Author: Gerardo Vazquez, Abogado, Vazquez Estudio Juridico.
Though things are rather dark these days, this article may contain a ray of sunshine for the ordinary consumer. And, as you will see, what is good news for the consumer could be bad news for the Spanish banks.
Let us start by wheeling in that weighty and long-winded document known as the Spanish mortgage deed (escritura de hipoteca). Designed to comply with an 19th century law (Ley Hipotecaría de 1861, revamped in 1946) it is the sort of document you may have seen in a corner at the Notary’s table when you signed for your Spanish property and when the bank lent you money to assist in the purchase of your house.
You may well have bought your property in those glorious days at the beginning of this century, at a time when the property market was booming. In those days people seemed to be more interested in making sure that the property they were buying was in fact the one stated in the Spanish purchase deed, than in trying to understand that rather menacing document in the corner, which seemed full of obscure clauses.
You might remember that these clauses were never fully explained to you, and, to be honest, the fact is that, had someone tried to explain them to you, you might not have understood them anyway. In those heady days, banks and building societies were willing to lend money for the purchase of Spanish properties without too many problems, there was a lot of competition, and the niceties of the Law were sometimes put to one side in the rush of property transactions.
Later, as the glee subsided and the recession came, consumers where faced with the grim reality of that horrible document they had signed, the mortgage escritura. Many could not pay the monthly mortgage payments and they found themselves facing quick and nasty court procedures designed to evict them from their properties as soon as possible and to protect banks and building societies. They could raise little opposition, save to pay up the amount owed and penalties, if they could afford to do so. To give back the keys was an idea; a bad idea in fact, given that if you did so unilaterally you would then still owe lots of money.
As interest rates fell to ridiculous levels – with the Euribor at negative levels - some started thinking how could it be that the interest rate applied to their mortgage never fell. They quickly found out that their mortgage deed included a clause fixing a minimum interest rate. Others, when dusting off their mortgage and associated documents, started thinking why was it that had they paid fees and taxes to register the Bank´s mortgage. Surely the bank should have paid these?
Numerous court cases ensued, after all, what was great law in the 19th century was not so good now. It became increasingly difficult to explain why an 80-year-old granny should be shoved out of her flat when her only “crime” she had committed was to unwittingly guarantee her son´s mortgage. Nor was it very acceptable to see whole families with their screaming young children being forced out of their homes, often in the presence of hordes of police protecting the court officer and the locksmith who had come to turf them out.
Regrettably, the higher Spanish courts did not seem very sympathetic to all these claims. After all, why change a law that had worked fine for some 150 years? But luckily a few determined Lawyers started bringing cases before the European Court of Justice and a series of judgements ensued. These have totally changed an otherwise bleak scenario for the consumer.
And so, we come to the ray of sunshine promised at the beginning of this article.
Recently, in a leading case, on the 3rd March this year, the Court of Justice of the EU decided that a key interest rate used by banks (called the IRPH) is questionable, thus granting consumers a new chance to claim against their Spanish bank. This interest rate is invariably higher than the main rate which is the Euribor – at times over 2% higher. Thus, the floodgates for making claims have opened, given that one could be talking about the possibility of claiming back tens of thousands of Euros, not to mention the chance to seek a reduction in future interest payments. Although, obviously, whether one can do so or not depend on the individual case.
According to some estimates, the IRPH interest rate is included in up to 800,000 mortgage deeds, one of which could be yours. Therefore, it is time to take that old musty mortgage escritura from the cupboard and to take it to someone versed in such matters – you never know, it may contain a silver lining in these troubled times.
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