Home Repossessions in Spain: A Legal Perspective

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 daciÃ³n en pago is to waive the repossession procedure on you defaulting.

A "daciÃ³n 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 daciÃ³n en pago procedure.

Regards,
Raymundo LarraÃ*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. 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 daciÃ³n en pago procedure (handing over the keys to the lender).

The legal steps to complete a DaciÃ³n 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 daciÃ³n en pago procedure because you are already in negative equity.

A daciÃ³n 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.