Court rules off-plan buyers whose homes are unfinished can reclaim deposits

Among Brits alone, the pay-off could amount to up to €2.64 billion.

A solicitor’s firm, Spanish Legal Reclaims (SLR), has been fighting cases for tens of thousands of foreign property buyers who put down large deposits before the housing market crash and financial crisis, losing the entire sum when the works ceased indefinitely and never getting their new homes.

Some of these have remained as half-built breeze-block structures for up to eight or nine years, completely uninhabitable and not a saleable commodity.

But developers went bankrupt or decided to cut their losses and abscond, meaning claiming money back from them has been impossible.

Property developers, however, are obliged to lodge a deposit with the local council of the town they planned to build in, covering the cost of completion if they leave projects unfinished.

And many residential complexes left at half-mast have been repossessed by banks after developers defaulted on their loans, meaning as the legal owners, the lenders are liable for refunding off- plan buyers.

SLR’s chief executive Luis Cuervo said the bank guarantee fund was, in all cases, required by law to ensure buyers’ deposits were protected, and the town council deposits to complete unfinished housing estates and other works.

Cuervo reveals that a Supreme Court ruling found banks which repossessed incomplete developments are legally liable for refunding homeowners who lost out.

With Spain having built more new housing  complexes in the decade leading up to the start of the global financial crisis than anywhere else in Europe – new estate plans being reported in the news several times a week and often with two or three times as many homes on the cards as there were in the existing towns and villages they were based in – the amount of money which could potentially be reclaimed by out-of-pocket owners is immense.

British buyers alone account for over 100,000, according to SLR.

But expert and independent legal advice is crucial for those attempting to reclaim lost off-plan deposits, since a case can only be brought once under Spanish law and cannot be filed again if lost.

And banks are likely to put up a fight.

Even without interest and costs, it is likely that if 100% of owners were successful, banks in Spain collectively would have to part with up to €20bn – double the amount Spain borrowed from the EU to bail out ailing financial institutions in 2012.

Home-seekers began to get wise to the risks by around 2008, opting for already-established properties instead – and later cashing in on the repossession market, which remains a huge and mostly-untapped potential for finding real bargains – but the ‘boom and bust’ days are gone and Spain has learnt its lesson .

New builds are extremely rare now, unless they are something very unique or are to meet a shortage of affordable homes for the newly cash-strapped public, but the property sales industry is showing signs of a sharp upturn and overall recovery with a surfeit of quality homes at rock-bottom prices having created a true buyer’s market.

A small flat in an inner-London borough could buy a seven-bedroom mansion set in five acres of garden with a pool in a sought-after area of Spain, whilst a one-bed flat on the UK’s south coast could translate to up to three medium-sized apartments in a pleasant but non-touristy Mediterranean location