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.

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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.

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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

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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

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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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Rumours were confirmed last Wednesday 22nd of July when Aifos’ petition to file for receivership was formally accepted by Malaga’s Mercantile court number one. On the following day Aifos issued a press release by which it informed they had filed for voluntary receivership.

As we had previously pointed out in prior communications, filing for administration does not equate to bankruptcy as has mistakenly been reported at large e.g. In Spain’s highest profile administration procedure to date, involving well-known developer Martinsa-Fadesa, this company will restructure its 7 billion euro debt and will continue trading normally within the next years.

What developer Aifos has sought is for creditor protection allowing it to buy time to restructure its financial commitments. However, the mercantile judge ruling on the matter may ultimately decide at a later stage that Aifos should file for bankruptcy if it is deemed not to be able to continue trading. This will be decided upon in the ensuing procedure.

As from the time the official announcement is published in Spain’s Official Law Gazette (B.O.E.), creditors will have a deadline of one month to join Aifos’ Creditors list. (EDIT:  Today 31st of July it has been officially published)

Off plan purchasers may fall in any one of these three categories:

1. Purchasers that signed a Private Purchase Contract and have not had their off plan dwelling delivered.
2. Purchasers who had already withdrawn from their Private Purchase Contracts and had filed a lawsuit with no final ruling issued yet.
3. Purchasers who had litigated already and had a final ruling on their case but had not been refunded yet.

As a general rule everyone who purchased a non-delivered property through developer Aifos, whether having litigated or not, should retain a lawyer (and court agent) to join the Creditors’ list and/or litigate. The difference between cases is on their rights (i.e. those with final rulings will be labelled as “ordinary” creditors which lands them higher above on the Creditors’ ladder). Notwithstanding the above, all three cases will be considered as non-secured creditors.

Purchasers will have to liaise with their existing legal representative or else appoint a solicitor to either join the Creditors’ list and/or litigate. Once the receivership has been accepted trials will now be heard only at Malaga’s Mercantile court number one unlike before in which it was actually Civil courts that passed judgement on cases involving Aifos.

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

• 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.
• Continued monitoring of the receivership procedure ensuring client’s rights are upheld
• To negotiate with the judicially-appointed administrators reaching agreements as necessary
• To keep the client informed on the ongoing procedure
• Assisting to Creditors’ meetings to defend the client’s interests
• To claim or challenge judicially agreements taken by Malaga’s Mercantile Court

We will be sending this week to all our Aifos’ clients a detailed newsletter informing them of the legal situation and the available options available to them. This newsletter will also be available to non-clients upon request.

If you have purchased a non-delivered property through Aifos and wish to receive further information on this matter, please contact us free of compromise. One of our lawyers will contact you to explain clearly your legal options.

Email:  Contact Form
Phone: +34 952 86 18 90
Summer opening hours: Monday to Friday, from 8:00 till 15:00 hours

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Web owners and in general owners of forums, blogs and wikis are not to be held responsible of the user’s posts and comments, following the Law of Services to the Information Society, LSSI for short. Lugo’s High Court has just passed a recent ruling on this matter which acquits the web owners of “mindoniense.com”.

“Mindoniense.com” is a website dedicated to providing general information on the mainland town of Mondoñedo. Two anonymous forum users attacked relentlessly the town’s major. The major filed a libel law suit defending his honour. It was turned down as there weren’t enough grounds to sentence anyone in particular. The major alternatively sued the website’s owners as they were unable to identify both forum users.

In the first ruling the judge ruled that website owners cannot be held accountable on comments posted by users in accordance to art 16 of the LSSI. However the nuance is that web owners must not be aware of the illegality of the posted comments or that they undermine someone’s legitimate rights subject to compensation, and must act hastily to remove libellous remarks or else make them inaccessible on them being reported.

Source: El Mundo Newspaper

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Within the next months we are going to be bombarded with articles spinning the Government’s eagerly anticipated new Express Eviction Law which has yet to be pre-approved by the Senate before it is returned to the Congress of Deputies for its final enactment and publication in Spain’s Official Law Gazette.

This new law aims primarily to tackle cases of non-paying tenants which overstay in let properties, to the astonishment and despair of landlords.

But will it really help out? In short, no.

The proposed measures implemented by this law can be easily challenged or overcome by tenants. Besides the new measures will not shorten the eviction procedure significantly as sought as it hinges on the courts not being clogged, as they always happen to be. The shortcomings of the proposed measures are self evident.

The core of this proposal is the much vaunted 2 weeks waiting time, dubbed express eviction, as from the time there is a ruling evicting the tenant. But there’s a catch; the trick is that the said ruling can easily take 6 months on average dependent on the courts’ agility, so the tally would really be 6 months plus the 2 weeks. So yes, there is some reduction in the timescales involved to evict non-paying tenants, albeit not groundbreaking enough to open a champagne bottle as we are being led to believe. This half-baked attempt to redress matters will at best save only a couple of months. Landlords will still have to wait months to recover the possession of their let properties.

This is a classic example of passing new laws to satisfy the broad public (read electorate) at large which at the end of the day may only complicates matters further without really tackling pressing issues and even leaving the door ajar to potentially adding new problems. At best we can label it as a half-hearted attempt to address the situation.

