Blog post copyrighted © 2018. Plagiarism will be criminally prosecuted.
By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Lawyers
1st of September 2018
A new case has emerged in Mallorca affecting over two hundred off-plan buyers. The figure is likely to increase over the next months as more and more people report the scam. Most of those affected are foreigners who were buying property in Spain in good faith. Many foreign buyers are still unaware they have fallen for a scam.
The timing of this massive scam couldn't be worst, as it adds to Mallorca's property woes. Reported sales had already plummeted by 30% YOY as a result of the introduction of a local law by its hard left-wing coalition that greatly restricts the rights of landlords on holiday lettings with disproportionate six-figure fines on non-compliance. We wrote a detailed article on the significance of these changes and how they would likely adversely impact the market at a time Mallorca's property was booming: New Balearics Holiday Rental Law – 8th of September 2017.
An unscrupulous duo of developer & agent (Lujo Casa and Mallorca Investment) shared the same office space marketing 21 off-plan developments at very attractive prices (usually BMV). As the first police reports were filed by the few Spanish buyers that bought, the man behind the con fled to an undisclosed South American country with reportedly between 5 -7 million euros in ill-gotten gains. Just take a look at the company profile from Mallorca Investment's own website (you really couldn't make it up):
"Mallorca Investment Real Estate Property is a company of young people and fresh air provided by a long way in the real estate industry. Our team consists of several agents and professionals who provide a clean and efficient work to the perfect buyers and bring the best of real estate..."
As the buyers handed over their deposits without their being a Building Licence issued for these developments, they have lost all their life savings. A new perverse change in Spain’s Insurance Act was enacted in 2015 which made significant changes on how bank guarantees worked, in favour of lenders. We had highlighted and stressed these major changes at the time warning new-build buyers: Law 20/2015: Important new bank-guarantee legislation explained for offplan buyers – 21st September 2015. Also in our blog: Buying off-plan in Spain? You need a Building Licence – 20t March 2018.
The implication of these changes in the law is that the victims have no legal recourse against the lenders involved. It is very unlikely they will ever recover their money.
A surprising comment made by one of the affected:
"We all trusted that by making a bank transfer to a real estate company account that our money was protected."
This statement shows a common falsehood. Any money paid into the bank account of an estate agency is unprotected (unlike lawyers, as we have mandatory professional insurance liability covering this). Only some regions in Spain, such as Catalonia, force estate agents to hire insurance policies securing any deposits made by their clients. Estate agents in Spain are unregulated and there are no requirements to become one (again, unlike lawyers who are regulated and subject to the discipline of the Law Society). Andalusia will soon be passing its own laws regulating agents.
In most of the cases, the buyers did not follow the basic advice we always give in our articles on buying off-plan property:
Source: El Pais
If you are buying property in Spain, whether offplan or resale, you should hire a Spanish law firm to defend your interests. Buying property in Spain without appointing a specialized conveyancing lawyer is a recipe for disaster.
Larraín Nesbitt Lawyers has over 16 year’s conveyancing experience at your service. Our team of native English-speaking lawyers and economists have a long track record successfully assisting expats acquiring property all over Spain, including Madrid and Barcelona.
We offer the most competitive fees in the market.
We are specialized in conveyancing
Larraín Nesbitt Lawyers, small on fees, big on service.
Larraín Nesbitt Lawyers is a law firm specialized in conveyancing, inheritance, taxation and litigation. You can contact us by e-mail at email@example.com, by telephone on (+34) 952 19 22 88 or by completing our contact form.
Legal services Larraín Nesbitt Lawyers can offer you
Buying Off-Plan Property in Spain – 8th of June 2013
House Hunting in Spain – Interview with The New York Times. June 2015
Resurgent Spain: Málaga Sees Strong Sales – Interview with Mansion Global (The Wall Street Journal). December 2015
Buying Property in Spain from a developer (Off-Plan Property) – 8th March 2017
How to inspect an off-plan property overseas – Q&A with The Sunday Times. July 2017
Buying Property in Spain – 10 Reasons to Hire a Lawyer – 8th November 2016
Non-Resident Taxes in Spain – 8th December 2015
8 Tips on Buying Off-Plan in Spain – 8th June 2018
Please note the information provided in this blog post is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. VOV.
2.018 © Raymundo Larraín Nesbitt. All rights reserved.