Banks are facing a new legal front: the failed housing promotions. A 1968 Law made the banks responsible of the amounts to account provided. The Law 57/68 is clear: the promoters are required to be supported by banks and the banks are responsible for the amounts to account provided.
Now this law has become the new Achilles heel of the banking system. An estimate of about 19,500 million euros could impact the Spanish bank, however no mention of the origin of this figure is known.
The banks argue that in the years of the real estate boom many developers did not make the prescriptive bank guarantee for cost savings. Thus, supposedly they would be free of responsibility. Like many of the promoters of the bubble era bankrupt, the last customer will be not be capable to place a claim.
However, the ruling by the Supremo on the 21st of December 2015 is clear:
“In house sales governed by the Law 57/1068, credit institutions that admit incomes to account of buyers in the promoter´s account without requiring the opening of a special account and the corresponding guarantee, will be liable to the buyers for the total of amounts anticipated in the account or accounts that the promoter has open in those credit institutions.
Whether they have collateral or not, if they have complied with the provisions of Law 57/1968, the entities that have received early contributions are now taking responsibility of them
Just in the UK there are about 100,000 people affected by the Spanish real estate fiasco. And already they are producing a cascade of favourable rulings for consumers by putting in ‘check’ the income statements of financial institutions.
If an entity cooperates with a promoter and agrees to be your financial intermediary they assume responsibility. If the developer decides to circumvent the law, the bank is jointly responsible to act within the legal framework.
The conclusion? Law 57/1968 – and above all the judgments of the Supremo – they open a wide ample room in order to claim those amounts that were provided and that many thought to be buried.