Antonio Flores’ Blog

Everyone knows that a mortgage loan title deed is a lengthy document with elaborate legal clauses and complex formulas where the main conditions of the loan agreement are set out. What most people don’t know, however, is that banks tend to include restrictions as to what one can and cannot do with the property. The latter restrictions are what we are more interested in, because breaking them entitles the bank to cancel the loan agreement and request repayment of 100% of the remaining capital.

It has to be said that some of them are clearly abusive and would not withstand a legal challenge on application of the Consumer Protection Act, but going through some of the restrictions makes interesting reading if only to see how one-sided can banking contracts be.

We have used a standard mortgage loan contract, in this case from Caja Rural de Granada (savings bank), although they are all pretty much the same. As an example, this “Caja” can foreclose on the loan if:

1. You are late by 10 days in making a repayment (that’s ten days, never mind 6 months!).
2. You don’t pay the IBI (Council Tax) or Basura (Rubbish Collection Fee) receipts and insurance policies (IBI can be as low as €200s per year and Rubbish collection €40 per six months).
3. You don’t pay the Notary fees for the mortgage deed (possibly the daftest of them all when it is the banks who take the money from you, upfront, to pay for the Notary fees!).
4. You use the property for any other activity other than what has been agreed (any ideas? :)).
5. The property catches fire or is damaged and as a consequence it loses value (this could make sense but you have the bank forcing you take out insurance to cover this anyway).
6. You don’t give the bank the original mortgage deed within 6 months from signing the loan agreement (does anyone know where the original mortgage deed for their property is? From a legal point, it is completely irrelevant where the deeds are once they are registered so you can keep them in a safe, like some villagers do to get proper sleep, or use them to get the barbecue going, it really makes no difference).
7. You rent the property without prior consent of the bank and/or in detrimental conditions for the landlord (this clause is outright illegal and deserves no further comment).
8. You sell the property without the bank’s consent (they must first find out and then choose to add another property to their plentiful property portfolio!).

The notorious stupidity of some of the above clauses makes one laugh, but let’s look closely at what clause 8 entails. Recently I have been advising on some transactions on behalf of willing buyers and sellers without notifying the bank, because the bank has, quite simply, refused the buyer’s application on financial grounds. I will leave this for my next blog post.

Antonio Flores Mortgages bank repossessions, foreclosure in spain, spanish mortgage loan, spanish mortgages