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wwyavrfccv
11-07-2008, 08:45 AM
This is the discussion thread for the article Home Repossessions in Spain: A Legal Perspective (http://www.marbella-lawyers.com/articles/showArticle/home-repossessions-in-spain-defaulting-on-mortgage)

Mrs Haynes
12-09-2008, 06:50 PM
I understand the implications of reposeesion & I'm currently not in arrears, however I'm struggling to find ANYBODY who will speak English in my Spanish bank to try and help with altrernatives before I fall behind with the mortgage payments.

aflores
12-13-2008, 06:30 PM
Hello Mrs. Haynes,

What should ideally happen is that the property is transferred to the bank against payment of the debt and so the bank would then own the property and the mortgage would be fully settled, ensuring that there will be no comeback.

If you believe you will not be able to keep the payments up to date you would need to talk to them to advise them that you may not be paying the mortgage any longer and it is in their interest to take the unit directly from you as opposed to having to go through a repossesion procedure.

J.Adcock
12-16-2008, 10:58 AM
I currently own property where my ex partner wont pay there part of the mortgage and wont let me sell the property is there anything I can do?Her name is on the mortgage and the escitora there is also a third party on the mortgage but not the escitora.

MRS Johnson
01-20-2009, 02:58 PM
we are finding it hard to pay our spanish morgage,we moved back to england 1 year ago,and am trying to sell it ,we put alot of our own money in it now the house is only worth 150,000e what should we do should we just cut and run or what im unsure as to what to do?????we have definatly lost the money we put into it,the whole time in spain has just been the biggest mistake we have made.manythanks

Mr Morgan
01-22-2009, 10:37 PM
We have been tring to contact our mortgage provider, Caja Murcia, but with out success.
I have phoned and E Mailed but with out any reply.
I have phoned again and spoken to someone who took my number and promiced to phone back, but never did.
Can you suggest a way we can formally contact out bank.

Lawbird Lawyer
01-23-2009, 06:04 PM
Dear Sir,

No I’m afraid none other than sending them a registered letter (dubbed “burofax” in Spanish) addressed to the bank’s branch where you have set your mortgage repayments with acknowledgement of both receipt and content.

mr willett
01-25-2009, 10:59 PM
we are not behind with our spanish morgage however we owe the back 60.000 euros but it will not sell for this bear in mind we paid £23.0000 into this property as a deposit. we can not aford the 520euro morgage per month now ! as i have lost my job can you please give us some advice. could we just give the keys back to the bank ! we are in rented property at present , would this affect us getting a uk morgage later on. thanks

Fraught and distressed
02-04-2009, 06:24 PM
We have been speaking to our back but as the remainning 5% of the mortgage was covered by an insurance company they state that they are incapable of doing anything for us.

We seem to be chasing the bank in order to resolve the issue, and receiving nothing in return.

Is it advisable to wait until they reposess, or instigate the proceedings?

If the house at auction falls into negative equity, and we owe the bank, (is it true that this would effect us in our home coutry?) would we have to declare ourselves bankrupt, and what are the legal implications here?

If anyone can assist!!!

Lawbird Lawyer
02-04-2009, 10:09 PM
Dear Sir/Madam,

As per my article yes banks can legally chase you in your home country for the outstanding balance as you are held personally responsible of the loan you accepted.

As per art 1911 of our Spanish Civil Code the responsibility is unlimited and you will respond with all your current and future assets.

Will your bank pursue you if after the repossession procedure you are left heavily in negative equity? I have no idea.

For Spanish banks to pursue you abroad is an expensive procedure so its not all that easy for them. That is why I imagine -being practical as banks are- many will sell off the debt to local debt collecting agencies for a nominal value and waive long and protracted procedures.

Because one thing is what the laws says and another very different is how things really work in practice.

Besides, will UK Authorities sit idly whilst our banks seize dozens of thousands of properties in the UK leaving owners homeless?

Its up to the lender to initiate the repossession procedure.

Regards,

Raymundo Larra*n Nesbitt

Mike Carter
02-06-2009, 09:09 PM
We have a property in Costa Blanca. I have been made redundant so we are struggling to meet the mortgage. It is on the market but as in the UK houses are not selling at the moment. What would happen if we said to our bank we would like to hand the keys back to you as we cannot afford it? What is the best way forward regarding our situation please?

mpat
02-07-2009, 02:10 AM
What is dacion en pago.is it repossession?

Lawbird Lawyer
02-09-2009, 06:45 PM
The purpose of a dación en pago is to waive the repossession procedure on you defaulting.

A "dación en pago" is handing over the keys to the lender in exchange of having all debt discharged. The reason borrowers do this is because in Spain the responsibility on your defaulting a mortgage loan is personal and unlimited as per art 1911 of the Spanish Civil Code. Spanish banks can pursue you in your home country if you run into negative equity and the collateral's (the property) value is not high enough to offset the arrears, delay interests, lawyer's fees, associated expenses of the repossession procedure etc..

Please read the only article there is written in English on the dación en pago procedure. (http://www.marbella-lawyers.com/wordpress/dacion-en-pago/)



Regards,
Raymundo Larra*n Nesbitt

john foran
02-10-2009, 10:04 PM
My brother has a property in Spain that he has not paid the mortgage on in 4 months due to him losing his job and seperating from his wife of 10 years, he understands that he will lose his property if he does not come to a resolution with the bank, but there is also a cross charge on my parents house in spain which has no mortgage on it, can my parents lose their house?

Lawbird Lawyer
02-12-2009, 01:40 PM
By "crosscharge" you mean they were acting as guarantors of your brother's mortgage? In that case on your brother defaulting and the lender repossessing him should the property be in negative equity the lender can indeed go against your parent's property in Spain for the outstanding balance.

That is why I never recommend anyone to act as guarantors on signing mortgage deeds because of the huge risk they are committing themselves to, often with their only home, just to please some family member.

Please read my article on Bank Repossessions in Spain (http://www.marbella-lawyers.com/articles/showArticle/home-repossessions-in-spain-defaulting-on-mortgage). I quote myself:

The Court sets a date for the Public Auction - Normally between 6 to 12 months after the start of the Executive Procedure. The judge decides on the date of the auction. If no one bids for the property the bank will keep it. The bank tries to offset the outstanding loan debt with this auction. However, it may happen that after the property has been assigned to a winning bidder the amount raised is not enough to cover the debt plus all the associated repossession expenses (i.e. because the borrower had run into negative equity). The bank is entitled to pursue the rest of his assets even if abroad. Should there be a guarantor in the mortgage deed the bank will chase their assets. The property will now be lodged under the name of the new owner.

Mr Nelson
02-12-2009, 11:06 PM
I have a similar situation with a property in Holland. I fell behind on the mortgage and went into default.I then agreed to give the bank power of attorney to sell the property which they then did. I thought this would be better than allowing them to repossess. The property sold for a lot less than my mortgage so of course I still owe tens of thousands of Euros on it. How would the dutch bank go about recovering money from me. They have an old UK address for me and have no idea where in the world I am. Since the bank cant get hold of me (other than email) is it a good idea to approach them and make an offer. Say offer to pay 20% of the balance in full and final settlement ? How could I make this full and final settlement legal and enforcable so they couldnt come back to me later.

Thanks

Mrs H
02-13-2009, 01:30 AM
My bank manager emailed me in October 2008 and confimed that the bank would take the property back with no further action.Since then he has left and no one else can speak english I have phoned left messages and sent emails to confirm that the bank have agreed to take pocession of the property I dont know what to do as I have emails to confirm the bank have agreed to take the property back any advise what todo next????

Lawbird Lawyer
02-19-2009, 07:49 PM
Dear Madam,

I think you better appoint a lawyer to find out what is happenning with the dación en pago procedure (http://belegal.com/wordpress/dacion-en-pago/)(handing over the keys to the lender).

The legal steps to complete a Dación en Pago Procedure are:

1.- The customer must be on time with payments (the repossession legal procedure must not have been initiated), with Community fees and local taxes.
2.- You contact your lenders' branch manager and propose it to them.
3.- The borrower will be required to pay a new valuation (updated appraisal).
4.-If on average 80% of the new valuation of the property cover (debits +13% of the debits like legal expenses) the lender will accept to take the possession of the apartment, cancelling your debits and will waive taking legal action in Spain and in the British courts.
5.-The day of the signing the Deed at the Notary, the borrower will surrender the keys, and leave the property clear of furniture and tenants.

Mrs Ruskin
02-20-2009, 04:30 PM
I am in arrears by 2 nearly 3 months, but we have paid small amounts as suggested by the bank.

The bank have said that we cannot renegotiate the mortgage and to return it would also be very expensive.

If the property is valued or sold with negative equity do we then pay interest on that difference and is it common to negotiate the sum owed?

Thanks

Lawbird Lawyer
02-23-2009, 11:04 AM
Dear Madam,

The bank is probably not accepting the dación en pago procedure because you are already in negative equity.

A dación en pago is a conveyance procedure it's as if you were selling the property only that you will not receive money for it. So all associated expenses, fees and taxes to a normal conveyance procedure have to be paid. That is why there must be equity in the property to make up for this shortfall as it will be the bank that pays for all this (except the appraisal) which can be offset against the property's equity.

In your case the bank will probably end up repossessing you. Your best option wpuld be to sell the property as a non-performing mortgage loan (distressed asset) for the value of the loan so you can walk out clean.

joanne hill
03-16-2009, 10:07 AM
our Spanish property was valued by the bank at 300,001 euros the property was on sale for 240,000 euros.
Since buying the property in September 2007 the value has plummeted to 190,000 euros.
Do i have a case for negligence against the bank. I believe i have been subject to very unprofessional behavior from the bank. I believe my property was deliberately overvalued so a 110% mortgage could be sold.

Lawbird Lawyer
03-20-2009, 11:42 AM
Dear Madam,

No, I don't believe you have a case.

Yours faithfully,

Nicky
03-21-2009, 08:07 PM
We too have been caught in the credit crisis. We have two mortgages on two separate properties but with the same bank. Mine and my husband's work has dwindled and this coupled with the high interest rates we have been paying over the last year have left us drained of all money and savings. There is equity in both properties. We have been in talks with the bank for the last 5 months and they are finally lowering the interest rate a little but still the repayments are too high for us. We would be able to afford interest only and keep both properties which is what we would like to do but the bank will not let us. Indeed even though they are reducing the interest rate a little they are now asking for life insurances for myself and my husband which puts the costs up again.
If we hand the keys back to the bank can they take our other property and thus make us homeless. On recent valuations there is more than sufficient equity in both properties and we have had them both on the market but they are very few buyers at the moment and we are running out of time. Please can you give us some advice of what we should do next. Thank you

Lawbird Lawyer
03-25-2009, 03:11 PM
Dear Madam,

We've written a detailed article on the dación en pago procedure (handing back the keys to the lender) and submitted it to admin but we are still waiting for them to publish it...

When they finally do I'll post the link to it.

In the meantime, you can read a detailed reply on this matter in this thread. (http://www.marbella-lawyers.com/forums/showthread.php?t=218)

mrs Brewer
03-29-2009, 10:30 PM
Hi i have a morgage in spain of 81,000 euros my property is up for sale for 99,000 euros which i have just recently reduced. I desperatly would like to buy a property in England but handing my keys back in spain, would that blacklist me in England for a morgage?

Lawbird Lawyer
03-30-2009, 09:41 AM
Dear Madam,

No, it will not affect you in the least.

Please read our featured article on Dación en Pago (handing back the keys):

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

What will affect you is if the Spanish lender repossess you. In that case not only will you be blacklisted in ASNEF, RAI, and Experian but also they may chase you in the UK for the outstanding debt or elsewhere.

L palmer
04-09-2009, 10:34 PM
We like many can no longer afford our spanish mortgage, it is in negitive equity . Paying this mortgage in spain is resulting in us also being in difficulties here in the uk,we have contacted the consumer credit counselling service . We are a month behind with our mortgage in spain an we have not paid welth tax an community fees !!!. Our house is mortgaged in the uk an is specialy addapted for our handicapped daughter so i am scared of losing it if they come after us here in the uk, what can we do .

spanish resident
06-04-2009, 04:56 PM
i am english and a spanish resident and am being repossessed, the property is in negative equity, if i return to the uk will the spanish bank persue me there?, i have no uk or spanish job, and no assets in the uk. not sure what the spanish bank can do and surely noone (another bank) will buy their bad debt and persue me due to me having no assets at all, and what can a debt collector do when i have nothing for him to collect? like mrs johnson, worse mistake of our lives!

bill
06-06-2009, 04:03 PM
Dear Sir/Madam,we have not paid our mortgage for over 1 year now,but have still not heard from our bank or any other authority.we approached our bank months before we saw ourselves not being able to keep up the repayments.our bank manager said he was not interested,and would personally reposses our house.We have since found out ,the mortgage was for a vivieda,we own a nave.The bank will not speak with us now,but still no letters.HELP

Lawbird Lawyer
06-15-2009, 10:09 AM
Dear Mr Palmer,


That's up to your Spanish lender. They will decide on whether they pursue you or else sell on the debt to some other company, such as a debt collecting agency.

Normally Spanish lenders do not pursue abroad for small amounts as its expensive for them and would be hardly worthwhile. It all boils down to the amount outstanding owed to them. If its high enough it will be worthwhile for them to pursue you abroad or else sell on the debt to someone local who will.

If your UK property already has a mortgage against it, much of the equity is already compromised. So the Spanish lender would just place an additional charge on it. If they repossessed it it would be your UK lender who would obtain the lion's share as they were first and have priority.

So it makes sense for the spanish lender to just wait patiently until you sell it on. From the sales proceeds, the buyer will have to pay them what they are owned.

Lawbird Lawyer
06-15-2009, 10:21 AM
Dear Spanish resident,

You may not have assets now but in time you will. i.e. inheritance.

The Spanish lender will have you blacklisted in Experian and others barring you the possiblity to acces UK mortgages.

The dealine to pursue the mortgage debt is 20 years. However, if the lender within those 20 years communicates the debt or tries to contact the borrower the deadline is renewed, each time. So basically, unless you are very lucky, they will pursue you for the remainder of your lifetime.

And quite certainly at some point or other you will have assets.

Lawbird Lawyer
06-15-2009, 10:35 AM
Dear Sir,

The bank manager will repossess the nave acting as collateral. If that doesn't suffice, and you slip into negative equity, you will be held liable with your remaining assets, whether located in Spain or elsewhere.

What you must understand is that in Spain, unlike anglosaxon countries, when you take on a mortgage loan your responsibility is personal and unlimited with all your assets, both now and in the future, on you defaulting the mortgage loan whether for a dwelling, nave industrial, rustic plot of land or whatever the case may be.

If the collateral makes up for the owed amount that's fine and the debt will be fully discharged. Albeit if it doesn't, even after they've repossessed the collateral, they will chase you for the outstanding difference which mounts up every day with the default compound interest which ranges on average 25-29% p.a.

In every Mortgage deed you have the exact tailored default percentage apllicable to your own loan.

Please read my article which starts off this thread and explains the unlimited responsibility concept ex art 1911 of the Spanish Civil Code.


Yours faithfully,
Raymundo Larra*n Nesbitt

Lawbird Lawyer
06-15-2009, 07:06 PM
As this matter of collecting debts in the UK or in the ROI from non-performing mortgage loans is becoming increasingly important, it's now under the spotlight of the Spanish financial press:

La crisis inmobiliaria española llega a los juzgados británicos (http://www.expansion.com/2009/06/12/empresas/construccion/1244839107.html)

Expansión. Publicado el 13-06-09 , por Roberto Casado. Londres

We'll write a blog post shortly specific on this matter.

Manny
06-18-2009, 11:15 PM
Dear Sir or Madam

My daughter has handed in the keys of her property in Spain to the bank.
She owns her home in England where she lives with her son.
Would she be able protect her home in England from the bank in Spain if she were to put it in trust for her son?
If so, are there any drawbacks/negatives in doing so and could it be changed at a later date?

Many thanks!

Lawbird Lawyer
06-22-2009, 11:49 AM
Dear Sir/Madam,

This query regarding "putting it in trust" should be asked to an English lawyer as it relates to English law.

If your daughter has followed a dación en pago procedure (http://www.marbella-lawyers.com/articles/showArticle/spanish-mortgage-dacion-en-pago-handing-keys-bank) and her debt has been fully discharged in Spain before a Notary public signing a deed, then there is no reason to fear the Spanish lender. The debt has been settled already.

If your daughter however just handed the keys over at the bank then she has a reason to be concerned as the debt is still outstanding and her liability will be personal and unlimited.

Michael
08-25-2009, 05:15 PM
Dear Sir

I have a house with Hipotec in Spain.
I am not in negative, however it has come to my attention that besided a number of problems/errors when I purchased the house some 3 years ago, the bank have not registered the hipoteca in the notary. It is named in the scriptura.


If I fall into negative, then as I understand it the Bank can NOT reposses the house as they have not notarised the hipoteca.

Lawbird Lawyer
08-26-2009, 09:32 AM
Dear Michael,

What you meant to write is that the Mortagge Deed had been correctly signed at the Notary but for some legal reason it has not been lodged at the Land Registry and registered against your property.

This happens more often than people think. It normally has to do with the Registrar not accepting some clauses in the mortgage deed. So the Mortgage deed has to be amended to be re-registered at the land registry or else the Notary files a complaint against the Registrar which has to be settled.

The bank can still repossess the property regardless of this as you signed a binding agreement with them, the notarial Mortgage deed. The problem is that if someone wanted to but this property from you they would see no mortgage against it as it would effectively be free of charges. In any case this buyer would be protected because he's buying in good faith.

Yours faithfully,

Mrs Smith
09-04-2009, 05:19 PM
I am being repossesed due to none payment of my mortgage for a year.
I did go to my bank manager and asked for interest only as I am resident in Spain and understood that they would do this, this was before I was in trouble. She said she would let me know. After a while I rang again and was told she was still waiting. I did not pay anything to the bank as it would have eaten up the lesser money that I had. I then received a telephone call from the bank recovery saying they would embargo my business. I went to see him and he said I must come up with 10k as they were calling in my loan and credit card in full. I got him the 10k although it was a week late and he told me I needed more. To cut it short I took my money away and tried to make contact with my bank manager via e mail. They did not reply so I sent a recorded delivery to the head office, still no reply in the meantime I had to go and collect the court papers and was told the case was in acto. I am thinking of going to court and defending myself, on the grounds that the bank did not respond to any attempt to resolve this situation. Is this possible? Many thanks

Lawbird Lawyer
09-07-2009, 09:37 AM
Dear Mrs Smith,

No, I'm afraid that is not sufficient grounds to file a law suit. You would likely lose and be spending good money after bad.

Changing to interest-only means that you are requesting that what you agreed in your Mortgage Deed needs to be amended. On signing a Mortgage Deed it is a binding contract for both parties.

It is up to your lender if they accept or not. It used to be common that Spanish lenders did but only for 1 or 2 years as a teaser. Foreign lenders even offered up to 15 years interest-only (HBOS). Post-credit crunch, banks have thier own problems and seldom accept it. I've only seen a few cases recently in which they have; the majority of requests for interest-only are now turned down.

Unfortunately now its too late and as you write, you will be repossessed by them.

Yours faithfully,
Raymundo Larra*n Nesbitt

Mr Brown
09-10-2009, 03:33 PM
I was sold a reform by an estate agent who subsequently arranged a builders quote and a project manager. There is a mortgage of Euro 49,000. Separately, I spent a considerable amount of cash doing it up and the build quality is not good. However, working abroad, i have never lived there so the property is also looking jaded. It now transpires that the village is infested with termits and my property is affected. I would practically now have to rebuild a second time (Euro 45,000) with concrete floors (as opposed to wooden floors etc). I am reluctant to do so and am thinking of handing over the keys in desperation. Do i have any comeback against agent / builders for recommending wooden floors in an area known for termites ? Is termite treatment an alternative ? Is there an honest builder in Spain !?

Separately, can I transfer title of my UK property to my niece to try and escape the hunt for assets ? Can the Spanish Banks go after offshore bank accounts ?

Sorry for all the questions Mr Lawbird. This site is so informative. Keep up the good work.

Lawbird Lawyer
09-11-2009, 03:17 PM
Dear Mr Brown,

Thank you for your kind words.

I would advise you treated the wood with anti termite rather than going on a suing spree against estate agents or developers. You would likely lose.

Spanish lenders can pursue you abroad on you defaulting on a mortgage loan for the shortfall, yes. You are personally and unlimitedly responsible for a mortgage loan with all your assets both now and in the future wherever they may be located as per art 1911 of the Spanish Civil Code and as per the Mortgage Act.

If your money is safely hidden away in off shore bank accounts, no one can pursue it. If you hold assets in the UK, they can pursue them and are in fact already doing so:


forced complete ( 1 2) (http://www.marbella-lawyers.com/forums/showthread.php?t=69)
Unregistered

chased to complete (http://www.marbella-lawyers.com/forums/showthread.php?t=616)
abo07

What remedies does a developer have to enforce completion (http://www.marbella-lawyers.com/forums/showthread.php?t=582)
Unregistered

Can we be chased by the bank after arranging a Dacion en Pago? (http://www.marbella-lawyers.com/forums/showthread.php?t=674)
Unregistered

Will i lose my uk home (http://www.marbella-lawyers.com/forums/showthread.php?t=626)
Unregistered

Property was bargained away and we are being chased for the shortfall. Please help! (http://www.marbella-lawyers.com/forums/showthread.php?t=617)
Wendy

That's the whole purpose of this website, to reply to Spanish legal queries, no need to apologise.

Yours faithfully,
Raymundo Larra*n Nesbitt

Mrs Hoos
09-24-2009, 10:25 PM
We have an apartment in the Costa Blanca and we are struggling to repay the mortgage on it, we are not behind yet. The builder went bust and the building is unfinished so we are not able to rent it out or sell it as it is. Could we arrange a Dacion en Pago? Also our solicitor signed for the property on our behalf, we had given her power of attorney but had not given her our permission to complete on the purchase. Also we have never been to Spain to sign again for it in person. Is there any way we can give this property up without having our home in the UK taken away from us? Please help us we are desperate.

Lawbird Lawyer
09-25-2009, 09:17 AM
Dear Mrs Hoos,

You can follow a dación en pago de deuda providing:

1.- The property is not in negative equity
2.- The bank has not initiated a repossession procedure.

You can read about the dacion en pago procedure in more detail in my article:

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

Please contact us (http://www.lawbird.com/services/contact) if you want to hire us for this legal service.

Yours faithfully,
Raymundo Larra*n Nesbitt

Delboy
09-29-2009, 09:34 AM
I have a property in Vera Almeria and we have a 2 bedroomed apartment which was valued at 185000 euros but we would now be lucky to get 100,000 for it in the current climate. Someone has actually offered us 100,000 euros cash, but because we have a mortgage of 140,000 with arrears, the bank are refusing to accept the offer. I'd heard that new rules by the bank of Spain allow spanish banks to only provision for 70% of a loan in arrears. Surely then it would be in the banks interest to accept this offer. But they seem to want to proceed with repossession and hope to get more from its auction value which I find unlikely. I also read that the EU are taking a dim view of the way spanish banks have overinflated their bank valuations in the past and I believe the bank of Spain are insisting that banks update their valuations. Surely there must be some way that the EU can demand that banks take some financial responsibility for the gross negative equity that many spanish property owners now find themselves in! this would be classed as fraud in any other country!!