At a time when many ex-pat landlords are already struggling with their mortgage loans, as they relied on the let’s income to offset it against the mortgage repayments, the last thing they needed was the aggravation of withstanding non-paying tenants. This situation has lead many landlords to default on their mortgage loans which in turn have lead to a soar in repossession procedures.

A golden opportunity has been missed –again- by the legislator to address Spanish Tenancy laws that are heavily biased, for historical reasons, in favour of tenants. These laws need to be urgently and decisively adapted to modern social reality. When this is done, here’s wishful thinking, letting will become a serious alternative to purchasing properties allowing the Spanish rental market to pick up from the ground as in the rest of Europe.

In the meantime we will regrettably have to continue waiting until a law is passed that will boldly challenge this unfair situation once and for all allowing for express evictions instead of politically ill-conceived piecemeal attempts aimed to satisfy everyone.

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A mere delay in paying the let for a second time, by a non-paying tenant who has been previously sued by the landlord, will be a just cause for an eviction procedure. This new scenario has been made possible thanks to a recent rulling by the Spanish Supreme Court of Justice.

As explained in my article on Eviction Procedure in Spain, one of the strategies a non-paying tenant could follow to stall the procedure after the landlord had filed a law suit against him requesting a formal eviction, was by paying late (“enervación”). This stalled the procedure and forced the landlord to continue with the tenancy agreement. Albeit the tenant could employ this tactic only once.

The new change will mean that if the tenant should pay belatedly a second time (i.e. for two consecutive months), after the landlord has previously initiated an eviction procedure for the same reason, it will no longer mean the case can be dismissed or thrown out of court. It will mean the tenant breached the contract. Period. Spain’s Supreme Court has now unified the different approaches and regards that the tenant has breached the Tenancy agreement, provided the contract stipulates a deadline in which the payments have to be met every month.

This puts an end to non-paying tenants which continuously abused the legal system on deciding when they felt fit to pay their landlords in lieu of when they were meant to. This change has been brought about by one of the latest ruling of Spain’s Supreme Court. This is the second ruling on the same issue with a similar outcome which will now set jurisprudence in our legal system. The prior ruling is also from this year.

Both of these rulings aim to address the increasing problem landlords are faced with in Spain on letting their properties to professional defaulting tenants. Additionally, the dire financial circumstances have forced what used to be trustworthy tenants into defaulting their lets and abusing our system too. These rulings will now add new legal tools to defend landlords, as in Spain, the laws have been traditionally biased towards tenants for historical reasons which need to be adapted to social reality without delay.

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Within the last year we’ve seen an alarming increase in the number of queries regarding the legitimacy of certain Spanish law firms and lawyers. These companies are in fact non-existent and act only as shelter companies devised to fleece foreigners offering them dubious legal services often related to some murky financial interest, which is in the end nothing but some sort of advance fee fraud. Foreigners should be well advised that these scammers pass themselves off as legitimate Spanish law firms and lawyers. They prey exclusively on foreigners and are in fact not even Spanish themselves. Their command of English is very good.

Spanish lawyers belong to one of the numerous Bar Associations that sprawl throughout Spain. There are a total of 93. Every lawyer member of a BA will have a registered number. It is very easy to check in less than a minute if a Spanish lawyer is legitimate, providing he is in fact registered of course.

These fraudsters will always contact you to offer legal assistance in some service of which you by chance are the sole lucky beneficiary. The potential reward to reap is huge (hundreds of thousands if not millions) in exchange of a reasonable legal fee which in comparison doesn’t seem like much. The preffered contact method is email (which they may follow up by ordinary post), and they will offer you either of the following legal “services”:

1. Letting you know that after a long and winding investigation it has surfaced that you are the sole live beneficiary of a considerable Spanish inheritance from some distant relative you had in Spain (unbeknown to you) that has sadly passed away.
2. Offering you to join group actions to recover deposits from bogus resale time share companies in ongoing court proceedings (Reclaim Certificates).
3. Notifying you that you have won the Spanish Lottery (despite never having played it) or that you have been selected in a random draw and are now the lucky beneficiary of a special promotion from the generous Spanish Lotto Administration.
4. Contacting you regarding using your bank account, in exchange of a sizeable commission, for some million dollar bank transfer with origin in some dodgy place in Africa. This is known as the Nigerian Letters.
5. Offer to assist you in the verification and payment of unclaimed funds located in Spain of which you happen to be the only beneficiary.

An example of enquiries about such bogus firms are the following:

• Martinez e Beneficio
• Alberto Ganez Y Socio
• Perez, Gonzalez and Associates & Perez, Carrera and Associates

Our recommendation, as always, is to never ever pay moneys upfront if you have the slightest suspicion about the legitimicay of the people you are dealing with.

We have compiled a list of bogus law firms which is continously updated.

 
Other interesting related links:

• Protecting Yourself from Pyramid or “Ponzi” Schemes – 21st February 2009
• Fraudulent sell of shares from Spain – Boiler rooms UK FSA’s link.
• Timeshare resellers: Be careful! – 23rd of August 2001
• Lottery Fraud: Yet Another Scam – 24th September 2001
• Is the ‘El Gordo Lottery Sweepstake Company’ a genuine company?
• European Mediation Limited
• Bogus Holiday Club Membership (mostly in Canaries)

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