Aifos built 80 housing developments all over the Mediterranean. SUR
They have been living with uncertainty for the past four years and it appears that they will continue to do so, at least until early 2014. The more than five thousand people (including those who paid for properties which they have never received, workers, suppliers, banks and even Hacienda, the tax authority), who were affected when Aifos filed for voluntary bankruptcy on 22nd June 2009, may now finally see some light at the end of the tunnel after their long wait, although there is little hope of their recovering all the money they are owed.
The amount was initially calculated to be 900 million euros, although the company says it has managed to reduce this to 500 million after reaching agreements with financial institutions and completing some half-finished residential developments. What is certain is that the bankruptcy proceedings are still waiting to be dealt with by a court in Malaga which is one of the busiest in the country and has a backlog of almost half a million cases.
There is also the added complication of parallel court cases, such as the company’s attempt to challenge the three receivers for allegedly trying to impede the potential viability of the company; a case brought by a creditor who is accusing the owner of Aifos, Jesús Ruiz Casado, of decapitalising the company beforehand to avoid having to pay the debts; and the ‘Malaya case’, in which several directors of the company, including Ruiz Casado, are accused of making payments to Juan Antonio Roca, the former Town Planning advisor at Marbella Town Hall, in exchange for favours. Sentencing in the Malaya case is expected next month.
The court still has to resolve about 50 of the 800 complaints filed by creditors and the company itself against the interim report which was drawn up by the receivers in February 2010, but if all goes according to plan all these will be dealt with by the end of this year, bringing to an end the common phase of the proceedings.
After that, the law gives the receivers two months to produce an exact overview of the situation of what was once the biggest property group in Malaga province. This will include a list of its assets and debts, as well as a list of creditors. The provisional report, which is 2,211 pages long, shows that 6,234 people are affected and there are debts of 884,148,082 euros not including the sums that were paid on account by about one thousand purchasers, who are now trying to recover their money.
Property buyers worst off
Once the extent of the bankruptcy has been ascertained, the company and creditors have 40 days to submit a proposed agreement that satisfies both parties and ensures the viability of the company. If this is not possible, Aifos will have to go into liquidation and the money raised by selling its assets will be used to pay its creditors, who will receive the money according to priority until the funds run out. In that situation, those who bought a property off-plan will be the worst off because ahead of them in the queue will be financial institutions (which are the greatest creditors), Hacienda and Social Security, communities of owners and workers.
This can all be avoided if, as Aifos hopes, agreement can be reached whereby the creditors renounce a large part of their money, although this is complicated because at least 50 per cent would have to agree. The company has offered purchasers and suppliers 45 per cent of their money, which they would receive over ten years and in up to six payments.
Developer ordered to pay Aifos 5.5 million euros over a plot of land
It isn’t all bad news for Aifos, as a court has just found in its favour in a land dispute. The group had taken legal action against the Almeria-based Jale Promobys company over the sale of a plot of land in Rincón de la Victoria, and a court in Malaga found in Aifos’ favour and ordered Jale to pay 5.5 million euros in compensation. Jale Promobys appealed against the decision and the case was then heard at the Provincial Court, which has upheld the previous decision and ratified the compensation order.
The case dates back to 2007, when Aifos sold three plots to Jale for the sum of 20 million euros, for the construction of housing developments. Under the terms of the contract it was agreed that Jale would pay seven million euros by means of a promissary note, another seven million euros would be retained in advance of monies which would become due from Aifos for constructing the properties, and six million euros would be used to subrogate the existing mortgage on the land within 30 days and then pay it off.
However, Jale failed to subrogate the mortgage and stopped making the monthly payments the following year. The bank, Banco Guipuzcoano (which is now part of Banco Sabadell) called in its guarantee of 5, 502,450 euros and repossessed the site in order to sell it by auction at a later date. This is the sum Aifos is claiming from Jale in damages, on the basis that as a result of Jale’s failure to subrogate the mortgage, the group has lost out.
The court pointed out that Aifos had not asked for the contract to be cancelled, just for compensation for the loss of an asset because Jale had failed to meet its obligations. It is not yet known whether Jale intends to appeal against the decision.