The Lawbird Tribune

A SWAP is an insurance policy which purpose is to offset major fluctuations in, for example, a benchmark interest rate to which a mortgage is referred to. In Spain most mortgage loans are referred to the EURIBOR rate (Euro Interbank Offered Rate). The EURIBOR is the average interest rate at which a panel of 57 European banks lend to one another. The idea with a SWAP clause is that you pay a small fee on a regular basis to your lender as a normal insurance to offset against major interests rate fluctuations and if the Euribor rate should for example fluctuate wildly, as it did back in October 2008, hitting an extreme 5% your repayment interest rate would be capped at say 3%. Basically it’s as if you agree into signing your own collar clause where you are assured to pay a capped interest rate to your lender. This in theory.

In practice a SWAP is a complex financial instrument that has been in use by large corporations since the fifties to offset against currency and interest rate fluctuations. The problem came when it was recently mis-sold en masse during the last boom years to unsuspecting borrowers as a “safe” product without disclosing in full the pitfalls it may entail should the interest rate fluctuate steeply. Or even worse, in many cases it was bundled together with the mortgage loan itself as “free of charge”. Who would in their sound mind turn down a freebie which is tagged by a bank as “safe”?

When you hire a SWAP, unbeknown to many you are tacitly making an educated guess on where the interest rate will be heading next; so it’s basically taking a gamble with your hard-earned money! This product was marketed and sold as something “safe”  and at times even as “free”, but its drawbacks were not disclosed to borrowers which in most cases lacked the necessary financial savvy to ascertain clearly what they were being (mis)sold or even been given away as a “free” insurance. What was seldom explained to potential customers was that if the benchmark interest rate fell below a certain percentage it’s the borrower who had to pay to his lender an amount to offset the shortfall in the interest rate! And it’s no small amount either, tallying hundreds of euros a month in the worst cases which are to be paid in addition to the mortgage repayments of already struggling borrowers. So it has been an unexpected double or even a triple whammy for those whose source of income is in sterling pounds bearing in mind the poor exchange rate to the Euro over the last two years.

If you want to cancel a SWAP clause through a Notary public you will have to pay for the “privilege” north of 9,000€. This is an added grievance to those borrowers which had a SWAP tagged onto their mortgage loan as a “freebie” unbeknownst to them.

This insurance was largely mis-sold or even given away “freely” over the last years, at the peak of an all-time high Euribor interest rate, when lenders knew full well this rate was bound to reverse its trend and start heading down hitting historical lows. So basically they were (mis)selling a product which was going to bring huge losses to its clients within months of having hired it! As American novelist Mark Twain used to note with an acid sense of humour: “A banker is a fellow who lends you his umbrella when the sun is shining and wants it back the minute it begins to rain”

And now the positive news: There have been a string of likeminded rulings from Spanish High courts in 2009 establishing that SWAP clauses offered en masse to unsuspecting mortgage borrowers are abusive clauses and determine they should be regarded as null and void which avoids borrowers having to pay €9,000 or more to have them cancelled at a Notary. Moreover, Judges have awarded a full refund to borrowers who litigated on the commissions unduly paid to their lenders over the last years because of this insurance policy which was not properly explained to them. Even Spain’s Ombudsman has condemned them as abusive.

What to do?

If you think you may have been a victim of a SWAP clause in your Spanish mortgage call or e-mail us to see if we can act on your behalf.  Strength will be in large numbers.

raymundo Litigation, Spanish Mortgages abusive mortgage clauses, bankinter clip, mortgages in Spain, Spanish Mortgages

Promociones Eurohouse 2010 is a well-known developer based in Orihuela, Alicante, and is a subsidiary of San Antonio Group. Its off-plan developments have been bought mainly by UK and Irish citizens looking to retire and enjoy the mild Mediterranean weather. Regrettably off-plan buyers are in for a nasty surprise within the next days as this developer is the latest victim claimed by the ongoing recession.

It is yet unclear at this stage on whether it will be a voluntary receivership filed by the developer itself or else a forced receivership procedure imposed by one of its numerous creditors (Atlas International) as both have been lodged on the same day before Elche’s Mercantile court. It will now be up to the Mercantile judge to decide on which one it finally accepts. The reported debt, yet to be confirmed, is over 150 million pounds.

