BANKS SHOULD MONITOR THE DEVELOPERS

The rules compelling the building developers to guarantee the refund of the amounts paid in advance by the purchasers for the building of a residence, included formerly in section 1 of the overruled Act 57/1968, and now in the First Additional Disposition of the Act 38/1999 of Building Arrangement.

Though these texts do not take part in consumer protection matter, the said rules protect above all to the consumers, as long as they use the notion of “residence”, and not any other kind of buildings, and by definition a residence cannot be regarded as a part of the production process of any other good than itself, as a final asset to be used and enjoyed by the purchaser.

Pursuant the said rules, developers shall either take an insurance or a bank guarantee for the refunding of those amounts paid by the purchasers on the account of the bulding expenses, for the event that the sales contract is terminated for breach of the developer. They also has to open a special bank account, exclusively used to pay the building expenses. The relevant bank, prior to the opening of the account, shall request under its responsability the proof that the developer´s guarantee has been served.

Up to here the accountability of the bank. Thus, it has to respond of the events in which a special account has been opened without requesting the due guarantee to the developers.

However the legal outline of relationship purchaser—developer-bank is not well set up, and therefore the interepretation needs to be forced to achieve its aim of protection to the weakest and less informed party, who is the residence purchaser. The breach of the duty of developer´s guarantee has – usually – a harsh remedy, since any motion filed by against the developer could be uneffective in case of its likely insolvency.

Therefore, someone should ensure that the developer complies with its duties. The law seemingly presumes that the purchaser cannot be requested to supervise the adequate granting of the guarantee; thus only remains the bank in this threefold relationship as a party to which can be required this monitoring, because of its solvency and its capacity.

As above said, banks will not open such special account where the purchaser can credit his payments, unless the developer has proven the existence of the guarantee. The liability of the bank would be limited to those cases of opening of the account without having fulfilled that duty. The problem consists mainly in the definition of this “special account” . ¿What kind of account is this? This is not legally identified. And as long as it is not, the developer could use any bank acocunt –  even one already open – to collect the payments of the purchasers, without the bank having to check previously the granting of the guarantees (because the developer could have not pointed to the bank that the account was really the envisaged “special account”).

This circumstance could empty the meaning of the protection rules, and would abandon the consumer making him depending on the diligence and good faith of the developers, something that should not be taken for granted, in the light of the abundant litigation in this matter.

With the purpose to correct the Word of the law, Spanisg Tribunal Supremo has ruled in its Decisions of 21st December 2015, 9th March 2016, and 17 March 2016, that in the absence of guarantee, the bank will respond jointly and severally along with the developer vis-a-vis the purchaser who is claiming back the payments done in case of breach of the contract.

The Supreme Court mentions expressly the existence of a duty of care – and therefore a tortious liability based on the culpa in vigilando envisaged by section 1.903 of Civil Code of the bank over the developer. In case the bank does rightly know that the purchaser of the residence is making deposits in any account, yet a preexistent one or open on purpose, is obliged to ensure the existence of the guarantee in favor of the purchased. This knowledge, in cases seen by the SUpreme Court, arises from the reason of the transfer, or any other circumstance for which the Bank should reasonably infere that the deposit is made with the intention of paying a residence. It is this simple.

However, this culpa in vigilando does not constitute a case of strict liability, and the bank could be exonerated if proven that it could not have reasonable knowledge of the purpose of the deposits, and that it acted with the due diligence. The cases in which this happens will not be numerous, but they could always still happen. As the title of this article quotes, banks should monitor the developers.

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