Home Repossessions in Spain: A Legal Perspective

[david]

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]

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 LarraÃ*n Nesbitt

[Unregistered]

Thank you very much for your help.
David

[neal]

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]

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 -13th April 2010 Levante Lifestyle Magazine

Yours sincerely,
Raymundo LarraÃ*n Nesbitt

[stewal]

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]

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]

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 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 - 19th August 2010


Yours sincerely
Raymundo LarraÃ*n Nesbitt

[Lawbird Lawyer]

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 - 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 -13th April 2010

• The Dación en Pago Explained – 28th March 2009

• The Dación en Pago Procedure – 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?

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.

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

Yours sincerely
Raymundo LarraÃ*n Nesbitt

[Spanish Worrier]

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