Keith Rule says that he first thought about buying a house in Spain after a friend told him about an advertisement he had seen in an easyJet in-flight magazine for a property development in Hellín, called Finca Parcs-Las Higuericas, in Albacete province. The year was 2006, the height of the country's property boom.
"It was being sold as 'the real Spain'," says Rule. The development was not on the coast, but inland, in a lovely place," explains Rule on the phone from the UK.
Finca Parcs-Las Higuericas was going to consist of 617 chalets with their own swimming pools. Few of the 300 or so British or Irish investors who put down a deposit knew the area, but the layout plans and artist's impressions looked good, the price was right... what could go wrong?
Spain's property market collapsed in early 2008, taking with it hopes that Finca Parcs-Las Higuericas would ever materialize. The company behind the project, Cleyton Ges, went bankrupt, and Keith Rule began to worry that he would never get back the 53,434 euros he had put down, much less get his Spanish vacation home. The bank that had acted as intermediary in the promotion, CAM, was in serious financial difficulties of its own: it was unable to finance the operation, and would not return the money it had taken. He contacted a lawyer, who told him to sue Cleyton Ges. "But I knew that this wouldn't get me my money back. I looked on the internet and using the little Spanish I have, discovered that there was a law from 1968 stating that the bank was also responsible."
Using my Spanish, I found a 1968 law saying that the bank was responsible"
The little-known legislation that Rule uncovered details procedures in the case of deposits put down on the construction and sale of dwellings, and outlines in clear terms the guarantees that a home buyer is entitled to. The preamble states that the law was passed in response to "the justified alarm among the public caused by repeated abuses, which on the one hand, are a threat to social stability, and on the other, are clear breaches of the law."
The law was designed to avoid the repetition of cases such as Nueva Esperanza, a property developer that took money from more than 10,000 savers without ever building a single home. "The measures we are taking are meant to resolve an indignant problem, because people that had spent a lifetime saving to buy an apartment saw their money disappear overnight, and were left with no home," said the then-housing minister, according to the newspaper Abc . The law not only required the property developer to return buyers' money, but required the bank to guarantee that any amounts it received were spent on construction. The bank would, from now on, have to supervise the money and provide a guarantee "under its own responsibility." In other words, if a bank takes your money as a deposit on a property, if that property is not built, it is responsible for returning your money.
When the property market collapsed, lawyer Javier Domínguez Romero was contacted by people who, like Keith Rule, were in danger of losing their deposits, and who had also looked at the 1968 law. "The law had been forgotten about for years during the economic boom. Few lawyers even knew about it," says Domínguez, who later published a book on the subject.
Around the same time, Keith Rule had begun looking for a Spanish lawyer who would handle his lawsuit, as well as those of 46 other would-be home owners. Eventually he met with Jaime de Castro, a Gibraltar-based lawyer used to representing British clients within the Spanish legal system. The trial was held in May 2012. CAM tried delaying tactics by saying that all those bringing charges must appear in person in court. All 47 made the trip to Albacete provincial court, although none of them were questioned by CAM's legal team. CAM's argument was simple. It had no "legal relationship" with the 47, and said they would have to pursue their case against the property developer. The bank did not have guarantees for each depositor, as it was required to do so by law, should there be any problem with the construction.
The judge hearing the case agreed that CAM was indeed responsible and ordered it to return the 1.5 million euros that the British had paid to the developer: "CAM knew that the deposits placed in accounts in its branches were from the buyers of a property development and completely abandoned its responsibilities to them under the 1968 legislation, and as such committed bad banking practices." The sentence has since been ratified, and the British investors are getting their money back, with interest and costs. CAM, which has been taken over by Banco Sabadell, has not appealed against the ruling. The bank says that it inherited the problem. The British embassy says that it will use the ruling for future cases.
Rule, who is now working with the legal team that won the case, says that the ruling should give hope to anybody who has lost money to a property developer. "This law, after 45 years, is more necessary than ever," he says. He has set a precedent that in general terms provides much greater protection to consumers, because the bank has to pay, even if there is no guarantee.
Similar cases have emerged in recent months of foreign investors getting their money back from bankrupt property developers. Alec Edwards works for the Liverpool fire brigade. In 2009, he put down 150,000 euros as a deposit on a property in Trampolin Hills, in Murcia. "We could see that there was no building work, so we asked the bank to execute the guarantee, which it refused to do." Two months ago, after bringing legal action, he got all of his money back. His lawyer, Guadalupe Sánchez, says that British people are more inclined to take legal action. "Spaniards do not like taking on the banks, but the British seem to have no fear," she explains. Antonio Flores, a Malaga-based lawyer who specializes in construction disputes involving non-Spaniards, agrees: "These people really put their foot down, and demanded a response from the system."
Spanish judges are at last beginning to do something to improve the country's poor reputation in Europe. In March, the Supreme Court demanded that foreigners buying here be given special protection. Rule says that he is happy, not just for himself: "Spain has shown that it is a serious country, and that if you insist, the justice system works."