Lawbird Lawyer
09-29-2009, 01:05 PM
Dear Sir/Madam,

I will not be sucked in to the issue on whether Spanish banks ought to be held accountable or not for their actions. It is not for me to judge and besides it's totally off the point.

Regarding your legal query, I've bought properties for clients in which the vendors sold below the mortgage value. Naturally the cheque I paid the vendor was solely in the lender's name and the vendor had to fork out the outstanding difference to their own bank prior to me purchasing the property.

So it can be done. But then, how many vendors can afford to make up for the mortgage's shortfall (negative equity)? Very few and they have to be very desperate under threat of a bank repossession (http://www.marbella-lawyers.com/articles/showArticle/home-repossessions-in-spain-defaulting-on-mortgage).

Banks have instructed their valuers to "undervalue" properties following a nudge from the BoS from 2007. So now we've swerved from one opposite (overvaluing) to the other (undervaluing). Many properties are now being priced ridiculously below their intrinsic market value. But this on the other hand has created huge buying opportunities for those who are cash buyers in the midst of a liquidity shortage.

Indeed today is a tough buyer's market.

Yours faithfully,
Raymundo Larra*n Nesbitt

el tel
09-29-2009, 04:37 PM
There is a house on my complex which the owner went back to the UK and after 2 lots of squatters had used the house we now find the house has been trashed completely by the last squatter. The is paint and excrement all over the walls and ceilings and floors. The house was mortgaged by Santander but the lady who left to go back to the UK 2 years ago told them of her intentions and did not want anything to do with the house. Any advice would be welcome as the house still remains trashed and in a very unhealthy condition with a broken window. The President and administrator say they can do nothing about this health hazard its up to the bank.

Lawbird Lawyer
09-29-2009, 04:57 PM
Dear Sir/Madam,

It's really a private property so they cannot -legally- access it.

A different matter is the compliance with local health ordinances. You can file a complaint before the Town Hall and they can fumigate in extreme cases the premises for Public Health.

The bank will repossess the proeprty evenatually. Law courts are now clogged with repos. They are taking an average of between 2-3 years, in some cases even more.

Once the bank takes it over officially it is their duty to keep the property in good working/habitable conditions. Besides the bank will have to contribute and pay their share of the Community of Owners, just like everyone else.

Yours faithfully,

jacqui
10-02-2009, 06:02 PM
I have a house in spain which I have had difficulty making the payment. I have missed the 180 day deline because I did not find a tenant until the time had passed. The bank reduced the payments but i still could not get the rental amount to cover this. I have made offers to clear the arrears and keep up regular payments but they want accept this either. I am now at the point where I don't know to do. Can I still hand back the keys and will they chase me for any outstanding amount. My Mortgage is 5000,000 I know the value of the property has gone down to around 450,000. I own property in the uk can I put this is in trust to someone so that the spanish bank can not force me to sell.

elgordo
10-03-2009, 11:19 AM
When people just leave a property and the banks take no interest for years I believe a comunidad can only claim the comunity debts for the current year and the preceding year. If this is correct then persons who build up years of debt will walk away virtually scot free or the new owners will only be responsible for the 2 years of debt I mentioned above. Please confirm.

Lawbird Lawyer
10-05-2009, 12:43 PM
Dear Jacqui,

You can no longer hand back the keys to your bank (known in Spanish as "dación en pago de deuda" (http://www.marbella-lawyers.com/articles/showArticle/spanish-mortgage-dacion-en-pago-handing-keys-bank)) as your property is already in negative equity, meaning you owe your bank more than what it's worth.

Additionally you write that you have overrun an 180 day deadline.

I have no idea where you get that from. Banks normally do not start legal action against you until after 90 days or 3 months in arrears. Please read my detailed article on the matter which started off this thread as well as some related queries:

Bank Repossessions in Spain: A Legal Perspective (http://www.marbella-lawyers.com/articles/showArticle/home-repossessions-in-spain-defaulting-on-mortgage) - 25th June 2008

What are my options if I have fallen in arrears on my Spanish mortgage?
Property Law (http://www.marbella-lawyers.com/questions/showQuestion/193-What-are-my-options-if-I-have-fallen-in-arrears-on-my-Spanish-mortgage-) - 18th of November 2007

We are in 3 months of mortgage arrears with a Spanish bank for two properties the developer have not completed properly. What are our options?
Property Law (http://www.marbella-lawyers.com/questions/showQuestion/190-We-are-in-3-months-of-mortgage-arrears-with-a-Spanish-bank-for-two-properties-the-developer-have-not-completed-properly--What-are-our-options-) - 16th of September 2007


However, banks may start repossession procedure with only one month in arrears if they choose to as per the Mortgage Deed signed with them. You are not technically in default until after the 90 days in arrears which is why they normally wait so long. Some people mistakenly think that banks have to wait the said 3 months when its not the case, although in general they do wait.

At this point in time on you being in arrears of six months your bank has probably started a repossession procedure against you.

The ability of a lawyer to help you in such a case is honestly next-to-none. The reason is simple. You both signed a Mortgage deed (contract) which is mutually binding. On you breaching it (non-payment) the consequences are laid forth very clearly on it. Almost the only thing that can be done at this stage is come to an agreement to stop repossession which entails you paying all that's owed to your bank:

1.- Amount in arrears= six months
2.- Penalty interest on the 6 months arreas ranging from 18-30% compund anual interest
3.- Lawyer's fees for the repossession procedure (circa 10,000/15,000€)
4.- Court agent's fees for the repo
5.- Court's associated expenses for the repo

You will be expected to pay all the above in lump sum upfront to stall successfully the legal procedure against you.

If you fail to come up with all the requested funds they will continue the repossession.

As per art 1911 of the Spanish Civil Code you will be held liable with all your assets, both now and in the future, for the outstanding balance owed to the Spanish bank after the repossession procedure is over. Meaning they will chase in the UK or elsewhere and place a charge against any assets you may hold in Spain or elsewhere.

It may take years but they will eventually catch up with you; only that now the owed amount will be much higher due to the anual compound interest of 18-30%.

That is why it's critical that one isn't repossessed in Spain.- it's a red line that, once crossed, will haunt you for the rest of your life.

Which is why I always recommend that in lieu of a repossession procedure one hands back the keys to your lender to avoid it. Unfortunately in your case, you waited too long and you were already in negative equity.

Yours faithfully,
Raymundo Larra*n Nesbitt

Lawbird Lawyer
10-05-2009, 12:53 PM
Dear "Elgordo",

Yes that's the case.

Please read my article on the matter of Spanish Commonholds or Comunidad de Propietarios:

Comunidad de Propietarios: Avoid Problems with Your Neighbours in Spain (http://www.marbella-lawyers.com/articles/showArticle/spanish-comunidad-de-propietarios) - 26th June 2009

A quote from my article:




Owners’ Duties

Section 9 rules them in detail. The main duty will be, of course, to contribute to the maintenance and financial upkeep of the Community of Owners.

Failure to pay the community fees will result in the Community of Owners placing a lien against your property and possibly auctioning it off. This legal procedure in Spain works surprisingly efficiently. You have been warned!

.
.
.

On buying a resale in a community, the new owner will be held liable for the prior owner’s communities’ debts for the current year of transfer of ownership as well as the natural year immediately precedent (art 9 e). The property itself will be burdened with a lien for unpaid communal debts.

Which is why under law, the signing of the deed of transfer of ownership requires a Communities’ certificate stating that communal fees are up-to-date for that unit, signed by the communities’ administrator. The purchaser can however waive this requirement voluntarily.


Yours faithfully,
Raymundo Larra*n Nesbitt

Mr H
10-22-2009, 08:31 AM
I have 3 mortgages in costa del sol
I am finding it increasingly difficult to fund
The rentals are much reduced and in 1 case a tenant has simply not paid for 6 months
I believe there is enough value in all the properties to hand the keys back
What costs are involved , should I use a lawyer to do this process?

Lawbird Lawyer
10-22-2009, 11:23 AM
Dear Mr H,

It is not mandatory to use a lawyer on following a dación en pago.

However I warn you there are many reported cases of borrowers who on not appointing a lawyer, to save themselves money, were duped into thinking they were signing a dación are now being chased by their lenders in the UK and elsewhere.

A fine of example of such cases are the following threads:

Can we be chased by the bank after arranging a Dacion en Pago? (http://www.marbella-lawyers.com/forums/showthread.php?t=674)
Unregistered

Handing over keys - Mortgage arrears (http://www.marbella-lawyers.com/forums/showthread.php?t=724)
Unregistered

After having witnessed such cases I can only strongly recommend that you appoint a lawer to act on your behalf and represent you in a dación en pago. You can contact us (http://www.lawbird.com/services/contact) if you are interested in hiring us for this legal service.


The Spanish name for "handing back the keys" to the lender is called "dación en pago". Please read my articles on the Dacion en Pago Explained (http://www.marbella-lawyers.com/articles/showArticle/spanish-mortgage-dacion-en-pago-handing-keys-bank) and the Dación en Pago Procedure (http://belegal.com/wordpress/dacion-en-pago/) for more details, the only ones written in English on the matter.

All it is, is that your lender agrees to buyback the property from you and in exchange they will write-off the outstanding debt having it fully discharged. You will not receive any money. This is formalised by means of signing a Deed at a Spanish notary and you surrendering the keys to them.

The reason people do this is because on you defaulting servicing your Spanish mortgage the lender can repossess you. Please read my article on bank repossessions in Spain (http://www.marbella-lawyers.com/articles/showArticle/home-repossessions-in-spain-defaulting-on-mortgage). If after they have repossessed you the property is left in negative equity, meaning you owe the bank more money than what the property is worth, they can actually pursue you abroad in your home country.

In other words, unlike the US, you are personally at fault on owing money to the Spanish lender as per art 1911 of the Spanish Civil Code. The property itself, the collateral, was only guaranteeing the bank loan. Post repossession you will be held personally liable with all your assets, both now and in the future, for the difference between what you owe the bank (plus the repo associated expenses, lawyer's fees, default interests etc) and what the property is now worth after the full repossession procedure is over. The same thing happens in the United Kingdom.

That is why many defaulting borrowers in lieu of being repossessed would rather either sell the non-performing mortgage as a distressed asset (of which there are now many websites available) or else follow a dación en pago procedure if they are unable to find a buyer in time.

For a dación en pago to work out, two things are required basically:

1.- The property must not be in negative equity.
2.- Your lender must not have started a repossession procedure against the property.

Basically the outline on how it works is as follows:

1.- The borrower must be on time with payments (the repossession legal procedure must not have been initiated), with Community fees and also with local taxes.
2.- You contact your lenders' branch manager and propose it to them.
3.- The borrower will require it to be reappraised. You will be expected by your lender to pay this in advance. On average it's approx 350€.
4.- If on average 80% of the new valuation of the property covers (debits +13% of the debits like legal expenses) the lender will accept to take the possession of the apartment, cancelling your debits and will waive taking legal action both in Spain and at the British courts.
5.- The day of signing the Deed at the Notary, the borrower will surrender the keys, and leave the property clear of furniture and tenants.

It is not compulsory to hire a lawyer for the dación en pago. What is compulsory is that you appoint a translator to act on your behalf if your command of Spanish is low.

However, we just cannot stress enough how important it is to appoint a lawyer who will act both as a translator and also verify that indeed your debt with the lender is being effectively fully discharged on you signing the Deed. Besides your lawyer will be able to negotiate with the lender as some banks will try to make borrowers pay for some expenses. The Notary is not there to give you legal advice as they act impartially to either party.

Lawbird Legal Services (http://www.lawbird.com/) offers this legal service at a flat fee of 1,392€ (16% VAT already included) per property. Depending on where your property is located within Spain, further travelling expenses may be applicable.

We advice you contact your lender first prior to hiring us and see if they accept the dación en pago. The reason is that the above legal fee is a retainer fee and will not be refundable regardless of the outcome. So it's a good idea to first make sure the bank will accept the dación en pago before you hire us. If you think they are dragging their heels and weeks go by without feedback it might be a good idea to hire us to help push the matter through.

Yours faithfully,
Raymundo Larra*n Nesbitt

Robin
10-22-2009, 12:28 PM
HELP!! Necesito ayudar urgente!!
I have a property in Spain which has a Hipoteca of 300k euro. I cannot rent it out as it has structural problems with the roof and windows and floods every winter. A perito has advised 15000 to repair. I am claiming the costs for repair to the Community. A court date has been set for March 2010. I cannot pay the hipoteca. I have asked the bank - Banco Halifax to take the keys in lieu. They made a new tasacion of 400k euro, so the property is not in negative equity. I asked for a copy of the tasacion but they refused. The current debt is only 750 euros but it will grow as I now have no work. The bank has refused to take back the property en pago en dacion del dueda. Instead, they call me from the UK 4 TIMES THIS WEEK TO DEMAND THE MONEY AND THREATEN COURT ACTION. It is very stressful. I have written to Halifax to explain the situation and ask to be released in view of the 100k positive equity but the just refuse and are now aggressive. What a mess! I have been trying to sell it for 2 years. Avoid Spainish property and avoid Banco Halifax - its like dealing with the devil! Can you help? Gracias y espero tu respuesta.

Lawbird Lawyer
10-22-2009, 12:44 PM
Dear Sir/Madam,

I think your case is similar to this other one:

Buildings Insurance (http://www.marbella-lawyers.com/forums/showthread.php?t=726) Thu, Aug 27th 2009, 09:20, (3 Replies)

Yours faithfully,

Robin
10-22-2009, 02:59 PM
Gracias

We gave up with the insurance a long time ago. As the property has 100k of positive equity (based on the banks own tasacion in June 2009) why wont they take it back - how do we proceed to force the bank under Article 1175 of the Codigo Civil. Does it work?

Lawbird Lawyer
10-22-2009, 03:35 PM
Dear Sir/Madam,

You cannot force a bank into accepting a dación en pago unless the case is clear and your case isn't, in my opinion:

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



What Happens if the Bank Refuses to Accept a Dación en Pago? Can I Challenge It?

Yes you can, but being practical we wouldn’t recommend it. I would consider viable this option only if the bank had turned the proposal down unjustly when there is clearly more than enough equity to offset it against all the expenses. Note that it is pointless to challenge their refusal if it’s apparent you are in negative equity. It will be expensive, time consuming and fruitless.



Besides you are overlooking the fact that they've already initiated a repossession procedure against you, so you are barred from following a dación en pago anyway:




How does a Dación en Pago Work?

For the lender to accept it two things are required.-

1. The property must not be in negative equity.
2. The lender must not have started a repossession procedure against the property.



You don't fulfill either of the two points in my opinion.

You are making the mistake of taking for granted you have 100k locked in your property based in the June appraisal when it simply may not be the case.

In my experience getting along with banks, speaking to them, writing to them explaining the delicate financial situation you're undergoing and trying to reach an amicable solution is crucial. You must prove you really are making an effort. People who work at banks are human after all and they get into deep trouble as well when borrowers default on their loans leading to layoffs.

Banks just loath clients who go missing in action and then request for help at the last moment, months later with huge arrears.

I'm not saying this is your case, I'm just generalising.

A dación en pago is a win-win for both lender and the struggling borrower who has no other option left.

In your case your bank is a Brirish lender banking overseas. They know for fact you have UK assets.


Yours faithfully,
Raymundo Larra*n Nesbitt

Robin
10-22-2009, 03:57 PM
Raymundo

Many thanks for your advice. However, 2 points are not quite correct. 1. There is equity based on the banks tasacion. Who else can value a property in this market! 2. The bank have not commenced a legal process. We are in arrears but will pay these next week. The Bank has confirmed this is OK.

I know your comments were a generalisation, but in our case we have not gone missing! We have been negotiating with Halifax for over 1 year and they know our financial situation. They also know that our previous rental clients broke the contract because of the flooding and we are taking the Community to court for the loss of rental income under our 2 year contract.

We have asked the bank to join our plieto against the Community but they just dont want to know. They just want their money! We have no UK assets. If we cannot get the bank to accept the biene then we either have to walk away or go to the courts with an action against the bank.

Un saludo

Robin

Lawbird Lawyer
10-22-2009, 04:26 PM
Dear Sir or Madam,

Let's go over these two points so as to clarify.

The appraissal you have is not specific for a dación en pago, unless you stand me corrected, which is always lower than a normal appraisal value for conveyancve purposes or even for applying for a mortgage loan. So if the valuation came at 400k in June, for a dación it may have been as low as 350k. You do not realise that bank valuations differ depending on what they are needed for.

Secondly your roof has damages that are worth at least 15,000€ in your own words, if not more. These have to be deducted from the value as well. How long will they atke to be repaired?

Thirdly for a property worth 350k the expenses and costs arisen from the acceptance by the bank of a dacion en pago can easily be above 30,000/35,000€.

So:

350
-15
-30
= 305

Outstanding mortgage is equal to 300,000€.

Taking the role of the Devil's advocate, in my opinion there is not enough equity to warrant accepting a dación en pago.

You haven't mentioned how much in arrears you already are in which would also have to be factored in the above valuation deducting it. Besides the defalut interest rates applicable. If more than 3 months have gone by in arrears then lawyer's fees may also be applicable to the tune of 15,000€.

You must also factor in the maintainace anual costs this property incurs in (IBI tax, Garbage collection, Community Fees etc.) until the bank actually unloads it from its books selling it on.

Whan you've factored in all the above it comes as no surprise why your lender has turned down a dación. Banks are not evil, it is in their best interest to accept a dación en pago rather than following a long and winding repossession procedure as explained here:


THE “DACIÓN EN PAGO” EXPLAINED (http://www.levantelifestyle.com/index.php?mod=art_det&art_id=347) - Levante Lifestyle, 23rd April 2009



CONCLUSION

A dation in payment is a win-win for both parties really.

The borrower is free at last and has managed to secure successfully his assets whether in Spain or abroad from the lender or any law firm or debt collection agency 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, protracted and expensive court procedure (repossession), without having to apply for the mandatory provisions before the Bank of Spain to make up for this dubious loan which affects its liquidity ratio.

A repossession procedure lasts two years minimum, and may easily entail for the bank expenses running up to 20 per cent of the property’s value. These provisions set aside by lenders are being looked upon closely by credit-rating agencies post credit crunch and may ultimately affect their share value.


A dación en pago is not a God-given right. In your case it seems reasonable they've turned it down.

Maybe some lawyer will be keen on taking your case suing the bank because they've turned you down. My opinion is that you will be wasting your money in a case like yours. I take it you are aware that on losing a court case you may also have to pay for the other party's legal fees besides all the legal expenses. So losing a litigation case can leave you easily 20,000-25,000€ out-of-pocket. Litigation is a double-edged sword and must be used only as last resort always and very carefully. Indulging into reckless litigation will only be detrimental:

You Have a Strong Case… NOT! (http://belegal.com/blog-by-antonio-flores/you-have-a-strong-case-not-spanish-property-developers/) - Wednesday, October 1st, 2008

A different matter is if you have a 600k property with a mortgage loan of 200k and they turn you down for a dación en pago. We would gladly represent you in such a case which you would be bound to win.

I'm sorry but you wanted our opinion and we've given it to you. Anyway, our opinion is non-consequential, what matters here is what your bank, specifically their risk assessment department, makes out of it.

Yours faithfully,
Raymundo Larra*n Nesbitt

Robin
10-22-2009, 04:46 PM
I really appreciate the response and time you have given to my problem.

The tasacion was for a Dacion, so to use your example the equity would be

400
-15
-30
= 355 less 300 hipoteca or 55 equity.

It could be done but as you say, its a decision of the risk assessment department of a banco rota bank now owned by the UK Government!

My proposal. Pay the mortgage until the court hears the claim against the Community in March. There are debts of 25k on the community fees and IBI (so the 55k equity is actually 30k less the fees due until the bank can sell it).

If the court awards damages against the Community then I have to carry on paying the hipoteca until the market improves in probably 3-5 years. If we loose, well, it will be a sad way of saying adios to España!

No easy solution - I guess there are thousands of others in similar situations in Spain. Good luck to all of you and like me, think very hard about buying overseas property in future.

Lawbird Lawyer
10-22-2009, 04:48 PM
If the appraisal was specific for a dación then it may be different.

How much are you in arrears and since when?

Mrs N Fogolin
11-01-2009, 06:21 PM
What a great and informative website. We currently have 2 Spanish mortgages and with the fall in the pound have found it very difficult to keep our heads above water. We have spoken about the prospect of handing in keys, but as both properties are in negative equaty as i have learned from this site, this is not an option. So all i can do is wish everyone a decent outcome to their problems as what goes up must come down and vice versa. We are going to try to hang in there and keep paying. We are blessed with a communicative bank and have a good relationship with them. Spain is not synonymous with competition, maybe now is a good time to change their strategy as its going to bite them as it has done its clients eventually.

Lawbird Lawyer
11-03-2009, 10:28 AM
Thank you for your kind words.

Yours faithfully,

Altin
11-03-2009, 05:33 PM
I have a property in Cullera, Valencia, Spain and the court has set an auction date for 28th Sept 09, but there were no bids for the property. Does that mean i can return to live in the property until the bank sells it? Or is the property considered to be repossessed by the bank and hence no longer available to me?

Lawbird Lawyer
11-03-2009, 06:00 PM
Dear Sir,

You can live in the property until the court's bailiffs come to evict you along with police agents and a locksmith.

Your lender will now adjudicate itsef the property for 50% of teh appraisal value and will pursue you legally if there's any shortfall on what's owed to them after the repossession procedure is over as per the article which starts off this thread.

As explained in other threads, almost in all public auctions no-one is bidding and lenders are being forced to adjudicate themselves the repossessed dwellings.

Yours faithfully,

Unregistered
11-03-2009, 06:33 PM
Thank you for the prompt reply.

Generally, how long does it take for the lender to adjudicate the property to themselves and for the police/bailiffs to evict. The article above says approximately 6 months from the public auction date. Is it correct to estimate that i can live at the property for approximately 6 months as of 28th Sept 09 (public auction date)?

thanks

Lawbird Lawyer
11-03-2009, 06:40 PM
Or maybe even longer. Spanish courts are now clogged with repossession procedures and these are painfully slow.

It really depends on where the property is located which translates into the law courts activity. Those properties located in areas awash with repossessions (i.e. coastal areas) you can reasonably expect them to take longer whereas as properties located in the mainland courts may be more expeditive.

Those timelines I gave in my article are to be used as basic guideline only. The same case can take longer or not depending on the court that will hear it.

Nowadays a full repossession procedure is taking on average, from start to finish, between 2-3 years. And there are increasing reports of taking even longer now due to the massive workload the credit crunch has brought about in legal court procedures (lawsuits, repos etc.)

Yours faithfully,
Raymundo Larra*n Nesbitt

John
11-04-2009, 11:30 AM
Hello,

the electricity board have cut off the supply as i could not afford to pay the bill. How do i go about re-instating the electricity if i can only afford to pay a little amount? Is there any government assitance with mortgage payments similar to mortgage interests payments in the UK? thank you

Lawbird Lawyer
11-04-2009, 11:32 AM
Dear Sir,

Yers there's a programme but if your bank is in the process of repossessing you, you do not qualify. Besides, very few people can actually qualify for it.

There's simply nothing you can do about the elctricity unless you pay the outstanding debt in full to the utility company.