As soon as it’s officially announced in Spain’s Law Gazette (“BOE”) creditors will have only a strict deadline of 30 days to lodge before the Mercantile court their financial interest. Failure to join the receivership within this deadline will result in a loss of their stage payments.

Once more, we stress that a developer filing for a receivership procedure does not necessarily equate to bankruptcy, as some sources keep mistakenly reporting. That is something that will be decided at a later stage by the Mercantile judge overseeing the receivership procedure. Spain’s Insolvency Act is geared towards saving ailing companies who may be suffering temporary cash flow problems. Filing for receivership in Spain allows these struggling companies to buy time allowing them to renegotiate and restructure their financial commitments.

In fact many high profile developers who filed for receivership back in 2007 and 2008 have already announced they are exiting receivership and resume normal trading i.e. Llanera Will be the First Spanish Developer to Exit Receivership

Non-exhaustive list of affected off-plan developments:

1. Fortuna Golf Gardens
2. Fortuna Hills Golf Resort
3. La Mirada
4. Residencial San Pedro
5. Residencial Miramar
6. Miramar
7. Residencial San Pedro del Pinatar

Off-plan purchasers trapped in the ensuing receivership will need to collate the following original documents:

1. Original Private Purchase Contract
2. Original stage payment receipts of having sent over the funds (including the initial reservation deposit) on to Promociones Eurohouse 2010.
3. Original bank guarantees.

To represent a client throughout the whole receivership procedure (not just to merely add them to the Creditor’s list) a Power of Attorney will be required which needs to be both notarized and legalized (with the Hague Apostille). Arranging this POA takes on average 7-10 days from the UK so it is advisable to plan ahead so as not to overrun the 30 days deadline.

Lawbird offers this legal service for a flat fee of 1,300€ plus sundries (TBA). Payment in installments is available upon request.

Appointed lawyers will seek to best defend client’s interests in the ensuing procedure taking the following actions, amongst others:

1. Claiming from the judicial administrators the creditors’ position of the clients submitting all the necessary documents on time and in the due manner. To challenge adopted resolutions on the matter if proven detrimental to the inclusion in the Creditors’ List (this may entail additional legal fees).
2. Continued monitoring of the receivership procedure ensuring client’s rights are upheld
3. To negotiate with the judicially-appointed administrators reaching agreements as necessary
4. To keep the client informed on the ongoing procedure
5. Assisting to Creditors’ meetings to defend the client’s interests
6. To claim or challenge judicially agreements taken by Elche’s Mercantile Court

Lawbird Legal Services is a Spanish law firm with broad experience in litigation representing hundreds of clients in similar high profile receiverships. Learn more about the Firm.

raymundo Litigation, Property administration, administration procedure, bankruptcy, Fortuna Golf Gardens, Fortuna Hills, Golf Resort La Mirada, insolvency, Promociones Eurohouse 2010, receivership, Residencial Miramar Miramar, Residencial San Pedro, Residencial San Pedro del Pinatar

It has come to our attention that a fraudster under the supposed name of “Brown Wilson” is using the good name of our sister company, easy2loan SL, in a scam offering to lend money in return of a sizeable “commission”.

If you have received a letter or e-mail written in German or any other language, from someone under the name of “Brown Wilson” from Spain or anyone else, supossedly representing a company called Easy 2 Loan Financial Company, and offering you a bank loan you are being object of a fraud.

We would like to point out the following:

1. easy2loan SL is currently not trading
2. Following the above, our company is not offering any type of loan.
3. No-one under the name of “Brown Wilson” works or has worked for and on behalf of easy2loan SL

If you receive any communication apparently coming from the company EASY 2 LOAN Financial Company offering you a bank loan, you should report it immediately to the nearest Police Station as it is a fraud. Do not pay any money.

Presseninformation

Achtung! Herr Brown Wilson; Easy 2 Loan Financial Company

Wir sind informiert geworden dass einer Betrüger gennant als “Brown Wilson” hat des Names unsere Firma, easy2loan SL, benutzt.  Herr Wilson leiht Geld aber man muss verschiedene Gebühren und Kosten Bezahlen.

