Important Spanish Mortgage Update

A new court resolution has been issued this week relating to abusive clauses in a Deed of Mortgage.

The resolution makes certain clauses included in the mortgage loan null and void as they are considered to be abusive for the borrower.

The default clause; if you default on any of the clauses especially if you miss a payment the mortgage lender could recall the mortgage loan; this is now declared null and void.

For example the bank could recall the mortgage in the case of nonpayment of one installment, which is considered abusive.

According to the law now at least three mortgage installments should be outstanding before the bank can start proceedings through the court executing the mortgage to claim the debt.

Also the clause that applies high interest rates for delayed payments are now null and void.

They are considered to be abusive as it appears to be compensation to the bank because of the nonpayment of the mortgage installment on the due date and the interest levied is disproportional for the borrower.

Example case, a bank was charging interest rates for non-payment, 4% above the normal agreed interest rate.

The new judgement forbids this practice, based on the legislation normal interest rate should be for personal loans, which provide for a maximum of 2% above the normal agreed interest rate in the case of non-payment of the loan on the due date.

Judgement is also applied to the clause in the Mortgage where the borrower is made responsible for the Notary and Land Registry fees.

These are now made null and void as the bank is the only interested party to sign a public Deed, register the mortgage and to have a guarantee set up on the property which could be executed if the loan is not paid.

The borrower is only interested in receiving the loan.

Finally the only item where the latest judgment resolves in favour of the bank is with regards to the payment of the tax.

This is in connection with the Deed of Mortgage i.e. Stamp Duty to be paid to the Autonomous Region, the resolution confirms that the borrower should be responsible for the payment of this item.

If you feel you have been a victim of the above clauses, please contact us as per the judgement a claim can be made to recover the costs for you.

This is a translation of the original judgement issued by the Madrid Court written by Rafael Berdaguer Abogados.