Home Repossessions in Spain: A Legal Perspective

[Denis]

Hi. I am a gaurantor for 2 houses being developed in Majorca, this started around 4 years ago. My sister is on the deeds with me as a gaurantor, but i have just learnt that in case of repossession my UK assets are also liable via this thread, which i was told otherwise at the time. The numbers are good, its just we are unable to complete the houses. The mortgage and recent valuation gives €275K equity, but €100k needs to be spent to finish them and that is the stumbling block. There is also collaterol on my sisters property of €150k equity. So there is enough there if come repossesion before they reach me.
We have an interest only mortgage that expires in Janaury, which is when I see the big problem arising, as at the moment we have not fallen behind.

There are plenty of persons wanting to rent them, but as they are unfinished we are stuck.

If we are unable to find the funds to complete and the worst happens, would selling my UK property or handing over to a family member be wise before the worst happens.

We are also considering a 'dacion en pago' again if worst happens and with the equity I am hoping maybe accepted.

My main concern is my UK property and what I should do to avoid this being touched.

Thank you in advance.

[Lawbird Lawyer]

Hi Denis

Well I'm glad that by reading this forum, specifically this thread, it is dawning on people what they are up against before they sign nonchalantly as guarantors on mortgage loans. I always advise not to sign as guarantor even if it's for a family member or your best friend. If they fail to pay YOU will be up next in the lender's roster with ALL your assets, both now and in the future. And this is hapenning everyday of the week post credit crunch.

The problem with selling up your UK assets before your creditors come after you is that in Spain you could be criminally prosecuted for this. It is called in Spanish "alzamiento de bienes" and aims to waive the personal unlimited liability enshrined in Art 1911 of the SCC.

I'm fairly sure, without being an expert in U.K. law, that it works pretty much the same in the U.K.

In Spain you cannot be jailed for bad debts.

But you can certainly be jailed if you purposely decapitalise your pool of assets with the sole intent of deceitfully attempt to waive your financial commitments. i.e. repayment of a mortgage loan.

You may want to think twice before doing this. If you are going to take this route seek legal advice from a UK solicitor.

As to your other option, a dación en pago, it is the solution I always recommend only as a last resort to a borrower/guarantor. On following it you can walk away and start off with a clean slate. Your credit-rating will not be tarnished and you will have successfully waived all liability. Let us know if we can represent you in a dación. We charge a flat fee of €1,200 plus VAT.

The only problem with a dación is that Spanish lenders are now in 2010 even more reluctant than ever to accept it following what I write in other posts on this thread.

I wish you good luck and let us know if we can assist you with the dación option should you require it.

Sincerely
Raymundo LarraÃ*n Nesbitt