Unregistered
11-04-2009, 01:42 PM
The bank have started possession proceedings, the property was subjected to a public auction but no bid was made. The bank have now started possession proceedings. What i'd like to ask is that if i live in the property until it is repossessed - will I have to pay the monthly mortgage payments? Or do monthly payments stop once bank starts possession proceedings and i only owe them the debt? thank you

Lawbird Lawyer
11-04-2009, 01:46 PM
Dear Sir or Madam,

The repossession procedure is taking place because you defaulted on your monthly mortgage repayments.

It's rather pointless at this moment in time, post auction, to service your mortgage.

mrs jones
11-05-2009, 11:02 PM
Hello I could not afford to pay my mortgage in Spain, after I returned to the U.k I only paid half of the monthly amount I tried to negotiate nterest only but thet would not have it. I finally told them in Aug 2008 I couldnt pay anymore. I have not heard a word form them since, untill monday eve 2nd Nov 2009 at 5.30 GMT, An Englishman called and told me he was calling from my mortgage company and wanted to assist me in trying to sell the property, I told him I was driving and couldnt What do you make of this? do you think it was a debt collector? and why do you think they havent contacted me in over a year.

Mrs Jones
11-06-2009, 11:13 AM
sorry I meant to say that, I was driving and couldnt speak at the moment.

Lawbird Lawyer
11-06-2009, 12:36 PM
Dear Mrs Jones,

It would come as no surprise on them being a debt-collecting agency. Many people are already reporting receiving threatening leters from UK law firms or UK debt collecting agencies as a result of having defaulted on their Spanish Mortgage or else not having completed on a Spanish off plan property when the First Habitation Licence (http://www.marbella-lawyers.com/articles/showArticle/lfo-licence-of-first-occupation) has been attained.

Many people were in a state of disbelief thinking they could get away from it all flying back to the UK leaving the Spansh debt behind. Sadly, this is not the case. Or they were either naive or ill-infomed. Many weren't even aware that on signing a Spansih mortgage you are held personally and unlimitedly liable (http://www.marbella-lawyers.com/articles/showArticle/home-repossessions-in-spain-defaulting-on-mortgage) for the loan with all your assets, both now and in the future. And that includes those in the UK as well.

One must realise is that a full repossession procedure in Spain is taking now an average of between 2-3 years as law courts are clogged. Many people thought they were safe as 1 or 2 years had gone by since returning from Spain and they had not heard a word from their bank. And then one day out of the blue you receive a nasty recorded letter or else a phone call from a UK law firm or from a debt collecting agency demanding payment on behalf of the Spanish lender or developer with all the accrued interests.

Through our legal articles and blogs we endeavour to create awareness on this issue, and many others, to avoid borrowers or off plan purchasers getting themselves entangled in further legal and financial problems.

Yours faithfully,
Raymundo Larra*n Nesbitt

Paul
11-09-2009, 09:39 PM
Hello,
We have a 100.000e mortgage of which we now only owe 93.500e we live in the house here in Spain. But as from tomorrow we will be 3 months in arrears with our mortgage apart from a small payment of 300e which we managed to pay during the last 12weeks. the house has been on the market for a while and has now been reduced to 140.000e we received an email to day from our bank as follows:




Hello, Tomorrow you will have 3 monthly repayments of the mortgage unpaid, this means we can not stop repossession any longer, because of the new mortgage law we have to present all documentation to judgement, as a provision of funds for the barrister to carry on the claim we will charge you around 5.000 Euros and this amount of money will be included in the debt, as you know with the new expanish law your mortgage is being considered as a high risk mortgage and the procedure to reposses the property will be express.
As the market is down, in a possible auction the bank will not cover the total amount on debt, threfore you will end up loosing your property and you will still be a debtor for rest.

From now on we will no longer have your file in our branch and all documentation will go to our Juridic department, we will not have information in the computer in our branch and everything you want to do will have to be done in our headoffice and with their permission.

I am sending a copy of this e-mail to our juridic department called USRI ...




A family member has offered to loan us 800e to give to the bank. If I make this payment tomorrow would they still be able to carry out the repossesion? we are worried sick because we have no other money nor property. We can not go back to the UK as we have no were to go, also my wifes 85year old mother lives with us who is unwell, so you can understand my mother -in-law's safe care and keeping a roof over her head is very important to us but also very worring. The monthly mortgage payments are 570e but i have no work now. what should i do? sorry this is so long but were at our wits end with worry and do not know were to turn. We think we have someone interested in buying the house from us but all we seem to lack is . The bank is awear that we are trying hard to sell it, also our estate agent has been intouch with them to inform them that he thinks the house will sell soon because it is now well below the market value. if they start the proceedings tomorrow will we still be able to sell it if this person wished to purchase it? and if we paid them 800e would this hold them off for a month or so?
many many thanks for this excellent website.
kindest regards
Paul & Family

Lawbird Lawyer
11-10-2009, 02:21 PM
Dear Sir,

First of all let me start by writing that I regret what you must be going through.

As per my article on bank repossessions from last year 2008 which starts off this thread, banks normally wait 3 months to start repossession proceedings, but not always.

There's an article on the Spanish Sur that was printed yesterday Monday on the matter of what happens to a borrower when they stop paying their Spanish mortgage:

http://www.diariosur.es/20091109/malaga/pasa-dejo-pagar-hipoteca-20091109.html

You can at anytime, prior to the court hearing, pay waht you owe, the outstanding balance which will be after 3 months are over:

1.- Lawyer's fees: normally between 8,000 -12,000€
2.- Court agent's fees: approx 3,000€
3.- Arrears
4.- Compounded delay (penalty) interest on the arrears

You have to pay all the above lump sum to successfully stall the repossession procedure.

Any attempt or suggestion to your lender to pay in installments will normally be turned down on exceeding 3 months in arrears.

I'm afraid the 800€ will just not do to stop teh repossession.

Please read other similar queries to yours:

We are in 3 months of mortgage arrears with a Spanish bank for two properties the developer have not completed properly. What are our options? (http://www.marbella-lawyers.com/questions/showQuestion/190-We-are-in-3-months-of-mortgage-arrears-with-a-Spanish-bank-for-two-properties-the-developer-have-not-completed-properly--What-are-our-options-)

What are my options if I have fallen in arrears on my Spanish mortgage? (http://www.marbella-lawyers.com/questions/showQuestion/193-What-are-my-options-if-I-have-fallen-in-arrears-on-my-Spanish-mortgage-)


Yours faithfully,
Raymundo Larra*n Nesbitt

Unregistered
11-10-2009, 06:12 PM
Hi - we have a two year tenancy on a property. We have paid the rent but have just found out that the owner has not paid the mortgage or a loan he had taken out for over a year. There has been a court hearing and an annotation of pre-embargo for the loan amount and costs was registered in April this year. Is this repossession proceedings or is it just to secure the loan against the house? Would the two be done together. No date has yet been set for first auction.

As tenants, can we be evicted and, if so, will we be given any notice?

As no date has yet been set for first auction, how long do you think we may be able to stay in the property? I am worried as we have only just paid for the second year's rent.

Lawbird Lawyer
11-10-2009, 06:28 PM
Dear Sir or Madam,

You cannot be evicted on a repossessed property providing you continue to pay the let, don't worry. As a tenant you are (over)protected by law (Art 13 of Spain's Tenancy Law).

I take for granted you have already lodged your tenancy contrcat at the land registry where this property is located.

You will be considered a long-term tenant (5 years).

You may be offered to leave the property for a suitable settlement. It will be up to you to accept the offer.

Yours faithfully,
Raymundo Larra*n Nesbitt

unregistered
11-11-2009, 09:53 AM
Thank you for the assurance however, we have not logged the tenancy contract with the Land Registry as we were not aware it was possible or necessary. Will this mean we are not protected or can we register it now?

Lawbird Lawyer
11-12-2009, 12:36 PM
You're welcome.

It' doesn't mean you are unprotected, it only means it's more advisable for your best interests, specially if there's a risk of someone buying the property in the future from your landlord.

Long-term contracts should be lodged at the land registry, it's always advisable so that third parties cannot allege they were unaware of this.

You have a specific sub-forum on Landlord and Tenant issues over here:

Landlord / Tenant Issues (http://www.marbella-lawyers.com/forums/forumdisplay.php?f=7)

Yours faithfully,
Raymundo Larra*n Nesbitt

David Lightbown
11-16-2009, 08:09 AM
A very informative site.
I have talked to 2 banks for friends of mine who have problems and I found them helpfull but being able to talk to them face to face was the key. I have had a call from another person who has asked me to speak to his bank and the information on this site will help me help him Thankyou PS I am aware that a little knowledge can be dangerous

Lawbird Lawyer
11-16-2009, 10:55 AM
Dear David,

Thank you for your kind words.

That's why I've posted over and over again that it's important to build rapport with your bank. You must meet them in person, speak to them, let them know of your financial situation and that you are willing to help not to just walk away of the problem. Banks greatly appreciate this and can return the favour through interest-only, waiving commissions, daciones en pago de deuda (handing over the keys to the lender) etc.

Your bank is not the enemy, it's the debt incurred. It's extremely helpful to get along with your bank always.

Yours faithfully,

K.B.
11-26-2009, 12:26 AM
Dear,
We are British homeowners (in Spain). WE have two properties in Spain, both on mortgage, my husband was made redundant in June, we went both to the first house bank (they are in different bank) and we have given the Manager the paper for redundancy, he put it on his desk and I was quite sure he will do nothing of it. lately we started being harrassed by the branch manager to pay four remaining quotes since July. My husband tried to explain he lost his job but at the end he went to Spain for the second time today to up to them sign a remortgage, firstly as they are very far from were my husband is, he asked the ''Manager ' to explain to him and send him in writing how much shall we be paying exactly after the 3 years of temporary remortgage they are giving us (I dont unserstand why it has to be 3 years and not a remortgage as normaly should be as we are only 40 yrs old and this house has been mortgaged for 15 yrs only and given ur age we can extend upto 35 years if Iam not wrong. Anyway, the manager showted at him that she cannot give him anything in wirting and told him anyway he has to come back in January to sign they cannot do it now (we do have all her emails anyway abt the situation and the different stories she was saying so far) my husband said he cannot go back as he has a job offer for january, she distroyed the documents she has to give him to sign and told him to go to court... I was very surprised when he called me and told me how they behaved, i called her and she said i cannot talk to you , we have wasited too much time on you.... and hangged up the phone on me. Very professional though... Anyway, Iam worried we leave the situationas it is because they are not giving us any choice and they will start chasing our other property for debts against the first one... please hel,,,, we are so confused. Regards
K

Lawbird Lawyer
11-26-2009, 12:37 PM
Dear Madam,

I'm sorry to hear your case which sadly has become commonplace.

Your lender is now probably going to repossess your Spanish property. If there's a shortfall after they've repossessd you they may pursue your UK assets as well. It's similar as to how it works out in the UK:

Banks still chasing families for mortgage debts after repossession (http://www.mirror.co.uk/news/top-stories/2008/11/02/banks-still-chasing-families-for-mortgage-debts-after-repossession-115875-20863350/)

The details on how this works in Spain are explained in the article that starts off this thread.

Yours faithfully,
Raymundo Larra*n Nesbitt

Martin and Adrian
12-07-2009, 01:38 PM
We have two mortgages in spain one on each different property. For over 12 months now we have not paid any mortgages because we have tried to negotiated with our bank (Bano Popular) the way forward they have for 9 months given us false hopes and we complete on Wednesday on the sale of one property. We sold the property at 229,000 euros and had a mortgage of 150,000 euros but unknown to us the bank has taken some mortgage of our 2nd property and put on the first property with arrears and the buyer is having to pay they extra another 24 thousand euros we have lost all the profit and our buyer is paying in total aroun 252,000 euros. We do not get anywhere with the bank and feel let down the other property is in profit and we only now have 169,000 euro mortgage we cannot service this mortgage and we have asked for a complaint form for at least 9 months whioh they keep refusing to give us one. Is there anything we can do. We have lost everything like many others but want to stay in spain as the uk in our view is finished.

IzzyM
12-08-2009, 02:04 PM
My neighbour was about to be repossessed on two houses in this village, so she sold off all the contents for next to nothing before leaving for the UK.
However, she also ripped out all the bathroom fitments, sold all the internal doors and frames, a complete fitted kitchen that the builder had installed, and all the swimming pool housing contents.
The bank doesn't know the extent of the damage yet as there is a fiesta here just now. I am interested to know what kind of penalties she will face?

IzzyM
12-08-2009, 05:50 PM
Also, I have just witnessed the descruction carried out in the second house, an old townhouse, it has been vandalised, there is no other word for it, everything, cupboard, doors, chimneys, bathroom fitments, have had a sledgehammer taken to them. It's ruined. The other house was new - only 6 years old but has been reduced to bare shell, still with external walls, windows, and doors only.
I am worried because this lady plans to return in a few weeks to collect the payments owed for the last of her belongings that she left with a friend to sell. Is this damage considered 'criminal'?

deblew
12-12-2009, 06:18 PM
My parents live in Spain permanently. Their property is worth approx 300,000 euros in today's market. They have a small mortgage, 25,000 Euros, but as retired folks have minimal income. They are now struggling to meet the monthly payment of 400 euros. They have approached the bank who refuse to let them go on to interest only payments. They are looking at Equity release but cannot get this whilst they have a mortgage. They feel their only option is to hand the keys to the bank. Can you suggest any alternatives?

doris
12-20-2009, 05:53 PM
Thank you for this informative site.

A friend of mine is in a similar situation and having defaulted on payments for over a year, he was niave to think that the bank would just repossess the house and that is all.

As I have read from here, since he has defaulted he can no longer just hand over the keys. What is your best advice regarding this? He has received a letter from a UK based debt collector offering a 20% discount if the debt is cleared within 30 days... does that mean the debt has been sold from the Spanish bank to a debt collector now? I'm not sure if that means repossession is in progress? I believe the mortgage sum outstanding is not massive (around €70,000) although it is significant. If he has no means of paying this, will the debt collector (whether acting on behalf of the bank) accept repossession??

Lawbird Lawyer
01-08-2010, 12:53 PM
Dear Martin and Adrian,

You can write a complaint and send it to their Complaint´s Department. If they are not forthcoming with areply you can then lodge a complaint before the Bank of Spain on your matter. In this case their complaint´s department is centralised in Madrid:

http://www.bancopopular.es/popular-web/atencion-cliente.htm


Yours faithfully,
Raymundo Larra*n Nesbitt

Lawbird Lawyer
01-08-2010, 12:56 PM
Dear IzzyM,

That falls to the bank to pursue it or not. Some and some don´t.

Yours faithfully,

Lawbird Lawyer
01-08-2010, 02:56 PM
Dear deblew,

It would seem your parents can only return the keys to their lender as they have no other option.

The procedure to follow is explained clearly on this thread which has links to the article explaining it in even more detail:

handing over the keys to the bank (http://www.marbella-lawyers.com/forums/showthread.php?t=218)- 24th February 2009
Unregistered

Please contact us (http://www.lawbird.com/services/contact) if we can further assist your parents on this matter.

Yours faithfully,

Lawbird Lawyer
01-08-2010, 04:37 PM
Dear Doris,

You´re welcome.

As I've written in many replies, Spanish lenders at times sell on these debts to local debt collecting agencies for anominal value (i.e. 70% of teh debt) who will then pursue you. You can reach an agreement with said companies to pay in installments.

Following your query, if they are offering him/her that option it´s because probbaly repossession hasn´t concluded or hasn´t even started yet. They may have already started the repossession procedure however.

Even when a repossession procedure has been initiated you can still clear all the arrears. You normally have 18-24 months until the auction. If you clear it before the hammer goes down you can successfully avoid the repossession.

But you will now have to come up with all the following:

1.- Lawyer's fees: normally between 8,000 -12,000€
2.- Court agent's fees: approx 3,000€
3.- Arrears
4.- Compounded delay (penalty) interest on the said arrears

You have to pay all the above lump sum (no installments) to successfully stall the repossession procedure.

Prior to initiating the repossession procedure a debt collecting agency may contact you, such as your friend´s case, to offer him/her to repay the debt in installements.

My advice, as always, is to do everything possible to avoid this repossession scenario. You must draw the red line at this point to avoid yourself a financially compromised future.

Yours faithfully,
Raymundo Larra*n Nesbitt

Stefan
01-13-2010, 02:26 AM
What a great help this website has been. I was stung 5 years ago with didgy English estate agent. Paying well over the odds. But my question is like most others, I have a property in Spain and with the Pound being so weak the mortgage payments willbecome difficult after March. I saw this coming back in august 2009 and went to see the bank manager. He is a nice guy, we communicated on his computer using bablefish. He said I could lenghthen the mortgage but the cost would be 2,000 euros. That seems alot. My house is up for sale and I just want an interset only until the house sells. Are there no such things as interest only mortgages if you are struggling or is it up to the managers discretion? Incidently after our meeting he took me across the road and got me half drunk. So not all bad. PS- To everyone out there stick in an follow the advice on here, in a weird kinda way its nice to know that we are not alone with our worries and concerns.

Lawbird Lawyer
01-13-2010, 11:09 AM
Dear Sir,

Thank you for your kind words.

It's at the lender's discretion to give you interest-only, yes.

It is not compulsory for them to offer it.

Have you read my blog post on swapping over to interest-only?

Spanish Mortgages: No Tax on Term Extension or Swapping to Interest only (http://belegal.com/wordpress/spanish-mortgages-no-tax-on-term-extension-or-swapping-to-interest-only/)
Friday, June 26th, 2009

Yours faithfully,
Raymundo Larra*n Nesbitt

Richard Linda
01-19-2010, 01:39 PM
I have an apartment in Murcia with a loan from Cajamurcia. I have lost my job and asked Cajamurica to take back the apt under the 'Dacion en Pago' procedure as discussed here.

They have not started repossession procedures, I am not in arrears and the apt is in small positive equity so met all the criteria you discuss but they they have refused saying that I needed to have paid back 15% of the capital before they consider it.

What can I do now?

Lawbird Lawyer
01-19-2010, 01:49 PM
Dear Sir,

A debtor is in his legal right to request that his lender accepts assets (an apartment in your case) to fully or partially discharge your mortgage liability.

If your lender is refusing your petition, you have no option other than to hire a lawyer and challenge them at court enforcing your rights which are enshrined by our Civil Code.

With even more reason if the apartment is in positive equity.

Yours faithfully,
Raymundo Larra*n Nesbitt

Reberto
01-20-2010, 02:36 PM
Hi, I have a spanish house and this was bought by myself and my partner in 2006 - We since split up, and although the mortgage was in both our names, I was left paying the bill. I could not afford to pay all the mortgage but did so as long as possible then reducing to half which was affordable, but without her contribution it was not possible to keep this up for long and thus got further into debt. Eventually I sent a recorded letter and email to the spanish bank saying I could no longer keep up the payments and asked them to take the properity in exchange of the outstanding debt, this was early 2008, I have heard nothing since, no chasing of debt, no emails no calls until today I recieved the following message.

We have just been advised via a telegram that the Bank is starting court proceedings to repossess your property in Spain.

We are not sure you were told about it as we were the proxy at the time of the purchase.

This is sent for information only.

I would be willing to settle the debt, but wonder how much this would be as they Value on the villa at time of purchase was 159000 euro's and the mortgage left owing was 109000, does that mean if they sell in auction they cannot go below 50% of its worth or its mortgage or does it get revalued, and will they accept me paying half the deby left owing as this was in joint names?

Lawbird Lawyer
01-20-2010, 04:45 PM
Dera Sir,

I refer you to post 93 (http://www.marbella-lawyers.com/forums/showthread.php?t=73&page=10#93) on this thread which explains what you have to pay now to avoid a repossession.

It doesn't matter if you owe all, half or 1% of the property; you are liable for the full amount of the loan jointly or severally with your ex-partner on defaulting.

You will be expected to pay in full lump sum the breakdown detailed in post number 93 if you are to stall successfully the repo.

Failure will result in you being repossessed. In which case, as explained in my article which starts off this thread, in no-one bids in the public auction the value of the property will drop 50% as per our Civil Procedural Laws and your lender will adjudicate itself the property. If there's any shortfall between what you owe and the value fetched by the property in the auction (very easily) you will be held personally liable with all your assets both now and in the future.

As I also explain in this very thread on repossessions, no-one is bidding in these public auctions (unless the house is in a prime location i.e. beachfront) because the mortgage liability on these overvalued assets frequently exceeds the value itself of the underlying asset defeating the whole purpose of acquiring it. In other words, a flat that is worth 120,000€ has a mortgage on it for 175,000€ so no-one will want it because you cannot resell it and make a profit. Even professional bidders are out of the picture.

That's why banks have set up all these real estate agencies that I reported back in early 2008:

Pssst! Looking For Cheap Spanish Property? (http://belegal.com/wordpress/pssst-do-you-want-cheap-spanish-property/) - October 5th, 2009 by raymundo

Lenders need to get rid of their property portfolios and now they are targeting foreign institutional investors than can shift hundreds of properties for sizeable discounts.

Yours faithfully,
Raymundo Larra*n Nesbitt

maggie
01-25-2010, 09:17 PM
We have been lucky to sell our holiday apartment in spain, which we purchased 8 years ago. We are being paid in euros which we will deposit in our english bank where we live. Are we better off financially by the Euro being strong against the pound, whereas 8 years ago, the euro was weak. Thank you for your help

Lawbird Lawyer
01-26-2010, 10:49 AM
I'm glad I was of help to you Maggie.

That is an advantage that few vendors spot.

You can actually offset the loss of lowering significantly the price of your Spanish property as you are being paid in hard currency (Euros) which you can then change at a superb exchange rate over to GBP. So you can actually walk out even or even make a tidy profit on the sale.

Kind regards,
Raymundo Larra*n Nesbitt

Jon
02-04-2010, 05:41 PM
I have a friend who has/ had 2 property’s in Spain both of these has not had any mortgage payment made for over 2 years now, They have tried to sell one of the property’s to clear a large amount of the outstanding mortgage but the bank blocked the sale saying all or nothing. The second property was never finished by the developer as they went bust taking the up front money with them.

There has been very little communication from the bank regarding the outstanding debts. Reading your post’s this seems a bit strange when you consider the time that has past since any payment has been made.

You say that the Spanish banks will take action in the UK to reclaim any outstanding amount, this now hits another point. My friend’s house in the UK was also in mortgage arrears and was repossessed middle of last year. Both her and her partner have separated financial problems being one of the causes for the separation

Nether my friend or her ex partner have any valuable belongings, she is in rented accommodation and her partner is now living with his mother. There is outstanding debt in the UK for the repossessed property plus additional unsecured debts that where run up.

Nether one of them shot of a lottery win or similar are or will be in a position to make repayments to ether the British or Spanish creditors.

The question is how long can the proceedings go on for, what happens if payment can not be meet??

Thanks
Jon

Lawbird Lawyer
02-04-2010, 06:28 PM
Dear Sir,

The statutory limit is 20 years. However this is a prescription limit.

Meaning that if the lender at anytime within those 20 years (Art 1964 SCC) sends you a registered letter demanding payment of the debt, or chases you through the law courts, the clock start ticking again (Art 1973 SCC).

And they will do this again and again as they are relentless. They hire law firms that make sure the 20-year limit is never overrun.

On my first job as a lawyer I was chasing up mortgage debts from 1987! This is done because over your lifetime you may come into money as it's foreseeable you will inherit at some point or other in the future, at least most people do statistically.

