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Spanish Law Tribune

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Archive for December, 2008

Steep Drop in Euribor Translates into Cheaper Mortgages

December 31st, 2008

(http://None)The (12 month) Euribor (http://www NULL.euribor-rates NULL.asp) fell today to 3.085%, and will set the average for December at 3.4%.

The Euribor (ER) is the rate of interest at which banks lend to each other. It is the reference which most Spanish Lenders take to set the mortgages’ rate of interest. This rate is reviewable by your bank, depending on your Mortgage Deed, every six months or once a year. The European Central Bank (ECB), which sets European Monetary Policy for all EU members with the exception of the UK, has no direct control over the ER.

Post credit-crunch fear, shortage of liquidity in the markets, widespread bankruptcies and plummeting stock prices unseen since 1929’s infamous Wall Street’s Stock Market Crash has gripped banks with fear in the last quarter of 2008. This fear to lend to each other due to the mutual mistrust on one another’s writedowns has fuelled the ER hiking it to levels which were unprecedented historically.

In line with the US, the European Central Bank has lowered consecutively the interest rate which indirectly affects the ER. The Euribor rate reached an all time high on October 2008 peaking at 5.393%. To this you must add the spread on paying a mortgage which typically for a non-resident will be 1% on top of the Euribor rate. This caused a surge of mortgage defaults (http://www NULL.marbella-lawyers in 2008.

The reason being is that the ECB is lagging behind the United States Monetary Policy which has now set its interest rate at almost zero (0.25% to be exact) to hopefully fuel the ailing American economy. So the ECB has quite some catching up to do next year as its interest rate is currently held at 2.50%. Currently the Euribor rate for 12 months is set at 3.085%

In any case the continued policy of the European Central Bank to lower the interest rates over the last months will help to drive down the Euribor rate which is always news most welcomed by everyone, specially borrowers. Spanish banks will revise and adjust the Euribor rate which in turn will lower your monthly mortgage repayments. This normally happens in July.

For example, a typical mortgage of €300,000 revisable next July 2009 could drop by as much as €550 a month if the Euribor rate continues its downward trend and hits the 2% forecasted by financial experts by mid 2009.

So for all those that are struggling to pay their mortgage loan and are considering defaulting you should be aware of this significant drop in 2009. We suggest you find out at your bank when the Euribor rate will be adjusted for your own particular case and how much money you stand to save.

Property , , , , , ,

Aifos’ Creditor Petition for Administration Procedure Turned Down

December 12th, 2008

El Economista reports today (http://www NULL.eleconomista NULL.html) that Gestión de Obras y Reformas S.L., the creditor which initiated before Malaga’s Mercantile judge a petition for a forced administration procedure on developer Aifos has been turned down by the judge.

As we were trying to explain during the past days (forum thread (http://www NULL.marbella-lawyers NULL.php?t=96), blog post (http://www NULL.marbella-lawyers and newsletter) this forced administration procedure did not mean that Aifos had filed for bankruptcy as it was mistakenly being reported at large.

The judge’s ruling on the creditor’s petition puts an end to this forced administration procedure.

What consequence does the above have? None. As stated, Aifos will continue trading as normal building and selling properties. The announcement of the forced administration procedure did not mean that Aifos had stopped trading and that it will now resume it. Aifos at no time had stopped trading all along this process.

Those who were buying properties will continue to do so and those who were litigating will also continue as well. Nothing has changed. This of course doesn’t rule out the possibility that some other creditor may in the future choose to follow the same path…

Litigation , , , , , , ,

The Legal Case Against Fortuna Land

December 8th, 2008

Spanish Police have uncovered (http://www NULL.elpais what appears to be the latest Costa del Sol scam, this time connected to the old land banking investment practice. And I say that it (only) appears to be a scam because Fortuna Land and their associate companies could well have the opportunity to defend themselves successfully if, on the basis of the contracts signed, no promise or guarantee of a certain or fixed return was made.

And if the above is confirmed any skilled lawyer could turn, on behalf of the perpetrators, a scam into a civil dispute, well away from criminal courts. In my opinion this whole fiasco could be construed as a scam and therefore prosecuted via Criminal Courts if the following requisites can be proved, beyond reasonable doubt, by the Prosecutor and victims:

  1. That the developer promised the reclassification of the land from rural to a classification necessary for the commercial purpose it was destined for.
  2. That the developer new that the reclassification was either very difficult to achieve or simply impossible, and he did not even attempt to change it.
  3. That the developer provided false or manipulated valuations (this action per se is enough to prosecute for fraud).

My gut feeling tells me that this is all fraudulent (their website is worrying) but as a lawyer I would loathe to be predisposed to a certain opinion just by reading the press and internet comments (http://www NULL.fool NULL.aspx) and not looking carefully at the documents signed by the parties, the advertising used for selling and the sales “pitch” used by their telemarketers, which is key to decide on launching criminal or civil proceedings.

What I can guarantee, with 100% certainty (and my professional reputation goes with it!) is that cold callers offering a debt recovery service (http://www NULL.marbella-lawyers NULL.php?t=77) are real conmen trying to seize this opportunity to extract an extra amount of cash from the already vulnerable investors. Whether they are of African origin (Nigerian 419 scam) or former timeshare scammers, putting the phone down after a brief conversation indicating you are not interest should suffice.

I have so far only seen a copy of the deeds of sale of shares of the company owning the land signed at the Notary in Fuengirola, which is insufficient to decide on what actions to take, so any input (documents, advertising material, copy of valuations etc) is welcome to file a case against the developer, in the person of the directors/administrators of the company(ies) involved.

Litigation , , , , , , , , , ,