Regulation 1896/2006. This Regulation applies to both Spain and Britain, and allows a prompt recognition of European orders for payment.

The advantages of the European order for payment procedure or monitorio are huge: it is a simple procedure, useful for international pecuniary claims and easy to put into practise. In fact, it can be used even by and against individuals.  For example: a creditor applies for a European order for payment. If the defendant does not contest the petition, this will become final. And this order will be recognized all around the European Union (except for Denmark).

So, how does the procedure work?

1. The creditor fills in a standard form which appears in the EC Regulation. This form is the same for all EU countries. There should not be any problems with the language and it is not necessary to attach any proofs of the debt (bills, invoices, etc).

2. After examining the form, the Court contacts the debtor and demands payment. Then the debtor has three options:

    -He can pay, and therefore the procedure comes to an end.

    -He can ignore it. Then after 30 days the European order will be enforced.

    -Finally, he could contest the order. In that event, the next step will be a Court hearing (unless the claimant has discarded this possibility when filing the forms).

3. In the event of uncontested orders, the creditor will be able to enforce the order in the same country where the initial procedure was started or in any other country of the European Union where the debtor may have assets. For instance, lets imagine a chap called Joe Bloggs who is a British national but living inMarbella. He owes money to John Sixpack, who lives in Leeds. John Sixpack files for a European order for payment procedure at the Court which holds the specific jurisdiction according to European rules, which in this case could be Marbella. Joe Bloggs ignores the claim and eventually the order becomes enforceable. However, when trying to enforce the order, John Sixpack discovers that Joe Bloggs has a house  in Germany which is free of charges. John should be able to enforce the European Order in Germanywithout having to start a legal procedure from scratch.

This procedure can be very useful in cross-border matters within the European Union but as usual it is always convenient to speak with a lawyer and see the most suitable option for each case as the information contained in this article cannot be generically extrapolated to all kind of circumstances.


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