Some people learn to live without having anything under their name so as to avoid them. In any case no-one can jail you for having debts in Spain.

Yours faithfully,

Jon
02-04-2010, 07:32 PM
Thanks for your help your info is very helpfull.
One other thing that concerns me is what would happen if i was to treat my friend to a holiday in spain, is the fact that a debt and court procedings are outstanding going to be picked up at pass port control ? would she be taken to the nearest police station / court to answer questions on the matter?
Thanks again Jon

Lawbird Lawyer
02-05-2010, 10:37 AM
Dear Jon,

You are welcome.

No, that's exactly why I added the line that you can no longer be imprisoned in Spain because of running up debts.

Your friend can book a flight and come over to Spain to enjoy the sunshine. She won't have any problems at customs nor will she be dragged off to the nearest Police station.

Yours faithfully,

mea kerr
02-05-2010, 01:38 PM
We are now 4 payments behind on our mortgage in the Canaries. The bank has said they need at least 2 payments to stop the file going to the legal dept. We have struggled with the mortgage for just over a year. We have been in contact with the bank via e-mail throughout this, often telling them how much and when the money will arrive. The problem is we stopped paying communidad to try and keep up the mortgage payments, we now also owe €5000 communidad and cannot meet any payments with the bank. If the bank refuse to let us hand the keys back what is the best course of action we should take? Kind Regards

Lawbird Lawyer
02-05-2010, 02:06 PM
Dear Ms Kerr,

I copy you in my article:


Advice to Struggling Mortgage Borrowers in Spain (http://www.levantelifestyle.com/index.php?mod=art_det&art_id=707) -14th April 2010 Levante Lifesyle Magazine

http://www.eyeonspain.com/forums/posts-long-5402.aspx - 3rd September 2008 Eye on Spain


Advice to Struggling Mortgage Borrowers in Spain

Raymundo Larra*n Nesbitt
3rd February 2010

Introduction

Following-up on my article of 2008 on Bank Repossessions in Spain (http://www.marbella-lawyers.com/articles/showArticle/home-repossessions-in-spain-defaulting-on-mortgage) ex-pat landlords are still struggling to remain afloat in 2010.

It is important to clarify that a property on being repossessed still belongs to you, not to the lender. You are the one that appears lodged at the land registry as the title owner. On defaulting a mortgage loan the debt goes personally against you. You will be held liable with all your assets, both now and in the future, following art 1911 of the Spanish Civil Code. This is a General legal priniciple in Spanish law.- Personal and Unlimited Liability.

The above has huge legal implications that most foreign borrowers were not aware of at the time of signing their Spanish mortgages. It means that if the property has slipped into negative equity (i.e. house price fall, or after a repossession procedure) then the outstanding balance is owed by yourself. This debt is pursuable even in your home country against your assets held abroad. As explained in my article on Spanish repossessions, if no-one bids for the property in the public auction the lender will be forced to withhold it for 50% of its appraisal value. Meaning you will owe the outstanding balance plus the repossession expenses incurred (lender’s lawyer’s fees as well as court agent’s fees). The latter will be added to your debt. Post credit crunch it is renowned that professional bidders have vanished into thin air as credit is hard to come by. Bidders are required to lodge before a law court auctioning off the property 30% of the appraisal value. Given the current grim financial environment we can safely assume that in most cases properties being repossessed and auctioned off will end up in lender’s property portfolio. Which explains why lenders have been busy incorporating real estate divisions (http://belegal.com/wordpress/pssst-do-you-want-cheap-spanish-property/)to get rid of their excess property stock.

Spanish banks can and are already chasing-up debts in the UK or elsewhere against any assets you may hold in your home country. They may outsource this work to local UK law firms or else debt-collecting agencies or else simply sell the non-performing mortgage to specialised companies for a fraction of the nominal value. The latter will then chase you. Lenders will not hesitate to send you threatening letters with the hope of avoiding a protracted repossession procedure.

In practice, it will fall down to the amounts owed. It's true that this is often an expensive process for Spanish lenders so they may be reluctant to follow it. Bear in mind the default interest rates agreed within your Mortgage deed normally range between 15-30% compound interest p.a. (not simple interest!). So the debt will mount exponentially over time very quickly. Walking away from your Spanish debt is not an option for most people as it will come later on to haunt you in life. Not to mention that your credit rating in Experian and other credit-rating agencies will be ruined.

Some borrowers in arrears, unable to meet their financial commitments, have simply handed over the keys to their lenders in the hope this would discharge them from their debt liability. Crass error. In Spain to hand over the keys to the lender it must be done through a formal procedure at a Notary public which involves signing a deed relinquishing ownership in exchange of being fully discharged from the mortgage liability. This is known in Spanish as “Dación en Pago de Deuda (http://www.marbella-lawyers.com/articles/showArticle/spanish-mortgage-dacion-en-pago-handing-keys-bank)”. Spanish banks are very surprised at this new phenomenon dubbed “jingle mail” and have been caught completely off-guard because they are used to dealing with Spanish borrowers who no matter what service their mortgage on time even if they have to live on bread and butter. Whereas many foreigners have been walking away as if this was the US thinking no further legal consequences would arise from turning their backs to the problem.

The ability of a solicitor to act on your behalf on this matter is honestly very limited. The ongoing credit crunch doesn’t make it any easier as Spanish banks themselves are increasingly struggling to secure finance lines from abroad. The Bank of Spain is bound to pass -again- more stringent regulation (http://ftalphaville.ft.com/blog/2010/02/22/155561/bank-of-spain-to-raise-provision-requirements/) in 2010 forcing Spanish lenders to increase provisions set aside for defaulted loans on dwellings from 20% to 30% after one year in their balance sheet. In my opinion this new regulation will have as collateral victims foreign struggling mortgage borrowers as Spanish banks will from now onwards grow increasingly wary of caving in and accepting a dación en pago de deuda (handing over the keys in exchange of the debt).

Historical low interest rates have held at bay repossessions in Spain after they had reached an all-time high in 2008 when the Euribor rate (to which most Spanish mortgages are referred to) peaked on October 2008 (http://belegal.com/wordpress/steep-drop-in-euribor-translates-into-cheaper-mortgages/). If interest rates are once again raised later on in 2010, as experts forecast, in the hope of a market recovery we may face –yet again– a new tidal wave of bank repossessions.


Tips to struggling mortgage borrowers:



1. Switching to interest-only (http://belegal.com/wordpress/spanish-mortgages-no-tax-on-term-extension-or-swapping-to-interest-only/). This can be arranged whilst the property is put up for sale or just to weather off the storm meanwhile. This option has become increasingly difficult post credit crunch as Spanish banks seldom grant interest-only and if they do, it's really just as a teaser for two years.

2. Extending mortgage repayments (http://www.marbella-lawyers.com/forums/showthread.php?t=49#4) an additional number of years. The drawback is that on doing so the amount of interests you pay on the long run is increased dramatically. So it's only an option for those who are left with no other really. The Government is now allowing this change free of charge to struggling mortgage borrowers providing they are resident and the property is their permanent dwelling. Borrowers will not pay for Notary or Land Registry fees on following it.

3. "Dación en pago (http://www.marbella-lawyers.com/articles/showArticle/spanish-mortgage-dacion-en-pago-handing-keys-bank)". This is basically handing over the keys to the lender (http://www.marbella-lawyers.com/forums/showthread.php?t=218) and signing a deed at the Notary whereby the lender commits itself not to chase you for the debt and consider it discharged for good. Two things are required, the property must not be in negative equity and ideally there should be, as rule-of-thumb, 20% equity so as to offset the lenders’ expenses on taking over the property. It doesn’t matter if you are in arrears, what does matter is that the repossession procedure must not have been initiated by the lender. This is harder than people think because due to the easy credit of the last years the Loan-To-Value of properties was really high, too high in fact, hence all the bank related problems we keep reading with massive writing-offs. People borrowed far too much and now their properties may have fallen below what they borrowed against them. Should this happen the lender will be very reluctant to agree to this "dación en pago de deuda" because the collateral now will have few equity.

4. Selling the property as a distressed asset. If you have already run through the numbers and you are convinced that you will no longer be able to service your mortgage, rather than defaulting and being repossessed, you should very seriously consider selling the property as a distressed asset. The catch again is that the property should not be in negative equity. The more it is the least likelihood there will be anyone interested in it as they in turn are regarding the purchase as an investment and the numbers need to stack up to make it worthwhile for them.

5. Applying for debt consolidation. There are many financial companies offering this service. Basically what they do is group all your debts with different lenders (from credit cards, your mortgage loan, personal loans etc) with only one lender who then extends the loan repayments. The consequence this has is that your monthly repayments are cut down significantly making them more affordable. However the drawback once again is that on extending the financial commitments you will pay more interest on the long run.


Contd. below:

Lawbird Lawyer
02-05-2010, 02:08 PM
6. Swapping over the mortgage to a new lender. Many lenders are now offering to take on existing mortgages paying all the transfer expenses. These lenders normally require the property was bought prior to 2003. In addition, for those who hold collar clauses, (http://belegal.com/wordpress/spain%25e2%2580%2599s-senate-petitions-government-to-suppress-floor-clauses/) swapping over to another lender offers the opportunity to get rid of these bothersome clauses and take advantage of the low interest rates.


In Conclusion

My advice is to draw a red line on a repossession procedure. You should try to avoid this scenario at all costs. As the debt goes personally against the borrower in Spain, you may live a nightmare with debt-collecting agencies, banks or lawyers knocking at your door for years to come. As the compound default interest is fairly high this will be tagged on to what you already owe creating a debt spiral.

Please note the information provided in the above article is of general interest only and is not to be construed or intended as substitute for professional legal advice.


Related articles:

• Spanish Mortgages: No Tax on Term Extension or Swapping to Interest only (http://belegal.com/wordpress/spanish-mortgages-no-tax-on-term-extension-or-swapping-to-interest-only/) – 26th June 2009

• Spain’s Senate Petitions Government to Suppress "Floor Clauses" (http://belegal.com/wordpress/spain%25e2%2580%2599s-senate-petitions-government-to-suppress-floor-clauses/) - 23rd of September 2009

• 10 Common Abusive Clauses in Spanish Mortgage Loans (http://www.marbella-lawyers.com/articles/showArticle/10-common-abusive-clauses-in-spanish-mortgage-loans) – 4th of June 2009

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

• Sterling Plunge: Not All Doom and Gloom (http://belegal.com/blog-by-antonio-flores/sterling-plunge-not-all-doom-and-gloom/) -4th January 2009

• Steep Drop in Euribor Translates into Cheaper Mortgages (http://belegal.com/wordpress/steep-drop-in-euribor-translates-into-cheaper-mortgages/) -31st December 2008

• The Dacion en Pago Procedure (http://belegal.com/wordpress/dacion-en-pago/) – 21st November 2009

• Cannot Keep Up Repayments on your Spanish Mortgage? Not All is Lost (http://belegal.com/blog-by-antonio-flores/cannot-keep-up-repayments-on-your-spanish-mortgage-not-all-is-lost/). -9th November 2008

• What are my options if I have fallen in arrears on my Spanish mortgage? (http://www.marbella-lawyers.com/questions/showQuestion/193-What-are-my-options-if-I-have-fallen-in-arrears-on-my-Spanish-mortgage) -18th November 2007

• We are in 3 months of mortgage arrears with a Spanish bank for two properties the developer have not completed properly. What options do we have? (http://www.marbella-lawyers.com/questions/showQuestion/190-We-are-in-3-months-of-mortgage-arrears-with-a-Spanish-bank-for-two-properties-the-developer-have-not-completed-properly--What-are-our-options) -16th September 2007



Lawbird Legal Services (http://www.lawbird.com/) is a law firm with broad experience in Litigation, Corporate and Spanish Property Law.


Yours faithfully,
Raymundo Larra*n Nesbitt

mrs lewis
02-16-2010, 04:21 PM
We are currently having our home repossessed in spain we have children. Can we legally be evicted.
many thanks

Lawbird Lawyer
02-16-2010, 04:55 PM
Dear Madam,

That will not thwart the procedure.

Stefan
02-28-2010, 09:08 PM
Hi, I mentioned a couple of months ago about extending my Spanish mortgage but the bank wanted 2,000 euros. Their bank manager is off ill and the person who my friend spoke to (She is a lawyer from Peru) so speaks fluent told her that is was not their problem and they had their own clients to deal with. I spoke to santader bank in London a nd they have tried to help but with little success. I have sent a number of bank statements, my business accounts etc to the bank of Valencia whO I bank with. My question is you said previuosly that there was a blob about not paying tax on extended mortgages and interset only mortgages, i could not find the blog but I just want to know shoukld I have to pay tax on another mortage again and will I have to pay Santander bank for leaving them? I have been with them for 5 years and don't think there is a tie in penalty now. Also, I do not know if it would be better to have a mortgage with just the banks normal interest rate or the Eurebor? is it still low? Many Thanks

Lawbird Lawyer
03-02-2010, 12:32 PM
Dear Stefan,

Many queries.

I wrote a blog post in June last year on the points you raise:

Spanish Mortgages: No Tax on Term Extension or Switching to Interest-only (http://belegal.com/wordpress/spanish-mortgages-no-tax-on-term-extension-or-swapping-to-interest-only/) -June 26th, 2009




Spain’s Tax office has replied within the last month two binding legal queries which shed some light onto the taxation of the amendment of mortgage terms ("novación").

On the first reply of 25th of May, the Dirección General de Tributos (DGT) clarified that switching to interest-only will no longer attract Stamp Duty. On the second reply of 10th of June, the DGT has stated that changing the mortgage’s reassessment date will no longer pay Stamp Duty either. It would be regarded as exempt following art 9 of Law 2/94. E.g. a borrower changes the mortgage resetting from once a year to a quarterly basis.

Regardless if the borrower chooses one or both options they will not attract tax. Also, a lender cannot lawfully charge more than 0,1% to extend mortgage repayments.

This is welcome news indeed for struggling mortgage borrowers that will now have more options available to them without being taxed on choosing them. Reducing citizen’s tax burden is always the right path on the road to financial recovery.



The Spanish Tax Office itself has replied to this query in a binding reply. Ther are no taxes to be paid on switching to interest-only or changing the reassesment date of your mortgage (Euribor rate revision), period. Another matter are the notary and land registry fees due on the mortgage loan amendment ("novación").

Regarding extending a mortgage loan a lender, by law, cannot charge lawfully more than 0,1% of the pending capital redemption. That is the maximum they can charge the borrower as commission.

Another matter -again- are the Notary and land registry fees borne which you will have to pay as it's natural, not your lender. They are specified in art 8.

Law2/1994 (http://noticias.juridicas.com/base_datos/Fiscal/l2-1994.html#a8) rules on this, as per my blog post herein above. Concretely in its art 10:

Art*culo 10. Comisión por ampliación del plazo del préstamo. (commission for extension of mortgage loan)

En las novaciones modificativas que tengan por objeto la ampliación del plazo del préstamo, la entidad acreedora no podrá percibir por comisión de modificación de condiciones más del 0,1 % de la cifra de capital pendiente de amortizar. (maximum of 0,1% of the amount pending redemption)

Regarding your last question, on whether it is more advisable that your mortgage loan is referred to the Euribor rate, as most Spanish mortgages are, or else to the "banks normal interest rate" I advise the former.

It is renowned that in view of the Euribor having hit a historical all-time low in 2010 banks are now trying to push alternative benchmark interest rates on new mortgage loans. You can be sure they are not doing this so borrowers benefit, quite the opposite, these new referral rates happen to be always higher than the Euribor. Bottom line, stick to Euribor rate if you you want to pay less.

And to close, you as a Consumer have a right to obtain always a full breakdown of expenses itemising exactly what you are being charged for.

Yours sincerely,
Raymundo Larra*n Nesbitt

Stefan
03-03-2010, 05:34 AM
Hi Raymundo

Thanks alot for your clear explanation. That has been very helpfu. There is one more querie if I may ask and that is If I leave Sanatnder to go to the Bank of Valencia (As Santander do not offer mortgages with the eurebor) will I have to pay taxes if I remortgage with another bank or only avoid them if I stay and extend lenght of term with current lender?

Many Thanks Again

Stefan

Lawbird Lawyer
03-03-2010, 10:54 AM
You are welcome Stefan.

Many banks are now offering clients to switch lenders and they are the ones that pay for everything, so it's gratis for you. Are you aware of such offers? Why don't you talk to an experienced mortgage broker on this? They can point you in the right direction.

If you remortgage with another bank you will of course be expected to pay tax, yes. That's why you must run thorugh the numbers carefully and verify it interests you to jump ship.

Regards,
Raymundo Larra*n Nesbitt

mr singh
03-16-2010, 02:26 PM
Dear Stefan,
what is the current 2010 stance/policy of Santandar bank on persuing UK lenders who default on spanish mortgage? I am upto date but in 3 months will not be able to keep up payments.The property on a golf resort should just about the value of the mortgage .I was going to let the bank have 3 month advance notice and ask them to cancell mortgage and take the property back as the they can still i think break even.What do you think?

kelly
03-16-2010, 03:44 PM
we have been offered a dacion en pago on our property, we are now awiting the study.
last september we had a re mortgage
our bank valued our property last september at 328,000 euros which to me is way overpriced we have a mrtgage of 175,00 and we are hoping the dacion will cover this. I have been told that by law in spain banks cannot drop the valuation of a property by less than 20% in the same year is this correct? i would really like some advice on this
thanks

Lawbird Lawyer
03-17-2010, 10:28 AM
Dear Sir,

I'm sorry, I do not know to what law you are referring to.

Yours faithfully,

Lawbird Lawyer
03-17-2010, 11:36 AM
Dear Sir,

You have made the mistake of not hiring a lawyer to hand over the keys to your lender through a formal procedure known as "dación en pago". This procedure is explained in my articles:

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

The Dacion en Pago Procedure (http://belegal.com/wordpress/dacion-en-pago/) - 21st November 2008

I always recommend everyone to hire a Spanish lawyer to ensure the mortgage liability is discharged in full, which isn't your case.

You have made the same mistake as these other borrowers:

Can we be chased by the bank after arranging a Dacion en Pago? (http://www.marbella-lawyers.com/forums/showthread.php?t=674) - by boabster

Property was bargained away and we are being chased for the shortfall. Please help! (http://www.marbella-lawyers.com/forums/showthread.php?t=617)
Wendy

The above people thought or were mislead into thinking they were doing a dación en pago. They in fact gave POA to their banks who sold the properties on at BMV. The outstanding debt is till owed to the bank and the liability is personal and unlimited meaning the lender can pursue in the future the borrowers for the shortfall. Or they can simply sell on the debt to some debt-collecting agency in the homecountry of the defaulters.

To stop the bank from pursuing you further you would have to sign a deed at a Notary where the debt is released in exchange of you paying what's owed.

Yours sincerely,
Raymundo Larra*n Nesbitt

Nigel
03-18-2010, 12:48 PM
Thanks for the useful info and hopefully you can comment on the following.

I am in the process of being repossessed by a bank on Gibraltar for a house I own and that is registered here in Spain.

Unfortunately I now have no way of paying the mortgage, which is c30.000 in arrears and with negative equity currently running around €250.000.

I have no assets here or elsewhere.

My only option, it seems, is to declare myself bankrupt. Is this a possibiity in Spain? If not I won´t be able to live with the constant chasing from banks, lawyers, debt recovery agencies etc as you have noted in many posts above. In that case i will mover back to the UK, declare myself bankrupt there and be discharged after 2 years. A bad credit file would be a good thing after the current nightmare.

Lawbird Lawyer
03-18-2010, 02:14 PM
Dear Nigel,

Filing for individual bankruptcy is possible following Spain's Insolvency Act of 2003.

However this is seldomly advisable for individuals.

First of all it is devised for affluent individuals, which helps explain why so few families in Spain have applied for it (couple of hundreds only).

Secondly you will be expected to pay in the region of €20,000 lump sum for it to be considered which obvioulsy defeats the whole purpose of "filing for bankruptcy" for most individuals. If they had €20,000 to spare they would logically not be in need to file for it.

Spain's lacklustered Insolvency Act has been undergoing heavy criticism from lawyers and judges and was partially amended in 2009 and will be amended soon yet again.

So bottom line, we do not recommend you to follow this option in Spain.

Yours faithfully,
Raymundo Larra*n Nesbitt

John Rodger
03-22-2010, 04:34 PM
I have signed a guaranor form foir a friend on some properties in Spaina nd now the person can not afford them.
The guaranor was signed in a UK lawyers form who does not do international law. If I have signed this guaranor form in English does this mean it is valid in spain or is it that just spanish versions are valid ? THis is for 350,000 so obviously I do not have the money to pay.
I heard I had to go to spain to be liable as if I did not attend any court hearings it was then not valid ....
please can you confirm these points for me please.
Lastly do you also act in other parts of spain i.e. Majorca or Tenerife or not.
Thank you very much

Lawbird Lawyer
03-22-2010, 05:46 PM
Dear Sir,

We act nationwide, yes.

Can you please contact us (http://www.lawbird.com/services/contact) and scan and e-mails us what you've signed regarding the Spanish mortgage.

Normally a guarantor is included in the Mortgage deed itself signed at the Notary.

As you are probably already aware, when you act as a guarantor of a Spanish mortgage if the principal borrower defaults on the loan, a guarantor is held personally and unlimited liable with all his assets both now and in the future for the full amount of the loan.

Yours sincerely,
Raymundo Larra*n Nesbitt

Paul Nelson
03-24-2010, 10:19 PM
I have a property in Spain which I no longer live in. My ex partner is still living in the property and has stopped paying the mortgage as she says she can no longer afford to. We are both on the deeds and I am pretty sure that the property is not in negative equity, (150,000 euro mortgage left) and property worth about 300k. If the bank does go ahead to repossess the property and sells it at auction for a a profit am I entitled to half of the remaining proceeds and if so how do I go about obtaining them? Thanks for your help

Lawbird Lawyer
03-25-2010, 10:40 AM
Dear Paul,

If the bank goes ahead and repossess it it will probably adjudicate itself the property as no one is bidding for properties nowadays post credit crunch unless it's regarded as prime real estate for which there is always a market.

Meaning there wil lbe automatically a price drop of 50% of the appraisal value as explained in my article on bank repossessions in Spain which starts off this thread:

Excerpt:




Public Auctions Mean a Further Drop in Property Prices


As the influx of repossessed properties increases in the near future banks will eventually be forced to go through a Public Auction. In these auctions the value fetched by properties can easily fall below 50% of the market value, which would mean that even if the bank sells the asset in the auction the debtor will still owe the bank the balance of the loan. To this balance the legal fees of the bank’s lawyer and the associated costs of the seizure process must be added.



So a property worth 300K will be adjudicated for 150K to the lender after the repossession is over. To which the expenses and fees of the repossession must be deducted.

So both you and your ex-partner will be held liable for the shortfall and may be pursued for the negative equity.

When you write you are both "in the deeds" I take it you refer to the Mortgage deed. Because if only one is on the Mortgage deed and you are both on the Title deed only the former will be pursued legally.

I would strongly advise you and your ex-partner to follow what is konw as a dación en pago (handing back the keys to your lender in a formal legal manner).

More on the dación en pago process:

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

We can assist you in a dación en pago, we charge a flat fee of € 1,200 plus VAT per property nationwide.