Falls Sie einen Brief, Email oder Anruf von Brown Wilson aus Spanien bekommen und jemand sagt Sie dass Sie Darlehen aufnehmen konnen, denn ist es wahrscheinlich einer Betrug

Darauf, hinweisen wir das folgende:

1. easy2loan ist nicht Aktiv
2. Unsere Firma bietet kein Darlehen Dienst.
3. Kein Brown Wilson arbeitete jetzt oder hat nie gearbeitet bei easy2loan SL

Falls Sie irgendeine Kommunikation von Easy 2 Loan Financial Company bekommen betreffend ein Darlehes, bitte einleiten Sie sofort eine Reklamation an der Polizei, wie wiederholen dass es einer Betrug ist.

aflores Spanish Mortgages

Just when bar and restaurant owners thought things couldn’t get any worse, given the grim financial downturn, you can always rely on the Government to prove them wrong. Mrs Trinidad Jimenez, Spain’s Health Minister, announced yesterday that smoking will be banned in all closed public venues as from the 1st January 2010.

Bar, restaurant, hotel and discotheque owners have only just finished paying off the mandatory expensive reforms to their business premises so as to segregate designated smoking and non-smoking areas in compliance with the newly passed Smoking law (law 28/2005 which came into force on the 1st January 2006). Scarcely three years ahead the Government plans to scrape it off amending this law and banning smoking all together in closed public premises. So basically these refurbishments will now become useless.

On a side note, Spain’s football league are now threatening to go on strike if the tax reform announced by the Government this week is enforced whereby top-football-earners will now be taxed at the highest tax band of 43% instead of a flat income tax rate of 24%. This had garnered Spain widespread criticism throughout Europe on grounds of unfair competition.  Hopefully this will not be the case.

I think some people may be in for a hard time next year if they like watching football or smoking or both.

56 days to go…

raymundo Taxes, Uncategorized ban on smoking, smoking, smoking law

This much-anticipated law was finally approved yesterday. It amends the Civil Procedural Law, the Tenancy Act and the Commonhold Act.

The gist of this new law is as follows:

1. Timeframe reduced to file eviction law suit down from 2 months to 1. Landlords had to imperatively wait two months of unpaid rental before they could initiate the formal eviction procedure through the civil law courts. This has now been reduced to only one month’s waiting time.
2. Swift execution of the eviction. The judge’s ruling will suffice to execute the eviction on the day and time that is agreed. The landlord is free to agree with his non-paying tenant to condone part of the debt providing the defaulting tenant leaves the property immediately. As from the ruling, the deadline to vacate the property has to be a statutory minimum of 15 days. It may even reach one year depending on what’s agreed.
3. The whole legal procedure is substantiated through a verbal court procedure, as per Spain’s Procedural Law (this is not a novelty). This should be faster, in theory.
4. The landlord can now waive the statutory long-term let of 5 years. He may now include clauses within the Tenancy Agreement in which this compulsory timeframe does not apply. i.e. a clause whereby it is stipulated that the property will be needed for the landlord’s own use or for his family’s. However, if after 3 months’ time the landlord or his family have not taken possession of the property, he will be forced to re-install his ex-tenant and award him a suitable compensation to offset the expenses of the move.
5. Changes in the Community of Owners. Commoners will have to approve by simple majority (3/5) those improvements in the community whose aim is to be ecologically-friendly i.e. improved water or energy ducts. If these improvements can be individually enjoyed by the commoners then only a vote of 1/3 is required.

Source: El Mundo newspaper.

