Spanish promotor took buyers’ money before obtaining building permits

Martinsa took money from buyers without obtaining building permission

Following the announcement last week that one of Spain´s largest construction companies, Martinsa-Fadesa, cannot repay its debts, certain irregularities have come to light regarding the contracts property buyers were asked to sign with the company.

More than 12,500 families that have signed contracts with Martinsa-Fadesa are now waiting to see if their properties will be completed or not and many are in the do not know whether they will be able to claim back money paid in advance as it has emerged that a lot of money was paid before any official deeds were drawn up.

The lawyers dealing with claims from buyers have already detected a number of irregularities which may place buyers in a vulnerable situation regarding the legality of contracts. The company of lawyers, Ofilegal, has been the first to set up an association for those affected by Martinsa-Fadesa. Ofilegal says that the contracts it has seen so far are ´poisonous´.

According to Ofilegal, Martinsa-Fadesa took money from buyers without first obtaining the necessary building permission. In one case it received money from buyers for a promotion of properties, Colmenar Viejo (Madrid), from 2004 onwards despite the fact that building permission was not granted until 2006 when some buyers had already paid up to 40,000 euros each.

Ofilegal says that many people are not aware that money paid in advance is insured which guarantees that money is repaid if contracts are broken. However, in some cases the guarantee is about to run out which would make it virtually impossible to recover any money already paid to the company.

Other problems for buyers is that Martinsa-Fadesa has signed contracts with landowners offering them a certain number of properties when building work is completed.

However the land is only fully signed over once building work has been completed within the timescale agreed. If work is not completed on time the landowner can reject the contract and Martinsa-Fadesa would in this case lose the land (and buyers their potential new home).

Another serious irregularity has been discovered in a subsidised housing project in Móstoles, Madrid. In this case Martinsa-Fadesa forced buyers to create an owners association (communidad de propietarios) and pay money into it. Up to a million euros was deposited in the association and it has now been discovered that the administrators of this association who are linked to Martinsa-Fadesa have already spent 500,000 euros.

Martinsa Fadesa is also currently negotiating with unions over the redundancy conditions of 234 of its employees, a quarter of its workforce.

Unions have asked the company for further information on the locations of those affected by redundancy. CCOO will demand that Martinsa-Fadesa presents a viable plan for the continuation of the company and maintenance of its workforce and UGT will ask for access to documentation. UGT has also informed the Ministry for Work of its concerns regarding the situation of workers in companies that have been subcontracted by Martinsa-Fadesa and has asked for them to be inspected.