Please read the following post carefully:

Advice to Struggling Mortgage Borrowers in Spain (http://www.marbella-lawyers.com/forums/showthread.php?t=73&page=11#107) - 3rd February 2010


Yours sincerely,
Raymundo Larra*n Nesbitt

matthew
04-01-2010, 08:34 PM
i have taken a loan out for 6,000 euros and have paid back about 1,000, we had the loan on our property in spain. and my mother put her house against it as well, i made the first 6 months payments, then lost my job, my mother died and we we moved back to uk, and have no contact from the bank as we do not speak spainish, we have been back 6 months, and a friend has told us they have taken our house,its worth about 100,000 is this possible. is there any thing i can do.

Stefan
04-02-2010, 06:40 AM
Hi

I just wanted to ask you a couple of things please. I have my house up for sale but I am trying to get an interest only mortgage until he property is sold as the euro rate is crippling me financially. If you are not a resident where do you stand with tax and general fees if remorgaging? The other question is there apparantly a Spanish couple who want to rent my house. The only thing that concerns me is that I have been in touch with an esate agent called equus about renting, they said they can arrange a contarct and collect money but where do you stand inSpain when tenants stop paying rent? I beleive there is an insurance policy you can take out for 58 euros a year which protects rental income, and court costs for eviction. Do you know of this insurance and if so is it reliable. I am not sure if the tenants also have a small child and this is another thing when children are invloved it is harder to vacate them. As my house is up for sale it may be unwise to rent anyway. I don't know what to do as the worst case senario for me is that I have tenants in, not paying rent, I still have to pay mortgage and cant sell the house.

Many Thanks Stefan

Lawbird Lawyer
04-05-2010, 10:44 AM
Dear Matthew,

If your mother acted as a personal guarantor of your loan (avalista) and you stopped paying, your lender will take her assets if she failed to repay your debt, yes.

500 borrowers everyday lose their properties to their lenders in Spain on being repossessed.

Yours sincerely,
Raymundo Larra*n Nesbitt

Lawbird Lawyer
04-05-2010, 10:49 AM
Dear Stefan,

The insurance policies I know which are regularly used against defaulting tenants are normally an anual fee equivalent to one month's rental. More on this in my article:

Landlord: Keys to Successful Rental Income (http://www.marbella-lawyers.com/articles/showArticle/income-lease-rental-insurance-spain) - 31st January 2008

These insurances cover normally the legal fees and expenses of having a tenant removed.

Perhaps when you mention the €58 you are referring to adding an arbitration clause in lieu of litigating. This is an acceptable option as well but it alsp has its associated drwabacks, so it's not entirely risk-free btw.

Yours sincerely,
Raymundo Larra*n Nesbitt

stefan
04-05-2010, 09:30 PM
Hi

If you extend your mortgage to bring payments down do you still have to pay stamp duty tax if you are not a resident or will it be waved as the mortgage is already with theat lender?

Many Thanks

Lawbird Lawyer
04-06-2010, 10:29 AM
Dear Sir,

You already asked this question on post 111 on this thread and was replied to in detail in post 112:

http://www.marbella-lawyers.com/forums/showthread.php?t=73&page=12#112

You will pay it.

Yours faithfully,

Joanne
04-14-2010, 03:33 PM
I want to give my property back to the bank.My morgage is so high I can never pay it off or sell due to problems. I owe them 200 euros which is a part payment of monthly morgage. They have already threatened repossesion. I also have a personal loan from them. I owe community fees. I am self employed and my work has dried up. I read your comment on dacion de pago were you say all debts must be paid before you can make this arangement.I can not do this. Do I just have to wait for them to repossess incurring extra charges for everybody or is there another alternative.Would al these debts be added morgage, personnal loan ,and community fees together with any other debts on property. I do not own any property and have a car on credit. Can they if once my property is repossessed make a charge against any future earnings if I am self employed. For instance track down a bank acount and take any monies deposited there. Plus blacklist my name.

Lawbird Lawyer
04-14-2010, 06:58 PM
Dear Madam,

Where is it that I write that all debts must be cleared so your lender accepts a dación en pago? Can you quote me writing that please.

If I've written that it's incorrect advice and I stand corrected.

What I write is the following:

Advice to Struggling Mortgage Borrowers in Spain (http://www.marbella-lawyers.com/forums/showthread.php?t=73&page=11#107) - 3rd February 2010





3. "Dación en pago". This is basically handing over the keys to the lender and signing a deed at the Notary whereby the lender commits itself not to chase you for the debt and consider it discharged for good. Two things are required, the property must not be in negative equity and ideally there should be, as rule-of-thumb, 20% equity so as to offset the lenders’ expenses on taking over the property. It doesn’t matter if you are in arrears, what does matter is that the repossession procedure must not have been initiated by the lender. This is harder than people think because due to the easy credit of the last years the Loan-To-Value of properties was really high, too high in fact, hence all the bank related problems we keep reading with massive writing-offs. People borrowed far too much and now their properties may have fallen below what they borrowed against them. Should this happen the lender will be very reluctant to agree to this "dación en pago de deuda" because the collateral now will have few equity.



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




How does a Dación en Pago Work?

For a lender to accept it two things are required.-

1.The property must not be in negative equity.
2.The lender must not have started a repossession procedure against the property.

The outline of how it works is as follows:

1.The borrower must be on time with the repayments as well as with the Community fees and local taxes. The latter can actually be negotiated with the lender.

2.The borrower approaches the lender and proposes this procedure.

3.The lender will require the property to be reappraised. You will be expected by your lender to pay this in advance. On average it's approximately 350€.

4.If on average the new valuation of the property covers the outstanding mortgage loan plus 13% of the associated legal expenses the lender will accept to take the possession of the apartment, cancelling your debits and will waive taking legal action both in Spain and abroad in your home country. As a rule-of-thumb the cushion of equity should amount to at least 20% of the property value.

5.The day of signing the Deed at the Notary, the borrower will surrender the keys, and leave the property clear of furniture and tenants.

6.The property will now be lodged under the lender’s name.


I've signed daciones en pago at Notary's and my clients owed money i.e. outstanding community fees, unpaid utility bills etc. The dación was signed without a problem. So long as there is enough equity in the property the lender will sign.

You can also be in arrears and it wouldn't matter.

The only three things that matter are:

1. The property must not be in negative equity. Thre should be at least as a rule-of-thumb 20% equity. Following stringent regulation from the BoS the equity within the property should now be raised to 30% in my opinion for 2010. Whicn translates into lenders being more reluctant than ever to accept a dación en pago de deuda.

2. Your lender must not have initiated a repossession procedure against you.

3. And finally there should be no tenants inside the property as lenders don't like it because of the legal hassle (in reference namely to Art 13 of Spain's Tenancy Act).

Regarding your other queries the short answer is yes to all of them.

i) Your lender can effectively seize the money in a bank account, yes, if post repossession of the Spanish property you still owe them funds. As explained in my article on Bank Repossessions in Spain which starts off this very thread, lenders can adjudicate themselves the property for 50% of the appraissal value if no one bids for it. Meaning its very easy to slip into negative equity.

ii) As for your lender blacklisting you in Experian or similar credit-rating agencies that's one of the first and easiest things for them to do. I explained this in the reply to the following query:


What are my options if I have fallen in arrears on my Spanish mortgage? (http://www.marbella-lawyers.com/questions/showQuestion/193-What-are-my-options-if-I-have-fallen-in-arrears-on-my-Spanish-mortgage) -18th November 2007

iii) All these debts will be added and compounded into what you already owe, yes.

Yours faithfully,
Raymundo Larra*n Nesbitt

Joanne
04-15-2010, 06:18 PM
Thank you for your detailed and informative reply. I read dacion en pago 1 The customer must be on time with payments community and local taxes.Therefore I thought this ruled me out. I now see this can be negotiated with bank to be included. I have emailed my bank and asked for them to concider my property under dacion en pago. If this is excepted and the 350 is paid to them what other charges am I likely to incur your solicitors fees for example. After this procedure is completed.Would my future credit be effected say to buy a car or have a credit card I have no debt on credit card only apartment debts. I am nearing retirement age so would not buy another property. If I start earning again while procedure is going through but not wish to retain property would this be o.k. If Im turned down by bank for dacion en pago will the repossession procedure be the next step. My morgage is just too much for me along with high community fees.

Lawbird Lawyer
04-15-2010, 06:38 PM
Hi,

You're welcome.

Yes whilst it's always recommendable to be up-to-date in all the associated expenses as long as there is enough equity they will let pass any arrears or debts you may have outstanding. Almost in every dación I've signed the client had debts.

On following a dación en pago signing a deed at a Notary public relinquishing ownership in exchange of fully discharging you of your mortgage liability you will start off with a clean slate. At no time will you be black listed or your credit history suffer as a result of it. You won't have any problems. That's why I advise this option only when there is no other option; in other words, only as a last resort.

Should your lender turn down your request for a dación en pago de deuda I suggest you follow any other of the options I suggest in my article below:

Advice to Struggling Mortgage Borrowers in Spain (http://www.marbella-lawyers.com/forums/showthread.php?t=73&page=11#107) - 3rd February 2010

Remember that you must draw a redline on a repossession procedure in Spain; it should be avoided at all costs because of the dire consequences of Art 1911 of the SCC regarding the personal and unlimited liability and the fact that lenders pursue you legally -even abroad- for any shortfall post repossession.

If none of the above options can be followed, you will be repossessed, yes.

Regarding our legal fees, we charge a flat fee of €1,200 plus VAT irrespective of the value of the property. Depending on where the property is located in Spain we may aditionally charge a small sum for travelling expenses.

All legal fees and associated expenses are clearly laid out in a breakdown in our Letter of Engagement prior to retaining us. You will always know what you are paying for.

We do this in all the legal services we provide so there are never misunderstandings with our clients.

Yours faithfully,
Raymundo Larra*n Nesbitt

Joanne
04-15-2010, 08:26 PM
What a relieve I wil be in touch once I have reply from bank.Thank you so much. One final question I mentioned above is what if I start earning while proceedure is going through can they take that money if I want them to take back property via dacion en pago

Lawbird Lawyer
04-16-2010, 10:27 AM
No they cannot seize or freeze part of your wage. The whole point of the dación en pago is to avoid that.

Should they repossess you and be a shortfall they will seize part of your wages, yes.

Yours faithfully,

Joanne
04-22-2010, 01:40 PM
My bank have sent me form dacion en pago at my request. Also they asked for last 3 water,elec,community bills,I.B.I.and a deposit to be paid into bank. They did not say how much. My concern is what if there is not enough equity in my property as you have explained above. I purchased nearly six years ago at a very high price from the developer. I have told them the debts on property and asked if they would include this in dacion,will everything be frozen now as I have applied to them or am I still incuring debts.How long does all this take. They say they want to arange a valuer to come can they take my furniture and possesions into account.

Lawbird Lawyer
04-22-2010, 04:11 PM
Dear Madam,

As explained in the excerpt of my article on dación en pago procedure you would be on stage three.

Once they've done an appraissal for the exclusive purposes of a dación en pago they will give you a reply within a month or less.

If the reply is positive, you only have to agree on what day to sign it.

Yours faithfully,
Raymundo Larra*n Nesbitt

DannyBoy
04-23-2010, 01:54 PM
Hello, This forum has been very helpful. I have a similar problem we fell behind with mortgages payments 2 years ago and had emails from the local branch asking us to pay I informed them we couldnt and that we were leaving the property. Since then I have had no contact from the bank at all in 2 years and the local branch has closed. I have contacted the main bank asking what is happening but no response. I returned to the house yesterday and the locks ahve not been chagnged and the only post we have is from a debt recovery company, they are asking for 1700 euros for an outstanding overdraft with the bank who issued the mortgage, but nothing in reagrds to the mortgage. As my wife is not on the nota simple or mortgage could I make a rental aggreement to her so she could live in the property legally incase they do eventually try and repossess it.

Lawbird Lawyer
04-23-2010, 06:21 PM
Dear Sir,

Thank you for your kind words.

You ought to command a Nota Simple (http://www.lawbird.com/services/view/13/Land-Registry-Search---Search-by-Owner) to know if your lender has already initiated a repossession procedure or not. Maybe for some reason they haven't notified you. Repossession procedures are taking on average 2-3 years as law courts are clogged with them.

What would be the point of drafting this Tenancy agreement in favor of your wife? Remaining in the property for the next 5 years despite a repossession procedure?

Yours faithfully,

Unregistered
04-26-2010, 09:41 AM
Thank You for your response, the point of my wife staying there is as we are currently seperated and she needs somewhere to live, I myself am moving back tot he UK but she has decided to stay here so that was the reason, to know if she would be able to stay in the property with a tennants agreement until she managed to sort something else out.

Lawbird Lawyer
04-26-2010, 11:50 AM
If your lender is repossessing you I wouldn't advice you signing a rent over to your wife.

Yours faithfully,

sunnylondon
04-26-2010, 02:28 PM
I am currently three months in arrears with caja madrid and whilst talking to them over the last few weeks to try and get me on an interest only mortgage i have recived a respossion order that was started sometime ago, 8 th April. I have called the local branch again today that i was trying to sort out the mortage and i would like to resolve this before it goes to reposseion as i am moving to spain for good. She advsied me that once the reposseion order has started there is nothing she can do. I have range again and she was very aggressive telling me she had no time to talk to me and would relay the message that i can pay all arrears today to end this matter and we can discuss putting me on interest only later. I am very concerend that i will lose the property as it is not in negative equity. What action should i now take.

Lawbird Lawyer
04-26-2010, 03:14 PM
Dear Sir or Madam,

You can at anytime before the judge rules on the matter stall the repossession procedure paying all the moneis owed lump sum.

This is discussed in more detail here.-

http://belegal.com/forums/showthread.php?t=73&page=5#50

Yours faithfully,
Raymundo Larra*n Nesbitt

DannyBoy
04-27-2010, 09:35 AM
Hi thanks for the advice the problem is I don't know what the bank are doing the local branch where we took out the mortgage has closed and when I email or call the main bank no one can tell me what is happening and struggle to find any information about me or my mortgage account. I have recently requested a new Nota Simple and it does show the mortgage on there aswell as a Embargo from Social Security but it doesn't seem to mention anything about the mortgage arrears or repossession. Is there a way to find out?

Thanks

Lawbird Lawyer
04-27-2010, 09:48 AM
It would have to be trough the bank I'm afraid.

Repossessions are taking now more than three years on average due to the sheer volume. I wouldn't be surprised they take 4 years or more in the future as a result of the law courts being clogged.

Yours faithfully,

unknown
04-29-2010, 10:09 PM
HI danny boy i am in the same position as yourself.
hopefully a little advice here for me. we have a mortgage with Deutsch bank costa blanca our branch manager was very helpful setting up the mortgage. I went to the bank month after month to pay the mortgage none of the staff could find the details of which i gave them. I gave them all our details all the staff could find was three bank accounts (we did not open these the manager did by mistake and told us she would close then this did not happen)
Eventually the bank manager who set the mortgage up located the account and took the payment.
We had very little information on the mortgage account from the bank. Due to difficulties and lack of paperwork (we only had copy of the escitura) we were a little worried as to why no one could find the mortgage etc. we were asked by staff if we were sure that we had a mortgage with them (our branch then closed)
i visited another branch re repayment help through our insurance payment protection plan as my husband was made redundant. we were notified by the same bank manager that the insurance was due to be repaid as it was paid quarterly (i thought we paid in full) she wanted another 290(ish) euros for three mths but then told me this was for death only and for my husband only who was 31 and in great health again alarm bells ringing why was this so much, so as our situation was a little messy with my husband being made redundant and not having spare money we could not pay this nor could we pay the mortgage, i requested a break for a couple of months until we found further employment, the manager did not want to know she said no (very direct.)
then i asked if we could reduce the payments again no.
I walked away very distressed and not knowing what to do. I contacted the bank numerous times unable to pay the mortgage and no one could help as they could not locate the details I was even asked if i had a mortgage with them again. we departed to the k in search for work last year, before we departed we visited the branch and spoke again explaining we were going to return to the uk and asked about the bank taking the keys the manager again very directly said no we do not take houses back. I asked what would happen next she simply said nothing and shrugged her shoulders. I explained i would be in touch. When settled in the uk we contacted the branch to find the manager was no longer there and again no one not even the new director of the bank could find our mortgage details. The new director took our details and was quite concerned that we had no documents or had not heard anything regarding the non payments. She took our email address and phone number and explained she would be in touch the following day. the call never came so i contacted her again, she was going to contact me the following week. We have heard nothing until a couple of days ago when i had a call from a lady in the bank who asked if we wanted to sell the property. i said yes but then realised that the value of the property will not meet the mortgage etc nor do i have proof of the mortgage or legality of the sale. I am now in possession of a document in spanish for me and my husband to sign and send to the bank. If we let the bank sell the house what happens to the outstanding loan, I am looking to have a solicitor look at the document and give us advice of where to go next.

Lawbird Lawyer
04-30-2010, 10:01 AM
Dear Sir or Madam,

If you sell the property and there's still an outstanding mortgage loan you will be held personally liable for it even against your UK assets.

Please read the following thread on someone who already went through this:


Can we be chased by the bank after arranging a Dacion en Pago? (http://belegal.com/forums/showthread.php?t=674)

Yours faithfully,
Raymundo Larra*n Nesbitt

Karen
05-06-2010, 09:47 PM
Hi there,
Hope you can help us...We are struggling to pay our mortgage,although we are up to date. The house has equity in it and we want to follow the dacion en pago route. The bank have said the have stopped doing dacion de pago 6 months ago and refused. they will not come to value the house and are not interested at all. Instead they told us that we would be black listed if we stopped paying our mortgage. Can the notary make them follow the procedure,and the provision set by the spanish cival code?. Surely if we give back our house and all the taxes are paid,they can cancel the debt and we can all move on!. What do we do if they refuse?....we fit all the criteria but they aren't budging.......PLEASE HELP

Lawbird Lawyer
05-07-2010, 10:09 AM
Dear Karen,

Following my article on the Dación en Pago de Deuda (http://belegal.com/articles/showArticle/spanish-mortgage-dacion-en-pago-handing-keys-bank), I wrote that it's not a borrower's God-given right to demand from its lender to accept a dación en pago. The lender will decide on whether they accept it or not; you cannot force them other than trying to do it through a law court which will take long (years) and will be expensive and you'll probably lose it unless you have a good case. I really do not recommend following this litigation path.

What borrowers seldom realize is that a bank on accepting a dación en pago incurs in a great deal of expenses which come out of their pocket; it’s as if they were buying away the property from you:

1. 7% Transfer tax
2. Notary fees
3. Land Registry fees
4. Gestor*a fees
5. Maintenance and upkeep of the property
6. Payment of local taxes
7. Payment of Community fees
8. Mortgage arrears.
9. Outstanding utility bills.
10. Percentage to be deposited before the Bank of Spain after one year. (*)

So basically banks run through the numbers to see if it’s worthwhile for them –or not– to accept a dación en pago.

(*) If after one year the property is still on their books they will have to allocate before the Bank of Spain an amount of money as a provision of funds to offset a "potential" depreciation of real estate assets. In 2008 this amount was 10%, in 2009 it was raised to 20% and in January 2010 it has been raised yet again to 30%. What this means is that the BoS believes property prices will be falling. Surprise, surprise.

As explained in my article "Advice to Struggling Mortgage Borrowers in Spain (http://belegal.com/forums/showthread.php?t=73&page=11#107)", the Bank of Spain has passed on new regulation early on this year whereby banks are now obliged to deposit 30% of the appraisal value for auction purposes of the property. And this, to add insult to injury, comes at a time when credit-rating agencies are taking pot shots at Spain's sovereign credit-rating on a weekly basis (CDS's soaring day-to-day) and Spanish bank's stocks are derailing in the wake of Greece's financial meltdown as investors fear we're toast. So, banks are hoarding as much cash as possible to raise their core capital and the last thing they want right now is to shove more funds into money-losing enterprises such as daciones en pago de deuda. You do not need a crystal ball to know where property prices will be heading next in Spain.

What I concluded in my article was that if lenders were already reluctant to accept a dación en pago back in 2008 and 2009, following this new change in the law, they were going to be even more so in 2010. I also wrote that I foresaw that the collateral victims of this new stringent regulation were likely going to be all the struggling borrowers, such as yourself Karen, who were keen on following a dación en pago (to waive a repo procedure) as banks were going to increasingly turn them down.

So the logical conclusion of all the above is that instead of needing at least 20% equity (as my outdated article on the dación en pago highlighted in 2008) now in 2010 following the changes in law, I would say that a borrower needs at least 30-40% positive equity for a bank to accept a dación en pago in 2010 unless the property is regarded as prime (i.e. beachfront duplex) in which case the bank will be able to offload it to some savvy investor within the year. In this last case it would suffice to have 15-20% positive equity.

What this translates to into practical terms is that a property then must have been purchased at least prior to say 2004 to still have 30-40% positive equity in 2010 IMHO.

Yours faithfully,
Raymundo Larra*n Nesbitt

MiaH26
05-18-2010, 02:17 PM
After months of waiting, our spanish bank (Deutsch Bank) have now informed us that

'The bank is not acepting to reposses houses, we are starting with juridical actions'

What does this mean ????

Help me please!!!
05-18-2010, 05:50 PM
My husband is one of three brothers, all guarantors of his parents mortgage in Spain. The parents have already handed a property back to the bank and now have defaulted on the mortgage again,as they do frequently.
CAM bank have sent us default notices many times over the years which father in law brushed off as mistakes, however we now know that they are in dire straits with no heating and water. The mortgage is in arrears by 200 odd Euros and we have had 2 default notices, and now a letter from Experian which I don;t know what it means but I expect is a warning about legal action.
I never wanted hubby to be a guarantor but he agreed with his Dad, if we now paid off the debt to CAM (or Experian) would it be possible to be removed as guarantors. His father basically told us there was no way CAM would ever come for money to us, they'd just take the keys but I feel we have been hugely misled.
We have a good credit rating that we struggle to maintain on 1 income, with a 2 year old baby living in a house too small already with no money.
Please please help as I feel like I want to end it all.
Thanks.

Lawbird Lawyer
05-18-2010, 06:00 PM
Dear Madam,

Spanish banks at times call a dación en pago a "voluntary repossession".

What your bank, DB, is probably referring to is that they turn down your proposal for a dación en pago de deuda and will now issue legal proceedings against you to repossess the property as explained in my article which starts off this very thread.

Yours faithfully,
Raymundo Larra*n Nesbitt

Lawbird Lawyer
05-18-2010, 06:07 PM
Dear Sir or Madam,

I always advice never to act as guarantor on behalf of anyone on a Mortgage deed; even if it's at the request of your own children or parents. The reason is that on them defaulting, the Spanish lender will come after your assets, whether in Spain or in the UK. The consequences are just much too dire to take any chances with your hard-earned assets.

This is also explained in my article which starts off this very thread:




The Six Stages of a Home Repossession

.
.
.

5. The Court sets a date for the Public Auction - Normally between 6 to 12 months after the start of the Executive Procedure. The judge decides on the date of the auction. If no one bids for the property the bank will keep it. The bank tries to offset the outstanding loan debt with this auction. However, it may happen that after the property has been assigned to a winning bidder the amount raised is not enough to cover the debt plus all the associated repossession expenses (i.e. because the borrower had run into negative equity). The bank is entitled to pursue the rest of his assets even if abroad. Should there be a guarantor in the Mortgage deed the bank will chase their assets. The property will now be lodged under the name of the new owner.



