What are Spanish Property Development Deposit Recoveries

In 1968, General Franco, the head of the Spanish government introduced a law to remove the risk of investing in off-plan property. Known as Law 57 of 1968 (a.k.a. 57/68) it required builders and banks to insure deposits on off-plan property developments in case they were not completed.

Under the Labour government of the late 1980s, buy-to-let investments were deregulated to encourage the sale and raising of mortgages to pay for them. The reason for this is because it was seen that pensions would be inadequate for the ageing population and self-investment was believed to be a good answer to acquiring wealth for retirement. This meant that financial advisers could sell BTLs and mortgages required to finance them, at the same time.

However, due to the inadequate housing stock available to purchase, UK IFAs worked with developers to sell off-plan properties as BTL investments. And if off-plan property BTL investing was easy to sell, offshore off-plan properties were even more attractive. It is now known that many thousands of off-plan offshore properties were sold to UK residents during the 2000s of which extremely few have been built or fulfilled the returns on investment if built at all.

It led to a surge in building in Spain culminating in the 2008 banking collapse when 90% of Spanish developers became bankrupt. It is written in the press that over 1.25m properties were not completed. By far the majority of such deposits were paid by UK residents.

Obligations of Spanish Banks for Property Development Deposit Guarantees

Some Key Obligations

Why were so many off-plan Spanish properties sold to UK residents?

Compensation