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Archive for November, 2008

Aifos Faces a Forced Administration Procedure

November 24th, 2008

Gestión de Obras y Reformas, S.L., one of the numerous creditors of Spanish developer Aifos, has initiated before Málaga’s Mercantile Court number one a forced administration procedure as result of the money it is owed. In Spain companies undergoing a difficult financial situation can either initiate voluntarily an administration procedure or else one of their creditors may force it. The latter has been the case.

Aifos owes 850 million Euros (718 million GBP). It’s largest creditors are Banco Popular with 200 million Euros, followed by Banco Pastor with 33 million Euros. Another 96 companies form part of the creditors list to which AIFOS has been owing funds for the last 2 years.

AIFOS has currently employed 2,000 workers.

IMPORTANT: all our AIFOS clients have been sent a newsletter on this issue on Tuesday 25th of November. If you haven’t received yours or are unable to open the attachment please contact us. (http://www NULL.marbella-lawyers NULL.com/about/contactForm)

Source: El Economista Financial Newspaper (http://www NULL.eleconomista NULL.es/empresas-finanzas/noticias/879928/11/08/-La-inmobiliaria-Aifos-se-enfrenta-a-un-concurso-de-acreedores-con-una-deuda-de-850-millones NULL.html)

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The Dacion en Pago Procedure

November 21st, 2008

For those unable to service their Spanish mortgage a dacion en pago (datio pro soluto), is one of the proposed solutions we highlighted on our previous article regarding Bank Repossessions in Spain (http://www NULL.marbella-lawyers NULL.com/articles/showArticle/home-repossessions-in-spain-defaulting-on-mortgage). Antonio Flores also mentions it on a recent blog post. (http://www NULL.marbella-lawyers NULL.com/blog-by-antonio-flores/cannot-keep-up-repayments-on-your-spanish-mortgage-not-all-is-lost/)

In plain English, dacion en pago means handing over the keys to the bank, and in exchange the bank will discharge all mortgage debt not holding you liable in the future. They will also renounce pursuing the debt in your home country or elsewhere against any other assets you may hold. This solution of last resort puts an end to many people’s growing nightmare as the mortgage debt mounts up and becomes unbearable. On you defaulting a mortgage debt in Spain, the debt goes personally against you, not against the property itself. That is why many defaulting borrowers are realizing with shock that in despite of the lender having repossessed their Spanish property, they may chase you back in your home country or elsewhere for the outstanding debt. 

The dacion en pago involves you signing a deed at a Notary Public by which the bank commits itself not to chase you in the future for the debt and consider it discharged for good. The catch is that the property must not be in negative equity. This is actually more difficult than people think because due to the easy credit of the last years the loan-to-value of properties was very high, too high in fact, hence all the bank related problems we read on a daily basis with massive write downs carried out by Lenders. People borrowed far too much and now their properties may have fallen below their initial loan. If this happens, the lender will be reluctant to agree to this dacion en pago because the property will have no equity left. In this case if a solution cannot be reached the bank will repossess the property. Banks can sell the non-performing mortgage prior to it going to auction. Transfer Tax of 7% has to be paid on the value of the property as if it were a normal conveyance. Some banks will impose that this tax burden is borne by the borrower.

So if you are finding trouble keeping up with your mortgage repayments or you reasonably foresee you may fall in arrears soon and your property is still in positive equity you may suggest this option to your lender. However, it’s only up to the bank to decide on whether they are willing to accept it or not. Some banks are reluctant yet others will consider it although a specific case-by-case study will be required.  

The bank will evaluate if this option is in line with its best interests and will determine the amount of equity left in the property commanding an updated appraisal if necessary. If the numbers stack up, they will accept it. You will both sign the deed at a Notary’s and that will be the end of the matter. We advise you to hire a lawyer to make sure your debt will be totally discharged; besides you will need an impartial translator acting for you.
 
It’s a win-win for both parties really. The borrower is free at last and has managed to secure successfully his assets abroad from the lender or any law firm or debt collection company they may hire to pursue the outstanding debt. The lender on the other hand will now own the property outright and will have successfully waived a lengthy and expensive court procedure (repossession) without having to apply provisions to the Bank of Spain to make up for this dubious loan. These provisions set aside by banks are being looked upon closely by credit-rating agencies post credit crunch.

You can read a detailed article on the dación en pago de deuda here:

The Dación en Pago Explained (http://belegal NULL.com/articles/showArticle/spanish-mortgage-dacion-en-pago-handing-keys-bank)28th March 2009

 

Lawbird Legal Services (http://www NULL.lawbird NULL.com/) offers this service at a flat fee of 1,392€ (16% VAT included). Travelling expenses may be applicable as well, depending on where the property is located in Spain.

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