Yours faithfully,
Raymundo Larra*n Nesbitt

Karen
05-18-2010, 09:52 PM
Hi Raymondo,
Thanks for taking time out with my earlier enquiry. we have asked the bank for an appraisal of our house to establish for sure what equity we have. They are currently going on a valuation which is four years old. Since then we have spent 40,000 on the house,and it is now urban (registered with the catastro),on 6,000 m of rustic land. Will they have to reappraise it?,as they are not interested......it's as if they want it to be in negative equity..... we bought it for 260,000,they say it's worth 185,000,we owe the mortgage of 200,000.......as you can see,no wonder they don't want to value our house. The estate agents have valued between 385,000 and 325,000. What can we do?,we feel the must reappraise,or can we use an independant recognised valuer?,kind regards

Help me please!!!!
05-18-2010, 11:19 PM
Raymundo, I am so grateful of your fast response - you are so kind. Just some further questions, do you feel the Experian notice is a notice of repossession? I have tried to translate with babelfish but still makes no sense to me.
We have been told the bank are chasing even though my husband is only in a group as guarantor not on this individual mortgage, how does this work?If this is at all the case.
Also, is it never possible to be removed as a guarantor once signed as we have been told once the debt is paid we will all be removed from the mortgage?
I am seriously concerned about the advice that is being given as everything that we have been told (Spanish bank not being ABLE to chase the debt in the UK, possibility of being removed as a guarantor?)seems wrong.
If my husband has been misinformed by the Notario is there any way we can claim against that?
I am starting to worry the only way to safeguard our UK home is to put it in my name, but I understand it is possible for the banks to put a claim on future assets? My husband has a pension fund that we are depending on, could they take this?
The property is not in negative equity, could an equity release be taken to release funds?
Thank you so much for your kind assistance, I am so grateful.

Lawbird Lawyer
05-19-2010, 09:58 AM
Hi Karen,

You are welcome.

The problem is that lenders are not binded by appraisals carried out by "independent" valuers. They will want to appoint their own and trust only his appraissal.

What you should know is that an appraisal on teh sdame property wil lhave different outcomes depending on what it is being commanded for. i.e. an appraisal for a dación en pago will always be significantly lower than say one requested with the purpose of securing a mortgage loan. It's just a fact.

The fact that it is registered on the catastro doe not make a property urban as you seemingly imply. Rustic property is also on the catastro. As you yourself write, the plot of land is rustic which always has a signigicantly lower value than its urban counterpart.

In any case, I refer to post 150 (http://belegal.com/forums/showthread.php?t=73&page=15#150)on this thread in which I explain that the amount of positive equity required in 2010 by lenders has been raised to 30/40% for them to adopt a dación en pago de deuda in lieu of repossessing.

Yours faithfully,
Raymundo Larra*n Nesbitt

Lawbird Lawyer
05-19-2010, 10:18 AM
Dear Madam,

You make me blush. You are welcome.

Let's see, a lender would have no interest whatsoever in removing a guarantor. Would you if you were the lender? I didn't think so. Lenders are -gleefully- happy to have as many guarantors as possible signing the Mortgage deed because it means their safety net (pool of assets they can go after once the borrower defaults) is increased. Nowadays Spanish lenders are requesting young couples to have their parents and even their granparents signing as guarantors.

This is simpy crazy, because if a borrower defaults (and workers in Spain are being laid off every day of the week) a chaing reaction is triggered which creates a spiral of debt whereby the whole family has their prime asset (main residence or home) at stake subject to the repayment of the mortgage loan. There are newspaper articles portraying how whole families are being left in the cold after the younglings defaulted on leading a life fueled by "cheap" credit they could simply not afford to repay. In fact, taking this on a larger scale holds true of Spain itself.

Regarding Spanish lenders being unable to seize your UK property I believe it is the case if its your main property/residence and you already have a mortgage against it (i.e. hardly any equity left). However, I'm not qualified to give advice on UK law; you would have to ask a UK solicitor on that point. The fact is that Spanish banks can and are already chasing debts in the UK following EU Regulation 44/2001.

An experian notice does not amount to repossession to the best of my knowledge. A repo procedure takes on average 3 years in Spain. Once they have a ruling they will execute it in the UK against your assets if possible. Some people are in a state of denial on this matter quite simply because they do not understand the procedure and how long it takes in Spain.

So bottom line, you've been adviced incorrectly. Spanish lenders can chase you in the UK. Otherwise it would be all too easy taking out Spanish mortgages and fleeing the country when things turn pear-shaped, not so.

Yours faithfully,
Raymundo Larra*n Nesbitt

karen
05-19-2010, 04:09 PM
Thanks again Raymundo for your kind reply. Lets hope we know what direction we will be going in sooner than later.

Help me please!!!!
05-19-2010, 04:27 PM
Sorry to make you blush Raymundo, you shouldn't underestimate what a lifeline this site is. You help so many people, please take the praise!!!
Ok, I am beginning to understand something is amiss here with the information relayed to us. Could we take counter legal action ourselves if we were advised incorrectly? If so who do we speak to?
Also, if the debt weren't settled, would it be possible for the bank to take my husband's pension in 20 years time? Luckily our house is mortgaged currently, so my dear 2 year old son will still have a roof over his head. If we had no assets, would the bank wait until we had some or would they attempt to get us made bankrupt in the UK?
Thanks once again for your valuable help, you are so very kind.

Lawbird Lawyer
05-20-2010, 10:17 AM
You are welcome Karen.

Lawbird Lawyer
05-20-2010, 10:29 AM
Dear Madam,

Unfortunately in Spain the legal relationship is determined clearly by the signed and binding Mortgage deed which lays out clearly the terms and conditions of the loan. These cases are very straightforward in Spain.

There is little that can be done by way of defence from Spain on defaulting a Spanish mortgage other than paying what's owed lump sum before the hammer falls (Judge's ruling).

However, tha case is very different when it comes to defending your assets located in the UK. Regarding safeguarding your UK assets from a potential claim from the Spanish lender I strongly advise you to seek advice from a UK solicitor. I'm aware there are ways to counteract against these claims from Spain, specially when it comes to seizing your main UK residence, as you have specific regulation in place but I'm simply not qualified to pass advice on UK laws, sorry.

Yours faithfully,
Raymundo Larra*n Nesbitt

Help me please!!!
05-25-2010, 11:35 PM
Thank you Raymundo, you've been very helpful. I have now the full figures and luckily it looks like the bank are hoping to avoid such action at present, but you have given me very useful information for the future and I am truly grateful. Thanks once again.

Lawbird Lawyer
05-26-2010, 10:07 AM
You are most welcome.

Regards,

barrie
05-26-2010, 01:26 PM
Hi,
I would like some advice my property was valued by my bank at 325,000 euros in september 2009 for a change in the mortgage as i was borrowing extra money.
i have since had financial problems and have been unable to make payments the bank offered dacion en pago however yesterday i was told that the valuation is now 158,000 euros this leaves a shortfall of 22,000 euros as mt mortgage is for 180,000 euros.
i do not understand how the bank can do this when they wanted to lend me money their valuation was high now all of a sudden because thay are takeing the house back the value has seen more than a 50% drop in price can the bank legally do this?
there has been no change in the house since the previous valuation.
I have paperwork with the valuation of 325 ,000 euros which was signed at the notary do i have alegal case to contest this new valuation.

I would appreciate your advice on this.

Kind Regards

Barrie

Lawbird Lawyer
05-31-2010, 09:51 AM
Hi Barrie,

Sorry to hear your case.

This is a direct consequence of the Bank of Spain raising the provisions that Lenders must set aside on taking over NPL. I explained this very important proposal in Thursday's post:

Bank of Spain Raises Real Estate Provisions Set Aside by Lenders (http://belegal.com/wordpress/bank-of-spain-amends-real-estate-provisions-set-aside-by-lenders/) - 27th May 2010

Moreover, the BoS has now ordered lenders to reduce the appraisal of second homes located on the Spanish costas (in other words, those that expats normally buy) by 40 p.c.

What the above means is that the BoS wants properties stuck in lender's portfolios to be marked-to-market as Spanish lenders had not previously factored in the huge property depreciation that has taken place since 2007. So basically it means that the BoS considers there has been a drop of 40% on these second homes. It also considers there has been a drop of 20% on main residences and 50% drop in plots of land.

What all the above translates into is that now there must be a significant amount of positive equity in a property fort a Spanish lender to accept a Dación en Pago, otherwise they'd rather just repossess you.

That's probably why your lender has probably changed their mind and puzzled you on turning down your Dación en Pago proposal when initially they had been receptive to the idea.

Yours faithfully,
Raymundo Larra*n Nesbitt

barrie
05-31-2010, 12:13 PM
Thanks Raymundo,The property is not a second home it is my main residence so does the 20% not apply to me if so my property value should still be 256,000 Euros going on the previous valuation 8 months ago for 320,000 euros, is this correct?

Lawbird Lawyer
05-31-2010, 12:36 PM
You are welcome.

Correct Barrie, it it's your main residence, the BoS has outlined in its proposal the reduction in the appraisal value to be of only 20% to bring it in line with today's fall in property prices.

Borrowers on main/first residences are deemed more trustworthy as one can reasonably expect them to pay their mortgage repayments even if that implies living on bread and butter so as to waive the dire consequences of a repo procedure.

Second home mortgage borrowers will understandably ditch them first so they are regarded as more of a credit-risk, hence the -40% in their appraisal value. Thier priority will be to save their homecountry's assets, not recreational overseas property.

Difficult times.

Yours faithfully,
Raymundo Larra*n Nesbitt

barrie
05-31-2010, 01:07 PM
Thanks Raymundo, so in your opinion where do i stand legally on this are the bank at fault applying a 51% decrease in valuation since the last appraisal in September is there any way i can contest the appraisal?
The property is my main residence, i do not have the extra 23,000 euros shortfall they require for dacion en pago and i do not have any other assests, i have a car but that is registered in my wifes name and she is not on the mortgage. Would it not be in the banks best interest to take the dacion en pago than to persue me for money and assests that i simply do not have?

Thanks in advance

Barrie

Lawbird Lawyer
05-31-2010, 01:14 PM
How long have you been living in that property?

barrie
05-31-2010, 01:20 PM
I bought the property in FEB 2005,i am very worried about be repossessed and was hoiping the dacion en pago would be a good solution for us. I do not have asssests but can they take my wifes assests as mentioned before she is not on the mortgage i am the sole property owner

Lawbird Lawyer
05-31-2010, 01:43 PM
Are you British? By default the economical regime of British is separation of assets unless agreed otherwise.

The lender will only pursue you in your case, as the borrower who appears lodged in the Mortgage deed is only yourself. The dwelling acts as collateral. Even if its solely under your spouse's name the lender will go after it as they had a first charge against it (the Mortgage).

Your lender may wish to repossess you because in time you may come, for example, into an inheritance from a family member.

You should check in the appraisal report that the property is labelled as your main residence. Perhaps the surveyor mistakenly labelled it as second residence.

In any case from my experience, lenders will accept a dación en pago providing you make up for the shortfall in cash on signing before the Notary Public the deed relinqushing the property. These appraisals are difficult, but not impossible, to challenge as lenders will normally accept only those surveyors they themselves appoint despite you paying for the survey.

If you are unable to raise the funds they will repossess you.

Yours faithfully,

Barrie
05-31-2010, 02:08 PM
Thanks raymundo, yes i am british, my wife has no assests apart from a car. Are you saying then that if in the future my wife has assets they can take these even though she is not mentioned anywhere on the deeds or the mortgage?

Lawbird Lawyer
05-31-2010, 02:47 PM
You're welcome Barrie.

No, you've misunderstood my post above.

She's safe, it would be yourself who would be held personally liable with all your assets, both now and in the future if you default and are repossessed.

anonymous
06-01-2010, 08:33 PM
My friends bought a property in Spain a few years ago while their Son was living there, and have a Spanish mortgage on the basis that the son, as a resident of Spain, is guarantor. They own their property in UK outright and used all of their savings to help buy their Spanish property with a Spanish mortgage for the remaining 50%. They did not want to use their UK home to raise the moneyt.

This year the son has returned to UK (permanently) but has kept on a rental apartment for the summer and has not told the Spanish authorities that he is now no longer resident, as he still has a postal address there.

If the Spanish authorities find out that he no longer lives in Spain, or when he stops renting and therefore has no postal address in Spain, how does this affect my friends. (They have never missed a payment.)

I am very worried that the bank may call in their mortgage and wonder how much time they would have to sort this out.

Lawbird Lawyer
06-02-2010, 09:04 AM
Dear Sir or Madam,

It will not affect them so long as they service their mortgage repayments.

Yours faithfully,
Raymundo Larra*n Nesbitt

anonymous
06-02-2010, 10:44 AM
Thank you! That's a great relief.

Lawbird Lawyer
06-02-2010, 12:03 PM
You're welcome.

neto-negativo
06-08-2010, 03:37 PM
Hi Raymundo,

I bought a house in Spain from UCI "Cambio de Casa" 4 years ago, I foolishly took out a mortgage far in excess of my means, although, at the time I was earning quite a good salary. Since then, I have been out of work on and off over the last 3 years, I struggled with the repayments, and in the last 18 months, I have not paid anything on my mortgage. My wife and I are resigned to leaving the house (it is still our family home), but we have received no information or correspondance from UCI in the last 18 months? I am working again now, but I dont know what I should do, should I contact them and ask them for a new payment plan, or should I just forget about it and wait until we are told to leave by the court.

Lawbird Lawyer
06-08-2010, 03:55 PM
Hi,

UCI have probably already issued repossession proceedings against you. Haven't you been notified in your home address? That's odd, mind you UCI aren't particularly known for their good communication with clients.

Repos take long. As law courts are currently clogged with cases (not to mention the civil servant's strikes because of reduced public wages) you can reasonably expect them to take possession of the property 2-4 years after proceedings have been filed.

At this point in time, 18 months in arrears, I think your lender won't be interested in a "repayment plan".

Even when a repossession procedure has been initiated you can still clear all the arrears. You normally have 18-24 months until the auction. If you clear it before the hammer goes down you can successfully avoid the repossession.

But you will now have to come up with all the following:

1.- Lawyer's fees: normally between 8,000 -12,000€
2.- Court agent's fees: approx 3,000€
3.- Arrears
4.- Compounded delay (penalty) interest on the said arrears

You have to pay all the above lump sum (no instalments) to successfully stall the repossession procedure.

In any case, you don't lose anything on contacting them as the damage is already done. On commanding a land registry search you'll know if they have already initiated the repo procedure. Lenders have no interest in bricks, if they can avoid repossessing you they will.

In fact, at times there may be even pleasant surprises round the corner:

Cannot Keep Up Repayments on your Spanish Mortgage? Not All is Lost (http://belegal.com/blog-by-antonio-flores/cannot-keep-up-repayments-on-your-spanish-mortgage-not-all-is-lost/) -9th November 2008

I wish you and your family the best of luck.

Regards,

neto-negativo
06-08-2010, 04:26 PM
Hi Raymundo,

Thanks for the prompt reply. The trouble I have is this, I have no way of paying the arrears, or any of the fees. I am resigned to the fact that I have lost everything, so why should I struggle with attempting to fix the situation, why throw good money after bad? I suppose my wife and children, and I will just wake up one day and be told to get out. I know the compound interest is 18%, which is really high, so unless I win "el Gordo" or something similar, I really cannot see a way out. Its a real shame, I have no other country to live in, I have cut my ties with UK and Spain is my Childrens home, at least they have had a good few years in a nice house, and thank God they won't inherit any debt.

Lawbird Lawyer
06-08-2010, 04:38 PM
Hi,

I'm truly sorry. These are difficult times for everyone and many people are struggling to make ends meet. I know it may not sound as much consolation but you are not alone out there, many people are on your same boat as you can surmise from this gloomy thread. One really needs a Prozac shot to read through it.

Following what you write, I agree; it doesn't make sense to plough more money into a money-losing enterprise. Might as well cut back losses and enjoy the ride while you can. As I write, they'll take at least a couple of years to effectively repossess you. Until the bailiffs come knocking at your door, you can stay at the property and enjoy it.

As I'm sure you already know, there is no prison sentence in Spain for bad debts. Your children will never inherit your debts unless they expressly agree to it on signing an Acceptance and Adjudication Inheritance deed.

Yes 18% compound interest is really high and mounts exponentially over time. But what's done is done, there's no looking back now.

Kind regards,

neto-negativo
06-08-2010, 04:49 PM
Raymundo, thanks again for the advice, I have been afraid to contact UCI, but you are right, I should get in touch as a matter of urgency, the problem will not vanish into thin air!!! As a bit of advice to other people in the same situation as this. We know we have been foolish, and after 20 years of proud home owning in UK and Spain, it is inevitabley going to end badley, but we still have our health, we still have a close loving family and its only "stuff" that you cant take with you. I will let you know how I get on, and thanks again - neto negativo

neto-negativo
06-08-2010, 04:49 PM
Raymundo, thanks again for the advice, I have been afraid to contact UCI, but you are right, I should get in touch as a matter of urgency, the problem will not vanish into thin air!!! As a bit of advice to other people in the same situation as this. We know we have been foolish, and after 20 years of proud home owning in UK and Spain, it is inevitabley going to end badley, but we still have our health, we still have a close loving family and its only "stuff" that you cant take with you. I will let you know how I get on, and thanks again - neto negativo

Lawbird Lawyer
06-08-2010, 04:59 PM
You're welcome "negative equity".

If you need legal advice just let me know.

Adopting a positive attitude is always a good step; you musn't let problems overcome you or they'll eat you inside out.

Defaulting on a mortgage loan is not the end of the world. There are far more important things in life.

Kind regards,

Amiga
06-08-2010, 11:05 PM
Hello Raymundo, we live in Spain & have a friend, John, who is 86 & has lived here for 7 years. He paid outright for his property but unwittingly signed it over to his son who now is not paying the mortgage which he took out on it. This is due to the economic situation etc. John is very forgetful & so is not sure of the current situation & his son is not forthcoming to John's friends who are trying to help him. When he signed the property over it was stated on the documents that John could not be turned out of his home. He needs to know if he is still secure or whether he is likely to be evicted. Please can you give us some hope for him.

Lawbird Lawyer
06-09-2010, 09:30 AM
Dear Madam,

It doesn't matter what was signed or agreed. If there's a mortgage loan against the property and his son defaults, in time his father will be removed from the property, by force if neccessary.

The property acted as a collateral of the mortgage loan irrespective of who owns it (Title deed) or occupies it. Private agreements inter partes are overrided by a Mortgage deed, which is a public document signed before a Notary Public.

So basically, if his son slips into arrears the lender will repossess the property and have him removed eventually. As written in previous posts, this can take several years.

Yours faithfully,
Raymundo Larra*n Nesbitt

Amiga
06-09-2010, 10:07 AM
Thank you for your prompt reply. John's son has had problems paying for a while but about 18 months ago negotiated a further loan to help him pay the first. We think he is currently 3 months in arrears. All document go to the son in UK so we wonder if John will get any notice of eviction himself or will bailiffs just turn up. Would he be given time to remove his possessions? He has no money & we think all that can happen is that the British consulate will repatriate him to UK.

Lawbird Lawyer
06-09-2010, 10:49 AM
Dear Madam,

You are welcome.

Yes, he will receive notice at the Spanish address beforehand allowing him time to pack up.

As advised, this can take several years.

Yours faithfully,

Lawbird Lawyer
06-10-2010, 10:28 AM
For all those who master Spanish there's an interesting article today in the Financial press explaining (very basically) the legal and financial consequences of a repossession in Spain. Worth reading.

http://www.expansion.com/2010/06/09/empresas/inmobiliario/1276117018.html

Ebay Malc
06-18-2010, 06:49 PM
Thankyou for this useful and informative article - it's been a great help to me and my family. Two questions for you concerning my own situation after I briefly explain the circumstances. I purchased two properties here in Spain with mortgages obtained from BBVA. The first property (in 2004) was a house which currently has €87,000 outstanding. The second property is a bar / café (in 2005) currently with €33,000 outstanding. A loan taken out 3 years ago from BBVA has €2,600 outstanding.
I have missed one payment of both morgages due at the end of May. I am no longer able to pay anymore mortgage repayments. Question 1. Does your explanation about repossession for houses/residences apply to commercial properties such as my second mortgage on the bar/café and is the same timescale applicable. Question 2. Are the contents of the house/residence and bar such as clothing, personal computers, furniture, curtains, refrigerators etc siezed as assets when repossession takes place or can I remove/dispose of them prior to the repossession and what is the last time I will be given an opportunity to remove them? (Day before the Police/Locksmith arrive or when the hammer falls?)
Thanks again for a great article
Malc

Lawbird Lawyer
06-21-2010, 10:17 AM
Dear Sir,

You are welcome. I'm glad it helped you out; I wrote it with that purpose on mind as I was getting an average of 5 queries a day on this matter back in 2007.

In reply to your queries, it will follow the same procedure with the same approximate timescales.

You can remove all your personal belongings prior to repossession, yes.

You will be notified formally (recorded delivery) on the exact date and time on when the court's bailiff, the lender's procurador and police officers will come to have you physically removed from the property. By law this must be done giving notice to the borrower of at least 20 day's prior to the day scheduled to hold the Public auction (Art 667 LEC). They don't just come knocking at your door in the middle of the night to throw you out!

In fact, in some cases (minors of age) exceptionally they are kind enough to allow you an extra week or two to sort yourself out before taking effective possession of the property.

Repossession takes fairly long mind you. On average spanning between 1 to 2 years. In some cases taking even longer. This will depend on the workload of the law court dealing with your repossession. The more clogged, as they usually are, the longer it will take.

Yours faithfully,
Raymundo Larra*n Nesbitt

Tania
06-29-2010, 12:28 AM
Hi Raymundo

Where is your office based?
Also do you deal with clients who are intrested in purchasing a property?
I see by the above messages that you offer alot of advice on problems revolved around repossesions etc?
We are actually looking to buy a property on the coast of Marbella.
Regards
Tania

Lawbird Lawyer
06-29-2010, 09:39 AM
Hi Tania,

Our law firm is located in Marbella although we act nationwide.

We offer a broad range of legal services, ranging from Corporate law to litigation including conveyancing of course. You have a full list of our services here:

Lawbird's Legal Services (http://www.lawbird.com/services/)

This thread is devoted only to bank repossession related queries, that's why it's so biased towards the subject. This thread picks off on an article I wrote back in 2007 on Bank Repossessions in Spain.

I take the opportunity to offer you our Conveyance Service should you be interested.

You may want to read my articles on the matter:

• Buying Property In Spain Tips Part II. Off-Plan Property (http://belegal.com/articles/showArticle/buying-off-plan-property-in-spain) – 18th April 2010

• Buying Property In Spain Tips Part I. Buying Resale: Avoiding the Pitfalls (http://belegal.com/articles/showArticle/tips-on-buying-a-property-in-spain) – 31st January 2010

Our Conveyance Service already includes obtaining a two NIE numbers on behalf of our clients at no extra charge (the normal fee is €165 for each one, so its €330 you save for two people). Three NIEs or more will be charged at the ongoing rate. A NIE number is required by the Spanish Tax Office to file taxes. Without a NIE number completion on a property before a Notary Public is not possible. Obtaining a NIE number is taking less than 2 weeks through us.

Our Conveyance Service includes the following:


1. Complete all necessary searches on the legal status of the property and the developer/vendor, informing the buyer/s of any issues discovered that may influence the decision or conditions of the purchase.

