Home Repossessions in Spain: A Legal Perspective

[Lawbird Lawyer]

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)
Unregistered

chased to complete
abo07

What remedies does a developer have to enforce completion
Unregistered

Can we be chased by the bank after arranging a Dacion en Pago?
Unregistered

Will i lose my uk home
Unregistered

Property was bargained away and we are being chased for the shortfall. Please help!
Wendy

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

Yours faithfully,
Raymundo LarraÃ*n Nesbitt

[Mrs Hoos]

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]

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 - 28th of March 2009

Please contact us if you want to hire us for this legal service.

Yours faithfully,
Raymundo LarraÃ*n Nesbitt

[Delboy]

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]

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.

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 LarraÃ*n Nesbitt

[el tel]

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]

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]

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]

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]

Dear Jacqui,

You can no longer hand back the keys to your bank (known in Spanish as "dación en pago de deuda") 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 - 25th June 2008

What are my options if I have fallen in arrears on my Spanish mortgage?
Property Law - 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 - 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 LarraÃ*n Nesbitt