Bank liability off-plan Spain arises when buyers acquire properties before construction is complete and the bank finances the project. Spanish law establishes specific duties and responsibilities for banks to protect purchasers against fraud, insolvency, or failure to deliver the property as agreed.
Legal Framework on Bank Liability for Off-Plan Purchases
Banks providing financing for off-plan properties must comply with Spanish Civil and Commercial Code provisions. These regulations safeguard buyers by ensuring banks verify the developer’s solvency and provide guarantees against non-delivery or construction defects.
Supreme Court Case Law on Bank Liability in Off-Plan Purchases
The Spanish Supreme Court, in its Rulings 491/2024 and 492/2024, both dated 12 April, of the Plenary Session of the First Chamber, has changed its position on the liability of banks when buyers have made advanced payments for off-plan homes that were not built, and the developer has not guaranteed the repayment of these advances as legally required.
According to the new criterion, banks that receive advanced payments from off-plan homebuyers into the accounts of developers, when they have not required the developer to guarantee these advances by bank guarantee or insurance, are held liable towards the buyers. This is, provided that the financial institution knew, or could have known, that the money was intended for the purchase of off-plan housing for residential purposes.
In this way, the buyer is guaranteed the return of the advanced amounts even when the developer becomes insolvent, since the failure of the developer to comply with the appropriate legal guarantees, and the bank’s failure to investigate whether or not these guarantees existed and to demand them from the developer, cannot be to the detriment of the buyer.
Practical Advice for Off-Plan Property Buyers
Before committing to an off-plan purchase, buyers should request proof of bank guarantees and review financing contracts carefully. Legal advice is essential to understand the protections offered by Spanish law and to mitigate the risk of financial loss.
Legal Advice on Bank Liability Off-Plan Spain
If you are purchasing an off-plan property or face issues with bank financing in Spain, I can review your case and provide personalised legal guidance.
Contact me to discuss your rights and legal options confidentially.