2. Liaise and agree with vendor/s and/or lawyers in respect of terms and conditions of the purchase, ensuring compliance with current laws. In the event that the vendors are non-resident in Spain, a lawyer ensures that any amount paid prior to completion is lodged safely with a resident party, preferably the vendor's lawyer's account.

3. Make preparations at the Notary Public for completion of the purchase or any further preparations required relating to the purchase such as preparation of Powers of Attorney for individuals abroad (duly legalised and translated) which give authority to a physical person/s to act on behalf of the buyers.

4. Assist in the completion process and ensure title deeds are properly registered in the appropriate local Land Registry, and that the property(ies) is/are free from all charges and encumbrances, free from occupants and tenants, as well as payment of the relevant taxes associated with the purchase.

5. Assist in locating, negotiating and obtaining a mortgage loan to finance the purchase of the property. The obtaining of the mortgage loan may be in the form of an approval in principle prior to the signing of the private purchase contract and is understood without prejudice to any other mortgage facility provided by the developer or the vendor.

6. Obtain the NIE number (Número de Identificación de Extranjeros), or Foreigner’s Identification Tax Number.

7.- At your request we can also include as part of our legal service Title Insurance to cover unforeseen events for a further €294,34 covering the next 20 years.


Please note we offer additional optional services such as setting up utilities (water & electricity) on your behalf, drawing up a will for your Spanish assets or fiscal representation to file the annual Wealth & Income tax in Spain.

On owning property in Spain you are required to file and pay fours taxes, two national (Wealth & Income tax) and two local taxes which can be arranged through a direct debit to your Spanish bank account (IBI tax & garbage collection tax) on an annual basis. Rubbish tax is every six months.

Wealth tax has been abolished as from the 1st January 2008. However, Wealth tax for 2007 is still liable and has to be paid in 2008.

We charge 1% of the value of the property subject to a minimum legal fee of €1,300 plus 18% VAT.

Please be advised that additional legal services not included in the above quoted conveyance fees are the following (plus VAT):

1.- Arranging the set up of utilities (http://www.lawbird.com/services/view/16/Connection-of-Utilities) (water & electricity) €210.

2.- Drafting of each Spanish Will (Drafting of each Spanish Will)€180.

3.- Fiscal representation to calculate, file & pay Wealth & Income tax €85 per person, per year.

If you have any queries on the above you can always contact me (http://www.lawbird.com/services/contact).

Yours sincerely,
Raymundo Larra*n Nesbitt

Elaine
07-01-2010, 11:50 AM
Lawbird - I'm so glad I found your site.
My husband and I bought an Apartment in an Aparthotel complex in Vera. The management company have breached their contract for payment of annual rental income to us, as owners, because they are loosing money. They want a new contract in which they share the profit (if they make one) with owners rather than an agreed amount. No penalties to owners if they make a loss - other than NO payments for allowing the management company use of the apartment for 52 weeks per year.

We are at financial loss because of loss of 4300 euro of annual income, and have either to 1) default on mortgage, leave keys with management comapny and send our set to the bank? 2) renegotiate to interest only mortgage - but are being quoted in region of 2000 euro all told for various 'expenses' & costs - this being nearly 3 months mortgage 3) try to sell, whilst continuing to fund a mortgage we cannot afford now our circumstances have changed here in the UK as well as in Spain.

What would you advise?, we and some of the other owners in this position feel that the Bank, lawyers and management company concerned are colluding?

We bought as an investment, an apartment in a manged commercial complex, which is let out by a management company clearly in financial difficulty and now not able to pay rent according to the contract to the owners.

We want OUT, like so many others

Help!!

Lawbird Lawyer
07-01-2010, 01:39 PM
Tricky questions Elaine.

In my latest article on buying off-plan published on this website I recommend the following:


Buying Property In Spain Tips Part II. Off-Plan Property (http://belegal.com/articles/showArticle/buying-off-plan-property-in-spain) - 18th Apr 2010



8.If you are Considering Buy-to-Let, Make Sure the Local Laws Allow This

If you are buying with a view to rent the property out, either as short or long-term, make sure the region of Spain in which you are buying allows for this. Some regions, i.e. Balearic Islands, have stringent regulations whereby a special licence is required to rent. Failure to comply will result in the Town Hall fining you. Disgruntled neighbours always make apt whistle-blowers, so be warned. Other regions in Spain, such as Andaluc*a, do not require letting licences but do have their own regulation in place on letting out property. i.e. Decree 218/2005. And as a final word of caution, unless your property is in a prime location, do not rely on the let to offset the mortgage repayments.



Without attempting to patronise you, when you invest in life you can either reap a reward or make a loss. It's all about risk management. You must be ready to accept it.

Aparthotel complexs have this problem normally.- the not-so-guaranteed rentals. Witha glut of property available after a decade of over construction the competition to sell or let is fearsome in Spain.

Investments where, for example, the break even is after 30 week's a year of occupation may be dangerous to the pocket of any aspiring would-be-investor.

My advice is not to rely on rental income to offset mortgage repayments unless the property is regarded objectively as prime. Rentals should be regarded as a bonus always not as means to mitigate the monthly mortgage outgoings. And prime properties are frankly hard to come by i.e. beachfront gated luxury complex in Mallorca.

In your case owners should sue this company if you believe they are in breach of contract. An amendment that clearly is biased towards them should not be accepted (why should you anyway?) ex pacta sunt servanda.

If you are in 3 month's arrears with your lenders, as per my article that starts off this very thread, your lender may initiate a repossession procedure against you.

If you can swap over to interest-only you might as well do it to weather off the storm and meanwhile sell on the property to someone else. The amount you are being quoted is standard.

If you are in positive equity territory (substantially I might add, circa 20-30%) you may want to contemplate handing back the keys to your lender. You can read further in my articles:

Advice to Struggling Mortgage Borrowers (http://belegal.com/forums/showthread.php?t=73&page=11) – 3rd February 2010

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

The Dación en Pago Procedure (http://belegal.com/wordpress/dacion-en-pago/) - 21st November 2008

If you default on a Spanish mortgage the consequences are very serious as the liability you have will be personal and unlimited, with all your assets both now and in the future. There's no prison sentence for debts in Spain, don't worry.

But the consequences, both legal and financial, will last for years if not decades even in your home country. Please read carefully my above articles and come back here with any queries you may have.

My advise is always to draw a red line on a Spanish repossession. If there's anything at all you can do to avoid it, please do so for yours and your families' sake.

Too many people have been on denial regarding Spanish banks chasing you abroad. It's happened, its hapenning and will happen.

Spanish banks can sell on entire portfolios of NPL to local debt-collecting agencies who will do the chasing up. But they first need a ruling in Spain which must be final and that may take some time before they are able to pursue you abroad against your assets ex EU Directive 44/2001 (http://curia.europa.eu/common/recdoc/convention/en/c-textes/2001R0044-idx.htm).

Spanish Justice is very slow, we all know that, but its wheels churn relentlessly and will grind many who did not heed proper advice.

Taking on a Spanish mortgage is no joke and you must be very sure of what you are doing and what are the legal consequences for you and your whole family on defaulting as you may be putting your entire financial future at risk.

Yours sincerely,
Raymundo Larra*n Nesbitt

Rob in Madrid
07-01-2010, 10:37 PM
'In some cases taking even longer. This will depend on the workload of the law court dealing with your repossession. The more clogged, as they usually are, the longer it will take'

It is the exact same situation in America it's taking longer and longer for houses to be repossessed, as the crisis grinds on the stigma of walking away from your house is lessening more and more people are will to do a strategic default. That is they are perfectly capable of paying their mortgage but choose not to, live in the house rent free for 2-3 years-

So my question is this are people in spain starting to do the same thing, o holding on to the bitter end losing everything

Lawbird Lawyer
07-02-2010, 09:18 AM
Hi Rob,

US Banks will now be pursuing "strategic defaulters" so I'm told.

In Spain you have to be out of your mind to default on a mortgage voluntarily (if you have assets, mind you). I even read an article of someone who publicly advocated doing this as a "solution". The author was a UK accountant, not a lawyer.

Spanish people hold on till the bitter end living on bread and butter if neccessary.

It has now dawned on non-residents the serious consequences of defaulting. Mainly that the liability is personal and unlimited (Art 105 of Spain's Mortgage Act) and you may be pursued abroad against your home country's assets so it's no joke.

There are cases in which some non-resident borrowers default "strategically" hoping they will not be pursued abroad. This is basically acting like an ostridge ducking their heads in the sand.

In fact in Spain one could agree with its lender to limit the extent of responsibility to the asset itself acting as collateral. So if you default they only take away said asset and would not pursue you should there be a shortfall. But unsurprisingly lenders seldom agree to sign such a clause because they want to play safe.

Art 140 of Spain's Mortgage Act:


No obstante lo dispuesto en el art*culo 105, podrá válidamente pactarse en la escritura de constitución de la hipoteca voluntaria que la obligación garantizada se haga solamente efectiva sobre los bienes hipotecados.

En este caso, la responsabilidad del deudor y la acción del acreedor, por virtud del préstamo hipotecario, quedarán limitadas al importe de los bienes hipotecados, y no alcanzarán a los demás bienes del patrimonio del deudor.

Yours sincerely,
Raymudno Larra*n Nesbitt

Rob in Madrid
07-03-2010, 09:33 PM
Thanks, it should be noted that in some states the loans, mortgages are non-recourse so the lender can't go after you. Also and much more important when ever dealing with a bank (short sale foreclosure etc) you need good legal advice. There have been stories of people doing a short sale and the bank coming after them a few years later.

Personally I don't understand why everyone is so eager to buy. Yes prices are much lower than at the boom, but they are going no where (expect down) anytime soon. If you rent all the risk is on the landlord and you're not tying up all your capital. just my 2 ) céntimos

Lawbird Lawyer
07-05-2010, 10:01 AM
Hi Rob,

We've had a couple of posts on the open forum and quite a few more privately on having "short sold" or handed back the keys without a lawyer and then being chased by their banks for the balance.

E.g.

Property was bargained away and we are being chased for the shortfall. Please help! (http://belegal.com/forums/showthread.php?t=617)
Wendy

Can we be chased by the bank after arranging a Dacion en Pago? (http://belegal.com/forums/showthread.php?t=674)
Unregistered

That's why I always recommend hiring a lawyer to make sure that your personal and unlimited mortgage liability is fully discharged on handing back the keys. Only because a lender agrees with you by email to accept a dación en pago does not mean you are actually signing that a a Notary, such as in the above cases The only thing that matters legally is the deed that is actually signed before a Notary Public.

Regarding your advice of renting rather than buying now I've been advocating that for a few years. But I take it further than that, I advice rent-to-buy. With a rent-to-buy contract you are letting a property but you have the choice, not the obligation, of buying the property after a couple of years if it suits you. To top it off, the rent is deductible from the sales price so it's not throwing good money away.

Many developers are now offering this in 2010 in off-plan property at very attractive prices. Naturally there are many resales that are also offering this option to serious potential buyers. These rent-to-buy contracts differ greatly one from another. Some landlords may ask you to pay a full year upfront lump sum, others may ask for a rental bank guarantee (http://belegal.com/articles/showArticle/income-lease-rental-insurance-spain). Some will allow you only 11 months, others 4 years. There's freedom to tailor the terms and conditions of said contracts to suit both parties.

I wrote an article last year on rent-to-buys as I reckon it's an excellent option withg the ongoing market turmoil in which house prices may fall another 20%. The truth is that no one knows and its all wild guessing at best. Some qualified experts are of the opinion that the market has already bottomed out, others that it will fall further (20%) and then there are those that believe property prices should fall a further 50-70% (!).

Reant-to-Buy Or How To Profit From Spain's Market Downturn (http://belegal.com/articles/showArticle/spanish-lease-to-own-in-spain) - 5th November 2009

For what is worth I'm in the camp who believes that property prices will continue falling a further 20% on the costas over the next three years or so as we may be heading for a W-shaped recovery if there's a hike of interest rates later on this year. Regarding upscale market, luxury villas and penthouses, I think we may have already hit rock bottom already as they are fairly resilient.

Yours sincerely,
Raymundo Larra*n Nesbitt

david
07-05-2010, 12:30 PM
I have recently received a letter from uk solicitors about reposesion of property in costa blanca.I have moved back to the uk and have no assets here.I do have properties in Bulgaria and offshore bank accounts though.Is there any way for them to find these?
Your help will be greatly appreciated.David

Lawbird Lawyer
07-05-2010, 01:54 PM
Dear David,

If you have no assets then there's little to worry about.

Off shore accounts are almost untraceable so it is highly unlikely they'll have access to them.

Regarding your property in Bulgaria unless they are tipped off it would be very hard to track down too in my opinion.

You are aware of course that your Experian credit-rating will be ruined?

Repossession in Spain is normally only an issue if you have assets, or may come into possession of assets in the future (i.e. inheritance, jackpot...).

Yours sincerely,
Raymundo Larra*n Nesbitt

Unregistered
07-06-2010, 11:41 AM
Thank you very much for your help.
David

neal
07-08-2010, 12:27 AM
I have a 156000 euro mortgage on a 240000 euro purchased property bought off plan! They are now for sale ranging from 100000 to 210000 and although i havent defaulted on payments am finding it hard to continue.
What approach or action would you recommend at this point?

Lawbird Lawyer
07-08-2010, 10:50 AM
Hi Neil,

€110,000 up or down makes all the difference in the world on a 240k property!

It's the difference between your lender accepting the keys back or else by being repossessed by them with all that a repo procedure entails.

It depends on whether you have assets (whether in Spain or elsewhere in the EU) or not.

If you don't, there isn't much to worry about, is there?

If you do have assets back in the UK then you should try to avoid at all costs being repossessed in Spain. If you can hand back the keys to your lender, good riddance! Your mortgage liability (personal and unlimited) will be fully discharged meaning you start off with a clean slate and not taking a major blow in Experian and similar credit-rating agencies.

Banks are run by human beings. They listen to what you have to say. It is never a good idea to ignore a financial problem with them. Try speaking to your bank and make them understand the dire financial situation you are going through. You will be surprised by how often banks try to work along with you to solve the issue. The last thing a bank wants is to repossess you, they are not interested in bricks which weighs down their profit margins following new regulation of the BoS.

Handing back the keys is a solution of last resort. There are other options which do not imply losing your Spanish property and will allow you to weather off the financial storm afflicting us all. Take a peak at my article below and follow the links I supply at the end, it might come in handy:

Advice to Struggling Mortgage Borrowers (http://www.levantelifestyle.com/index.php?mod=art_det&art_id=707) -13th April 2010 Levante Lifestyle Magazine

Yours sincerely,
Raymundo Larra*n Nesbitt

stewal
07-18-2010, 11:01 PM
Hello, It is sad but comforting to know that i am not the only one in a very unfortunate situation. I bought my Apt on the coast on costa blanca for 90.000 eur, I owe 64000, So i have lost all of my savings and any pension i thought i would acrue when i come to sell in 15yrs or so, Not to be, I have missed 2 mortgage payments, I am worried sick at the thought of what will happen, I cannot afford to carry on paying as my comm fees have risen as well. I heard somewhere that a law has just been passed by spanish government for banks to accept that we have lost alot in this process and they have to accept keys or initiate repo proceedings without chasing us in the uk for any outstanding debt, i would really appreciate any comments or help you guys may have for me. May i say this a brilliant website

Many thanks
S

mike
07-21-2010, 04:23 PM
I have a property in spain which I can no longer afford the payments on. I haven't failed to pay any mortgage payments yet and am seriously thinking of handing the keys back to the bank in when I go over to spain in August. I do have assets in in England ( 2 properties One fully owned and the other with a small outstanding mortgage owing ) what would be the best way of protecting my assets here in uk. We currently owe 365000 Euros on the propety and those around us in a similar condition are currntly selling for about 350000 - 450000, when they do sell of course. Any help would be appreciated. Thankyou.

Lawbird Lawyer
07-26-2010, 09:38 AM
Hello, It is sad but comforting to know that i am not the only one in a very unfortunate situation. I bought my Apt on the coast on costa blanca for 90.000 eur, I owe 64000, So i have lost all of my savings and any pension i thought i would acrue when i come to sell in 15yrs or so, Not to be, I have missed 2 mortgage payments, I am worried sick at the thought of what will happen, I cannot afford to carry on paying as my comm fees have risen as well. I heard somewhere that a law has just been passed by spanish government for banks to accept that we have lost alot in this process and they have to accept keys or initiate repo proceedings without chasing us in the uk for any outstanding debt, i would really appreciate any comments or help you guys may have for me. May i say this a brilliant website

Many thanks
S

Dear Sir

There is no such legal provision enacted to the best of my knowledge.

Spanish lenders can legally pursue the debt in the UK against your assets. I wrote a detailed article on the matter explaining how they can legally do this following European regulation. It will be published in Levante Lifestyle Magazine (http://www.levantelifestyle.com/index.php?mod=subcat_index&subcat_id=38) in the upcoming months of August-September 2010 as well as online.

EDIT 19th August 2010

The promised article:

Recognition and Execution of EU Member State Rulings: Council Regulation 44/2001 (http://www.levantelifestyle.com/index.php?mod=art_det&art_id=809) - 19th August 2010


Yours sincerely
Raymundo Larra*n Nesbitt

Lawbird Lawyer
07-26-2010, 10:01 AM
Hi Mike

The problem with "handing back the keys" Mike is that following new regulation from the Bank of Spain lenders are seldomly accepting this option as they would rather repossess you. This is explained in detail in my blog post:

Bank of Spain Raises Real Estate Provisions Set Aside by Lenders (http://belegal.com/wordpress/bank-of-spain-amends-real-estate-provisions-set-aside-by-lenders/) - 27th May 2010

Spanish lenders have always been reluctant of accepting a dación en pago de deuda. And now, following the above, even more so in 2010.

As I always write, I advice everyone to draw a red line on a Spanish repossession procedure because of the unlimited and personal liability a mortgage loan normally entails. This of course is only a problem for those who hold assets in the UK. If you do not hold assets there isn't much to worry about. If you do hold assets in the UK you must seek the advice of a UK solicitor to protect you and safeguard your financial interests.

The only effective way to "get rid" of this serious financial problem, other than selling on the property with the associated mortgage, is to hand over the keys to the bank by way of signing a deed before a Notary relinquishing ownership of your Spanish property and in exchange the lender will fully discharge you from the associated mortgage liability. Meaning you will be able to start off with a clean slate, your credit-rating will not take a hit in Experian and similar credit-rating agencies and obvioulsy your pool of UK assets will be safeguarded against your Spanish creditors.

I advice you to read my articles on the matter:

• Advice to Struggling Mortgage Borrowers (http://www.levantelifestyle.com/index.php?mod=art_det&art_id=707) -13th April 2010

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

• The Dación en Pago Procedure (http://belegal.com/wordpress/dacion-en-pago/) – 21st November 2008


For a dación en pago to work out, two things are required basically:

1.- The property must not be in negative equity (AKA the no-negative equity rule).
2.- Your lender must not have started a repossession procedure against the property.

Basically the outline on how this works is as follows:

1.- The borrower must be on time with payments (the repossession legal procedure must not have been initiated), with Community fees and also with local taxes. This however is not normally the case and borrowers are in arrears with pretty much everything.
2.- You contact your lenders' branch manager and propose it to them.
3.- The borrower will require it to be reappraised. You will be expected by your lender to pay this in advance. On average it's approx 350€.
4.- If on average the property has 30/40% positive equity, the lender will accept to take the possession of the apartment, cancelling your debits and will waive taking legal action both in Spain and before British courts (following EU regulation).
5.- The day of signing the deed at the Notary, the borrower will surrender the keys, and leave the property clear of furniture and tenants (a dación will not be accepted with tenants inside the property).

It is not compulsory to hire a lawyer for the dación en pago. What is compulsory is that you appoint a translator to act on your behalf on signing the deed at the Notary if your command of Spanish is low.

However, we just cannot stress enough how important it is to appoint a lawyer who will act both as a translator and also verify that indeed your debt with the lender is being effectively fully discharged on you signing the Deed. Besides your lawyer will be able to negotiate with the lender as some banks will try to make borrowers pay for some expenses. The Notary is not there to give you legal advice as they act impartially to either party. An example of what may happen if you do not hire a lawyer is depicted on this forum query:

Can we be chased by the bank after arranging a Dacion en Pago? (http://belegal.com/forums/showthread.php?t=674)

Lawbird Legal Services offers this legal service at a flat fee of 1,416€ (18% VAT already included). Depending on where your property is located within Spain, further travelling expenses may be applicable.

For an exact quote, please contact us. (http://www.lawbird.com/services/contact)

If you have queries on how this works out come back to me.

Yours sincerely
Raymundo Larra*n Nesbitt

Spanish Worrier
08-03-2010, 07:29 PM
The mortgage on my property has not been serviced and the bank have taken posession. It was put up for auction, but there were apparently no buyers. The property was worth €3m with a mortgage of €1.6m. It appears that the bank are claiming that they own the property and can now sell it and retain the proceeds, even if it sells for more than the amount owing under the charge. Does this sound right?! Thanks

Paul
08-04-2010, 09:27 AM
I have tried since Feb to tell my Spanish bank we are in trouble - my tenants left and we had a lot of repairs/debts to pay. They would not reply to emails or calls and eventually I had a call from IPP Global in May who advised me to go for a Dacion En Pago. I paid them €1500 (on credit card) initial deposit (total will be €3500) and nothing happened. I have chased them to progress the Dacion as I was trying to keep my mortgage up to date by using my credit card in UK and sending most of my wage to service my mortgage in Spain. Last week my Spanish bank told me they would repossess my Spanish and English houses as I had defaulted - I thought the Dacion had been instigated after 3 months but IPP were still not moving. I have maxed out my credit cards and I sold my car to pay last months mortgage as I am terrified of losing my house in England. I still have no idea if the Dacion will proceed, I owe community fees and on advice I paid for a re-decoration to try and get the place rented again. I am at the limit of what I can cope with, it seems that in Spain people prosper only due to others misfortune. I have done everything I could to try to get out of this and save my home in UK - now it seems I am to lose the lot - what would you advise now?

Lawbird Lawyer
08-04-2010, 09:42 AM
Dear Sir or Madam

I would need to have a look at it.

In any case if you've read the article that starts off this very thread on Bank Repossessions in Spain I explain that if no one bids in the Public auction (something common nowadays) the lender keeps the property for 50% of the appraisal value.

So a property worth 3 million euros in the market is valued for exmaple specifically for the auction at 2 million and the bank gets to keep it for 50% of said value, that is 1 million euros. It will then sell it on to some lucky buyer for whatever price is can fetch, whether 1 million or 3 million being allowed to keep it all, yes.

Lenders nowadays post repossession on adjudicating themselves the properties are piling them into purpose vehicles within the enxt 20 days which are really their own real estate agencies. They want to offload them from their balance sheeets as it weighs down their credit ratings. More on this here:

Pssst! Looking For Cheap Spanish Property? (http://belegal.com/wordpress/pssst-do-you-want-cheap-spanish-property/) - 5th October 2009

The appraisal value of a property for auction purposes is always considerably lower than its "real" market value. And as I write, if no one bids the banks keeps it at 50% of this underrated value. So you can easily end up in negative equity with a Spanish lender post repossession.