Related blogs and articles:

• Non-Paying Tenants? No Longer an Issue – 23rd October 2009
• Comunidad de Propietarios: Avoid Problems with Your Neighbours in Spain – 26th June 2009
• New Express Eviction Law: Much Ado About Nothing -13th July 2009
• Paying the Rent Late Twice will be Cause of Eviction – 4th June 2009
• Spanish Express Eviction Law Pre-Approved – 24th December 2008
• Landlords Afraid of Non-Paying Tenants Take Pre-emptive Measures -16th September 2008
• Landlord: Keys to Successful Rental Income – 31st January 2008
• How to Evict Non-Paying Tenants – 17th December 2007

raymundo Litigation, Property, Spanish Rentals eviction in Spain, landlords, non paying tenants, Spanish eviction, spanish tenancy, spanish tenancy agreement, tenants

One of the major problems landlords face post credit crunch is the increasing number of non-paying tenants. Many landlords rely on this source of income to offset partially or wholly the mortgage repayments of the property that is being leased being forced to have them legally evicted.

In my article on “Landlord: Keys to Successful Rental Income” I pointed out that one of the best ways to avoid non-paying tenants was to take pre-emptive measures such as screening candidates carefully weeding out those with unsuitable profiles.

There is now a helpful website available that lists non-paying tenants nationwide: Fichero de Inquilinos Morosos (FIM). For a reasonable fee of only 9,95€ you will be able to search –in English- if your prospective tenant has actually defaulted previously on a Tenancy Agreement. As pointed out in my article, there are professional defaulting tenants that roam the country in search of their next victim, preying preferably on trustful non-residents. In hard times such as these, many struggling landlords cannot endure the hardship of a financial leach that eagerly exploits Tenancy laws shortcomings.

This website’s database is continuously updated with the input provided by both eviction rulings as well as by other users’ feedback. You can additionally include your own non-paying tenants in their list providing you comply and follow the online form’s instructions. Professional non-payers who’ve made a lifestyle out of it will have already been included in the list.

I think it is a useful tool that compliments nicely other tools such as rental insurance, rental bank guarantees, adding an arbitrage clause and screening out your prospective tenants. This gizmo can be used only for those candidates who’ve made it to the top of your screening list. You might as well spend a few dozen Euros now rather than having to fork out thousands at a later date. Better safe than sorry.

• Non-Paying Tenants? No Longer an Issue – 23rd October 2009
• Comunidad de Propietarios: Avoid Problems with Your Neighbours in Spain – 26th June 2009
• New Express Eviction Law: Much Ado About Nothing -13th July 2009
• Paying the Rent Late Twice will be Cause of Eviction – 4th June 2009
• Spanish Express Eviction Law Pre-Approved – 24th December 2008
• Landlords Afraid of Non-Paying Tenants Take Pre-emptive Measures -16th September 2008
• Landlord: Keys to Successful Rental Income – 31st January 2008
• How to Evict Non-Paying Tenants – 17th December 2007

raymundo Property, Spanish Rentals defaulting tenants, FIM, non paying tenants, rental, rental arbitrage spain, rental insurance spain, renting, Spanish eviction, spanish tenancy, spanish tenancy agreement

Look no further. We had noticed early on this year how Spanish banks had offloaded large stocks of properties from their books and funnelled them to existing or newly incorporated real estate divisions under their control, much like SIV’s. This had turned Spanish banks de facto into the largest real estate agencies. What we had also noticed, based on the failed conveyance procedures our clients had endured this year due to them being unable to secure finance, was that banks seemed to offer significantly more competitive lending terms on those properties owned by them!

This weekend I’ve read for the first time in the financial press that banks are actually offering incredible financial terms on those properties held by them:

1. 100% Loan to Value for residents (yes, you read it right, not a typo)
2. Euribor plus a spread of only 50 basic points (or 0,50)
3. Timeline? Take your pick. 40, 30, 25 years; anything goes.
4. Interest-only? Not a problem Sir. Will it be 1, 2 or 3 years?
5. Grace period? How would you like it, Sir? 1, 2 or 3 years?
6. Opening commission? Early redemption commissions? It’s commission-free, Sir (!)
7. Discounts available of up to 30 and 40% off from the market’s peak in 2007. Prestigious valuers’ appraisals ready-at-hand to prove the fall in price. Take your pick.

So where’s the catch? There’s none. There’s no small writing to be gleaned. It’s a straightforward deal. Banks will make money in two manners, both on the sale and on granting a mortgage loan on the property.

