All is not lost for owners of ‘illegal’ properties in Spain

Spanish property
  • CostaLuz Lawyers highlights potential to take action against banks
  • ‘Illegal’ property owners can claim for refund of off-plan deposit
  • Claims not subject to December 2020 deadline that applied to many other owners

The Spanish property experts at CostaLuz Lawyers have reached out to owners of ‘illegal’ properties in Spain to reassure them that all is not lost. The team has highlighted the potential for owners of these properties to make a claim against their developer’s bank for a refund of their off-plan deposit. Not only that, but if the buyer subrogated the developer’s mortgage, they can also claim for all mortgage repayments.

Action can be taken against liable banks under Law 57/1968, with no deadline in place for making such claims, yet few of those impacted are aware of the full extent of their right to a refund.

An illegal Spanish property is one that did not have the proper planning permission, building licences or other paperwork in place at the time the client paid their off-plan deposit. Many buyers moved into such properties following the building boom of the early to mid-2000s, either paying for them in full or taking on large mortgages. These buyers now have recourse to legal action to reclaim the deposits that they paid – along with interest and legal fees.

“We’ve been hugely successful in winning back some €25 million for Spanish property buyers who lost deposits to developers who went bust. The deadline for such claims under Law 57/1968 was 28 December 2020. However, claims for the return of off-plan deposits paid on illegal properties, and for mortgage payments where the buyer subrogated the developer’s mortgage, are not subject to this deadline; they’re not subject to any deadline at all.”

Keith Rule,

Owners can claim against the developer’s bank or insurer for a refund of any deposit that they paid prior to the legally required paperwork being in place. This applies even when no contract exists, as the Spanish Supreme Court has deemed that lack of consent means no time-barring can be applied.

Despite many of those who are eligible to claim having purchased their properties 15+ years ago, it was 2013 before the Supreme Court stated that ‘finishing’ a property means not just building it but also having all of the legal paperwork in place. And it wasn’t until 2016 that the court clarified that planning illegalities were a matter that fell under the purview of Law 57/68.

“There is clear case law to support the claiming of refunds of deposits paid on illegal properties and in some instances of mortgage repayments as well. The Spanish justice system can move slowly but this doesn’t mean that it is not worth pursuing a case. The return of a deposit, along with 15+ years’ worth of interest, can equate to a lump sum that feels well worth the wait.”

Keith Rule,


For more information, please contact CostaLuz Lawyers’ UK office on +44 1908 635 111 and speak with Keith. To speak with Maria in the Spanish office, call +34 956 092 687 or you can visit