In the above example the break even point is one million euros. If your mortgage loan was above 1 million euros you still owe money to the bank despite them having sold it for 3 million euros as the value by which they adjudicated themselves the property was only 1 million euors which would be below the outstanding mortgage loan.

The other day we were in a Public Auction for a prime beach front property (villa) in Puerto Banús (Marbella) which realistically would have today a market value of 4 - 4,5 million euros. The auction started off at 1,2 million and ended at 1.7 million euros; a bargain for such a property if you have the deep pockets to make even more money. That property can be sold on the following day making a huge profit even nowadays.

Spanish Property Auctions: An Insider’s View (http://belegal.com/blog-by-antonio-flores/spanish-property-auctions/) -25th May 2010

Sincerely
Raymundo Larra*n Nesbitt

Lawbird Lawyer
08-04-2010, 10:22 AM
Hi Paul

You are the third person that contacts us to tell us that IPP Global charged them 1,500€ and nothing happened. The other cases were another dación en pago and a mortgage change in the terms and conditions (novación) that did not happen either.

Isn't IPP GLobal a Real Estate Agency to the best of my knowledge?

You would need to query them what they've done on your behalf or whom they've hired or outsourced work over to. We cannot speak for them. I suggest you contact them on your matter urgently.

What I can tell you is that the dación en pago is a fast procedure if your lender accepts it. It takes on average 1-3 months.

As we've written in detail over the last year, your property needs at least 30 - 40% positive equity for a lender to accept it nowadys. You cannot force a Spanish lender to accept a dacion en pago, it's at their own discretion as it entails huge costs for them to accept the keys from you (they have to pay all taxes and associated expenses besides the mantainance of the property).

Only because you pay someone for a dación en pago does not imply they will obtain it.

Which is why our law firm always recommends that prior to hiring (and paying) us the client obtains the green light from their lender and then we take over arranging the negotiation, drafting and signing of the deed before a Notary relinquishing ownership. Otherwise you are just throwing away good money after bad.

You can read a detailed blog post here with abundant links on the matter:

Bank of Spain Raises Real Estate Provisions Set Aside by Lenders (http://belegal.com/wordpress/bank-of-spain-amends-real-estate-provisions-set-aside-by-lenders/) -27th May 2010

The truth is that lenders are no longer accepting properties for a dación en pago purchased, on average, after 2005 because of the fall in value of real estate assets as the blog post above explains in detail.

Yours faithfully

Denis
08-05-2010, 09:11 AM
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
08-05-2010, 09:45 AM
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 Larra*n Nesbitt

Gary
08-11-2010, 03:15 PM
Around 2 years ago i stopped paying my mortgage in Spain even though i could afford it as i could see what was happening with the ecconomy. I have tried many times to discuss where we go from here in order to settle the debt with the bank but they refuse to talk. We then found the banks lawyers who are Allen & Overy in London and my lawyers have written to them also on many occassions without a reply.
What is wrong with these people? what are they waiting for some kind of divine inspiration from the madonna!!
Has at this point the bank officially repossessed the property or not? can someone tell me please?
I also noticed that there is little speak of community charges - if the borrower defaults and the banks repossess who pays the charges as i am being chased for unpaid fees and have told the community to go to the bank as the property is no longer mine.
I'm interested to hear how this one works.

Lawbird Lawyer
08-11-2010, 03:32 PM
Hi Gary

Madonnas aside, you will be held liable for the outstanding community fees as you are still the registered owner until the property is effectively repossessed by your lender and becomes the new owner.

Bold move you've taken on voluntarily defaulting on a Spanish mortgage loan.

You are aware, of course, the liability is personal and unlimited on doing so with all your assets, both now and in the future?

These procedures in Spain are taking on average between 1-3 years depending on where the property is located (how clogged law courts are).

Sincerely
Raymundo Larra*n Nesbitt

Gary
08-12-2010, 02:14 PM
Hi Raymundo,
Many thanks for your speedy reply you don't know how refreshing it is.
Yes it was a bold move by me to stop paying the mortgage but why keep paying a mortgage until you have absolutely nothing left in the bank or collateral to deal with when you know that ultimately this is where your going to end up! If theres no one to rent the property and your circumstances change in your own country why carry on paying! I really feel for the guy who sold his car and maxed out on his credit cards.....that must really hurt!
But shurely the banks and Spanish government should shoulder some of these costs for behaving the way they have i.e. Paper bag money, Black money, government officials taking back handed money, illegal planning permission being granted, banks over valueing property by absolutely ridiculous ammounts, Spanish developers promising rental incomes that were never achievable ect the list goes on.
I have had my lawyer write to the bank to ask for a value to settle immediately but in 18 months nothing, yet i'm still responsible for paying community charges ect which is wasting my cash i have put asside to settle with the bank. It appears that the banks in Spain are a law unto themselves and just about everyone in Spain is on the payroll.
This is the worst deal i have done and there will never be a day that goes by where for 10 mins i don't hate myself for being so gullable. £80k of my kids inheritance down the drain and still counting. Viva Espania..... my arse!!

Lawbird Lawyer
08-12-2010, 03:23 PM
You are welcome.

Hmmm, following your post everybody is to blame it would seem other than yourself Gary. Really?

The fact is that turning back the clock only 4 years ago every Tom, Dick and Harry were raking in 20% capital appreciation on their properties, at least on paper, year after year after year.

It took a great deal of self-discipline to avoid falling for the hype when newspapers, magazines, tv etc kept banging all day long how much house prices were rising every year and just how rich and smart your next door neighbour was becoming with exotic Cape Verde property and releasing equity from his home. Remember self-certified loans known popularly as liar-loans?

People almost thought there was something wrong with you if you did not indebt yourself up to your eyeballs in cheap credit to live "the great life" to which everyone seemed to be entitled. Banks almost threw money at your face when you walked in. Cheap credit is like crack, very addictive and should carry a warning.

4 years on we are back to reality when only those who make a certain income p.a. can afford certain lifestyles with overseas properties. Unfortunately for some, such as yourself, the consequences of your acts will come back to haunt you for the rest of your life.

If after you are repossessed there's a shortfall your lender will pursue you abroad and tag on default compoud interest rate pa. You may not hear anything from them in the next decade thinking you are safe when some day out-of-the-blue you will receive a lawyer's letter or a phone call from a debt-collecting agency reminding you of your past life.

Property moves in cycles. In Spain these take on average 15 years from peak to through. The last cycle was from 1993 till 2007. Now that everyone is, to put it mildly, complaining on the market it is the best time to buy in my opinion. It is now when people will snatch properties at knockdown prices and will be admired for their financial savvy in years to come. Modern Society has a fixation for money and those who know how to make it. And making money is all about having common sense (and guts).

Next time round when you feel tempted to step in when everyone seems to be overboard on property hype -again-, just don't.

Buy when everyone is scared and the uncertainty is tangible, you won't regret it. You may want to read our article on buying off-plan and avoiding the common pitfalls:

Buying Property In Spain Tips Part II. Off-Plan Property (http://belegal.com/articles/showArticle/buying-off-plan-property-in-spain) - 18th April 2010

Any way I don't want to sound like I'm patronising you in anyway which is easy in hindsight and terribly rude. We are all adults and are entitled to our fair share of mistakes in life. You only live once after all.

GeeGee
08-31-2010, 11:17 PM
I have a question that I would very much like to know the answer to.

All the information I've seen about having a property repossessed talks about negative equity.... What happens if that doesn't apply? What happens if the price of an auctioned property is higher than the amount still owed to the bank? Are the banks obliged to hand over the excess amount to the ex-owner or do they get to keep it as a 'tip'?

mal odonnell
09-10-2010, 03:57 AM
I see that spain is ranked with 3rd world countries in how it respects property rights. I am a solicitor and I am dumbfounded at how the spanish banks seem to behave like there is no oversight. Spain will lose respect long term with how they are handling the troubles suffered by foreign investors.

jason
10-01-2010, 06:12 PM
I am going through the same problems as the people on here-arrears,what should i do etc.I have read all the posts & also looked at other forums regarding reposession & whether spanish banks will come after me in the uk for my assets & give me a bad credit rating.The 1 thing i havn't found is proof of whether the spanish banks have actually done any of this.At the moment i feel there is alot of scaremongering.I would appreciate any comments good & bad from people who have had there spanish homes reposessed & if they have been chased in the uk or given a bad credit rating.

Charles
10-02-2010, 06:45 PM
I would appreciate any advice – or indication of where I can get advice – on buying property at a Spanish court auction (?Subasta). I have been told it is not like a normal auction, that it is somewhat closed / the outcome is known beforehand?

Virginia Cummings
10-07-2010, 02:13 PM
My parents house has been repossessed and the bank are selling it for much less than the market value and way below the 50% that they ower for the outstanding mortgage. we believe that their is a law to recover money over and above the outstanding debt, can anyone help.

Tony
10-25-2010, 12:17 AM
Can you please advise, my business partner has a Spanish mortgage and he has also remortgaged his property in Spain to pay off his UK mortgage so he no longer has a mortgage here and has not paid his mortgage in Spain for several months. My concern is that since we are both directors of a UK Company if his debt is pursued here will this affect the Company assets?

Alan carson
10-28-2010, 02:18 AM
Hi - Im looking for all and any advice. This is a short version of a very loooong story. We built a house in Spain which has basically started to fall down and we have been forced to move out and return to the UK. We are still paying the mortgage on the property of 1800 euros a month despite the fact we cannot live or even visit the property as it has been declared unsafe. We are now in the process of suing the architect, builder and technician but have found out today it will be at least TWO YEARS before we even get an initial court hearing. On the advice of our lawyer we have not told the bank about the house - he says the bank would have looked to reclaim the difference in the mortgage given and the current value of the house. But we are now in a position where we can no longer afford to keep paying the mortgage on the property and also rent a property in the UK - especially when we have no idea if or when this will eventually reach court and even if we will be successful in our claim. Can anyone advise?
Much appreciated
Alan

jack sturridge
11-02-2010, 09:02 PM
can some one advice me i have a property in malaga which i have rented for 2 years i have a mortgage but cannot keep up the payments as the rent doesnt cover the mortgage the bank is threatening reposesion can the bank reposees the house an evict the tenants before the rental contract expires thanks

John Lees
11-13-2010, 06:23 PM
I have a Spanish mortgage of €105,000 & the current value of the property is €90,000 & I am unable to find a buyer. I have lost my income from the UK & will be unable to pay the mortgage & utility bills. I have no assets in the UK but intend to register for council housing. Can I still expect a visit from the bailiffs in the UK in the future regarding the outstanding debt after repossession, I would appreciate some advice. Regards. John

debs
11-17-2010, 11:20 AM
please tell, me, if we go to our bank and want to hand back the keys to our appartment must the bank take them? my husband and i need to leave spain and move back to the uk, we have no money coming in and can not affored nor wish to maintain our property in spain. our mortgage remaining is 185k the appartments where we live are now seeling for 175k. we payed 50k deposit 4 and a half years ago and have paid in full our mortgage payments every month. we understand that the differnce between the cost of the mortgage to the value of the appartment is 10k, so if we offer to pay this 10k back as a loan from the bank and that they take our keys and give us a closure document must they do this for us, or are they with in their rights to say no?

lawbird
11-18-2010, 01:11 PM
Dear Debs,

The bank can and probably will decline the transaction you propose. Your property is in negative equity and therefore it will not be cost-efficient to them (if compared with their other alternative, a repossession).

There are costs involved and they will expect you (or the equity in your property) to cover for these.

If you are interested in doing some further reading on when it could be possible to hand back the keys to your bank, I recommend you the following article:

http://belegal.com/articles/showArticle/spanish-mortgage-dacion-en-pago-handing-keys-bank

Kind regards,

ian hopkins
11-18-2010, 11:08 PM
we are in the prosses of being reprosesed we have just recived a letter from notary as we are 4 mths in arrears. can the spanish bank embargo my wages in uk ? is going bankrup an option?

paella87
11-20-2010, 11:19 PM
I would greatly appreciate your advice. When I lost my job I informed the bank in Spain we may run into problems and asked for an interest only mortgage. Thay have refused this and after 6 months have not offered a solution apart from suggesting we take on another mortgage which would be of benefit to them but not us. I am becoming increasingly desperate and am afraid that within 2 months we will have to default on our mortgage as our money runs out. When I mentioned dacion en pago I was told that Cambank would not consider this either. What should I do now ?

help
11-23-2010, 01:49 PM
Hi,

My girlfiend has a property with her ex boyfriend in Spain, They split up over 3 years ago now and she had tried on multiple occasions to sell the house but he hasnt allowed this to happen. She has offered to pay for her name to be taken off the house but he is not forthcoming with this, it seems as he lives in Spain (she doesnt anymore) it seems that he wants to keep the house... she has asked if it os possible for the bank to take the house back but that is not an option, and also asked him if they can let the bank take th hose and pay the difference bu he wont allow it stating that it will ruin his credit rating in Spain (he still lives in Spain) neither still live in the house in question.

Recently she has found out that he has defaulted on the repayments for the house so another 40K is now owed.

Unfortunately my girlfriend doesnt earn much and I dont have a job at the moment, we literally only make enough to scrape by each month and even if I had a job we wouldnt be much better off as we are living with family and need to move out in the very near future.

We are really stuck with this. If things go to court and the bank takes the house will my girlfriend will be persued by the bank (as I see from your article) would it get to the point that she would be arrested if she ever flew into Spain again? What will they do to her?

lawbird
11-24-2010, 11:57 AM
Dear Sir,

I understand that your girlfriend is not only a co-owner but also a joint mortgagor.

In that case please note that she is equally liable for this mortgage as her ex-partner. In other words, the Bank is entitled to chase her as much as they are entitled to chase him in the event of default.

Please note that defaulting on your mortgage is not a criminal offence and therefore neither you nor her you should be fearing imprisonment. However, and as the article explains, each mortgagor is personally liable for the debt with all their assets, present and future. If they fail to meet their repayments the bank will initiate repossession proceedings. The property will be auctioned off for whatever value it can fetch and (in almost all cases) this will be less than the value of the mortgage. If the property is sold for less, the mortgagors will be liable to pay any outstanding balance with their personal assets. Therefore, they can find themselves in a situation where they lose the property but still owe thousands and thousands of euros to their bank.

If your girlfriend or her ex have any other property in Spain or the UK, it is possible for the Bank to place an embargo over those assets in an attempt to recover the outstanding balance. The Bank can legally go after vehicles, bank accounts, properties and even embargos over their salaries.

In summary, there will be no criminal consequences, but the effects of default could be quite devastating for a person's life and therefore she (and her ex) should try to avoid this situation with any means available to them. In our articles we are always suggesting any alternatives we can think of, so please feel free to check the forum.

We hope this situation is resolved as soon as possible.

Kind regards,

paella87
11-24-2010, 09:03 PM
I would greatly appreciate your advice. When I lost my job I informed the bank in Spain we may run into problems and asked for an interest only mortgage. Thay have refused this and after 6 months have not offered a solution apart from suggesting we take on another mortgage which would be of benefit to them but not us. I am becoming increasingly desperate and am afraid that within 2 months we will have to default on our mortgage as our money runs out. When I mentioned dacion en pago I was told that Cambank would not consider this either. What should I do now ?

cat.
11-25-2010, 12:42 PM
hi we moved into a lovely 4 bed villa 4 months ago and have an 11 month contract.
we rented it off a guy we had know for a long time and he collects the rent every month..
nabours have told us that the person who owns the house left 3 yrs ago and not come back..
i went down the bank to ask about this property they came back n said it was with mercia and was repossed but still waiting to go to court.. should i tell the bank we live in the house? i would like to buy the house.. the bank have asked me to go and get more infomation. my partner told me to leave it till someone comes round.
but im worried now that we paying only 400 eruos a month for this house
this guy collects when we ask this guy he just says we are ok..
im wondering if we are squatting in the banks house and worried. would they kick us out? i have kids?
we are not on the padron yet as kids at school and dont wish to changeschools till next sept

help.
11-25-2010, 06:32 PM
Thanks for the reply, really appreciate it.

What would the implications of her declaring herself bankrupt be?, I know this is a very serious option to consider but we literally have no means of paying off this debit.
We are not the kind of couple that can even contemplate taking out a mortgage on a property even in the future, we are waiting on council housing at the moment. we live paycheck to paycheck and there isnt much hope of this changing in the future. I really need to resolve this issue by any means neccessary as it will ruin our lives and will even mean that we may not be able to afford to even have children.

keevla
12-05-2010, 02:30 PM
Raymundo may i ask ..my hubby & i own an apartment outright in Torrevieja but unfortunately he joined 3 friends in buying a golf apartment a couple of years ago. they have their 4 names on mortgage. now no one can pay it, its in arrears . each person owes 70,000 each on original cost of the property (280,000). if bank repossess it'll be lucky they get half leaving each person 35k in debt..can the spainish bank seize our personally owned apartment to cover all the debt or are we liable just for the quarter share.. thank you ever so much for advice.

mel clarke
12-06-2010, 06:20 PM
Hi. Im in the same situation as many here, massive mortgage and negative equity. Struggling in the UK financially and struggling to pay Spanish mortgage. Been in talks with bank since April and wont let us go back to interest only. It seems I was told the debt would stay in Spain from Barclays UK, but from your comments and press articles it seems they are trying to come after us here.
However, right at the start when we completed, the bank issued credit cards in my name and my partners and put 11000 euros on them to cover completion costs...we were duped by the solicitor and sales agent in terms of what the costs would be and never agreed to 11000 going on credit cards, but had given power of attorney to lawyer.
I have had Spanish lawyer look at deeds and he says there is 50,000 euros not accounted for and perhaps 'black money'. Trouble is he doesnt seem to want to know and we cant get an answer by phone or email.
I know we have been done over, and really need someone who can help us and obviously understand all the paperwork. Is this something you can help us with?

lawbird
12-07-2010, 07:31 PM
Dear Keevla,

The documentation needs to be reviewed but it is likely that you are all joint mortgagors. This would mean that you are all separetly liable for the full amount. The bank can therefore go after one of you for the full amount of the mortgage (or the outstanding balance should the property had been auctioned off already) and then all that you will have is a personal claim against your co-mortgagor(s).

Kind regards,

lawbird
12-07-2010, 07:37 PM
Dear Mel Clarke,

Yes, we can certainly review the documentation and assist you on your matter. If you provide me with your contact details, I can then provide you with a quote for our service. You can fill your personal contact details at the following link:

http://www.lawbird.com/services/contact

Kind regards,

Jan B
12-18-2010, 05:39 PM
Thank you for a very helpful, useful and interesting site. We are having serious problems paying our mortgage and have learnt a lot from reading the above comments. It would appear that our first step should be to contact our bank.

lawbird
12-22-2010, 11:56 AM
Hi Jan,

Thats correct.

Please find below two articles with tips on what you are about to do:

http://belegal.com/blog-by-antonio-flores/10-tips-to-increase-your-chances-of-success-in-handing-back-the-keys-to-your-bank/

http://belegal.com/blog-by-antonio-flores/how-can-lawyers-help-you-with-your-mortgage-loan/

If you are interested in instructing a Lawyer to assist in the negotiations, please fill in the following form with your contact details and some background informaiton and we will contact you:

http://www.lawbird.com/services/contact

Kind regards and merry christmas,

graham
01-05-2011, 04:07 PM
Hi"
I have been asking the bank now for some month,s to take back the keys to my apartment.
My partner dyed last year with cancer and left no will, the mortgage was in both names ,i now canot afford to keep the mortgage paid anymore i have for the last year but now all the funds have run out,
the bank seam reluctent to answear me as they seam to want me to inhearet my partners half and pay tax on it !
surly this is not wright as we where not married,
the bank put me in touch with an est agent they use and he could get the place sold for the outstanding mortgage but it all stopped when they said it needs to be singened over to some one befor they could continue,
surley if there is no will and testement left the property go,s back to the bank automatically!
i have now fallen into my first month of arrears for the apartment and am asking them to take the keys back NOW"
but they do not respond even to this,

lawbird
01-14-2011, 03:30 PM
Dear Graham,

In order for an estate agent to sell the property, the Seller needs to sign the transfer deeds. If one of the registered owners passed away, the only viable way to transfer the property is by accepting the inheritance first and then signing.

It is likely that the mortgage you took from your bank is a joint mortgage. This means that you are both jointly and independently liable for the full amount. The bank's legal position became a little more complicated since one of the mortgagors passed away, however, if you fail to negotiate with them and default in payment, they will eventually get the repossession proceedings started. Furthermore, with the fall in property prices, they will take the property back but valuing at current market price. You will therefore be liable to pay for the amount outstanding in the mortgage even after your property has been repossessed. Negotiating with your bank is therefore key here as if they repossess it may be too late to open communications again.

For all the above reasons, please note that it is not that "the property goes back to the bank automatically". Its not like that at all. You need to take proactive steps to negotiate a new agreement with your bank and sort the inheritance out before the IHT applicable raises considerably with charges, penalties and surcharges for delay.

If you would like to discuss this further, please do not hesitate to write us an email at info @ lawbird.com.

Kind regards,

Jan B
01-20-2011, 11:05 AM
Hi Raymundo, thank you for your kind response. I wrote to my bank requesting they consider a dacio en pago. Within a couple of weeks they have confirmed that they will take my property back and cancel my mortgage. My balance is around 77.000 euros and property value around this value as well.
They have advised that they want to move quickly, carry out a valuation, and have already prepared the paperwork for the notary. I've told them that my mother is going to Spain on 10th February and that she will act as my power of attorney.
I'm very pleased, but also surprised how fast everything is moving. I wanted your opinion - does this look correct to you ?
Best wishes, Jan.

Jan B
01-20-2011, 11:27 AM
I forgot to ask Raymundo, are there normally any additional charges that you are aware of to carry out the dacio en pago ? Thank you again for your help.

lawbird
01-20-2011, 06:48 PM
Hi Jan,

The forum is operated by different employees at Lawbird.

I would strongly advise you that you instruct a Lawyer to review the paperwork you will be signing. Without reviewing the documentation it is impossible to say whether the deal they are offering you is "normal" or good.

By way of example, we had a client who believed he was signing the return of his property to the Bank but did not realize that in the documentation the property was being valued at significantly less than the amount outstanding in the mortgage. He was then chased by the bank on the outstanding balance even when he had already returned the property back to them.

For all the above I suggest you instruct a Lawyer who will ensure that you are successfully released and who explains to you the consequences of what you are signing.

In terms of costs, there will be charges accruing from the transaction (eg. Notary fees) but exactly how much will depend on the value of the mortgage, the way in which the transaction is being structured and what has been agreed during the negotiations (ie. who will be paying for what).

If you would like to obtain a quote from a solicitor, please do not hesitate to contact us at info @ lawbird.com.

Kind regards,

Marcelo

Jan B
01-24-2011, 10:49 PM
Hi Marcelo, thank you for your response. I'll email you further. Kind regards, Jan.

colin
02-02-2011, 05:25 PM
I rented an apartment from a developer who was responsible for finding tennants as they offered the owner a rental guarantee when he bought, however the developer did not pass on my rents to the owner of the property and then the developer went bust. The owners lawyer would not agree to me renting direct from the owner as the owner is in arrears with his mortgage and the property will be repossessed. i have been to see the bank who are keen for me to buy the property on a rent to buy deal however they will not accept any rental payments. The owners lawyer has contacted me saying i must start to pay the owner but i am aware that the property is going to be repossessed and also i have no legal agreement with the owner, please advise.