Reading through the spreadsheet just left you gobsmacked. It was as if we had stepped back in time using HG Well’s time machine to the good old days of …2006. How could you possibly miss on the opportunity of buying a property through them with all the above lending terms bearing in mind the Euribor Rate is at an all-time low? Touchée, that’s exactly the point to be made.

How can developers or Estate Agencies compete against this? They cannot, it’s that simple. Banks have become the fiercest competitors in the Property Market taking no prisoners in their wake. If you request a mortgage loan on any property other than the bank’s, they will only offer you 50/70% LTV (non-residents), Euribor Rate plus a spread ranging from 0,7-1,50%, opening commissions (usually 1%), early redemption commissions, no interest-only, no grace period, no…well, you get the drift.  This is clearly a competitive advantage that, unless you are a fellow bank, you cannot hope to overcome.  

If this is not a buyer’s market, then frankly, I don’t know what is.

raymundo Spanish Mortgages

As we had previously reported, an Administration Procedure does not equate to bankruptcy as some mistakenly repeatedly uphold. Receivership procedures in Spain are geared towards saving ailing companies which are undergoing temporary cash-flow problems. Throughout the Administration Procedure, and dependant on a Financial report drafted by experts, the Mercantile judge will rule on whether a company under administration should file or not for bankruptcy.

Developer Llanera was the first large Spanish developer to seek Creditor Protection back in 2007. It is fitting that it’s the first one to announce its clawed comeback. The Creditors’ General Meeting must ultimately give its approval tomorrow to the company’s proposal.

This is indeed welcome news for stressed creditors who are now bogged down in similar legal quagmires and have lost all hope.

Source: El Economista

raymundo Litigation, Property administration, administration procedure, bankruptcy, creditor protection, llanera, receivership

Contrary to what would seem like reasonable Fiscal Policy in the midst of a deep recession, Spain’s Government has decided it will raise its Indirect tax, Value Added Tax or VAT.

It doesn’t take a degree in Economics to realise just how, errm to put it mildly, counterproductive this is to the broad Economy, more so in Spain’s case. With Consumer Confidence plummeting in Spain it would seem the Government should strive to incentivize spending, rather than curtailing it at every opportunity. Oddly enough and contrary to popular wisdom, that is exactly what it has announced last Saturday the 26th of September.-a tax raise leaving the door ajar to future tax raises…

With Spain’s Property Industry, which has long been Spain’s driving force along with Tourism, in the doldrums, with 5 million unemployed and reportedly steadily rising to unprecedented levels unseen since the days of the II Republic (1931), with a reported stock of between 1.6 to 3 million unsold houses (both resales and new builds), with a Public Deficit spinning out of control adding 80 million Euros of debt everyday and with Consumer Spending spiralling downwards hitting fresh lows every month our Government decides that what is best needed by our countries’ ailing Economy is to …raise taxes; contradicting its much vaunted electoral promise of “lowering taxes”.

On Saturday the 26th of September it has been decided that as from next year 2010:

1. The extended VAT of 16% is to be raised to 18%.
2. The reduced VAT of 7% is to be raised to 8%. This is the tax that is levied on new builds (off-plans). The tax on resales remains unchanged. This is not welcome news by a struggling sector vying to unload a huge stock of unsold new build properties
3. The super reduced VAT of 4% will remain unchanged.

One can only pray our Government will not raise even further our tax burden in such dire times. Lowering taxes is always the right path on the road to economic recovery which incentivates citizens saving and helps to attract Foreign Investments; both of which will be invested reactivating Consumer Spending which will ultimately lead to creation of new jobs, not to their destruction and the reckless public subsidizing of lost causes.

raymundo Property, Taxes tax, Taxes

We would like to remind all of those buying off-plan from Aifos that the deadline to submit your request to join Aifos’ creditors list ends on September 30. All of those who have not done so already please contact your solicitor as soon as possible.

You will have to forward your solicitor the following:

• Original Private Purchase Contract signed with Aifos.
• Original bank statements as proof of the different stage payments paid to Aifos.

Those who fail to submit the paperwork on time will be left out of the creditors list and will lose every chance of recovering anything from their deposits.

If you don’t have a solicitor who can represent you, please contact us urgently.

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