Off plan properties. The banks can held responsible for the moneys invested.

We have very often found the case of clients that, some time ago, have invested into an off plan property that was never built or delivered in time. 

It is not strange to find out that the developer went bankrupt sometime ago, leaving an empty plot, or in the best case, an unfinished property. When the financial crisis struck in 2008, many developers collapsed, leaving housing projects unfinished. Most new developments were sold off-plan.

 Property-buyers who had put down cash deposits were at the end of the list of creditors, and thousands lost their money.

Until recently, whenever we found this situation, we have been continuously advising that there was not a clear & effective legal solution to recover these moneys. 

This fortunately, has changed dramatically for the better. 

After a a Supreme Court ruling in Spain last year, for the last 14 month, The Spanish Courts have been continuously confirming that the bank where the moneys were deposited were legally bound to guarantee those funds to the purchasers. In case that the development did not get completed in time, or that the developer went bankrupt or alike.

Just as an example, Banco Popular, BBVA, Banco Mare Nostrum and Valencian Building Society S.G.R. have been ordered to pay over 2 million Euros plus interest, to 40 British investors.

The Courts are making clear that Off-plan property buyers in Spain have an “inalienable right” to have their off-plan deposit underwritten, rights that cannot be waived by banks who, having issued a collective insurance cover failed however to grant individual policies to buyers. This also includes “touristic apartments” as they are to be used by the owners as holiday homes, irrespective of their use as an investment for the most part of the year.

Banks have been ordered to pay the Courts the designated amounts, or face enforcement proceedings.

These decisions of the Courts have set a precedent that is fully applyable to similar cases with a very solid possibility of success.

We are consequently suggesting our clients to take another look at the matter, with views to obtain a compensation in Court for their investment. 

So, if you are in such a situation, please do not hesitate to contact us. We will be studying your case without compromise. Please note that there may be statuory limitations and deadlines applying to your case. So, do not leave it too long. 

Fortunately, sometimes, the Law changes for the better.

Have your Bank been charging you more than they should for your mortgage?. Time to revenge its coming ...

From 2013 the spanish courts have been repeteadly considering null and void the mortgage floor clauses. You can see our note on our blog in 2013. This clauses were designed to protect banks from negative interest rates.

http://javierherrerallamas.blogspot.com.es/2013/10/mortgage-floor-interest-abolished-take.html

Last week a Spanish court ruled that the country's banks leaders can no longer sell mortgages with so-called floor clauses. All main banks are involved, including Caixabank, Barclays, Bankia, and Banco Santander. Caixabank and Bankia.

The court said banks had to repay customers what they had lost since May 2013, when Spain's Supreme Court declared these mortgages, whose rates cannot fall below a benchmark, were invalid if they had not been presented clearly. This means the ruling is only retrospective to May 2013.

This ruling by a local court in Madrid followed class action suits by customers alleging that banks had not properly explained the clauses to them, which prevented them from benefiting from the euro zone's record low interest rates.

Most of the estimated 4m mortgages affected were sold during the 1997-2007 property boom when buyers were paying top prices for their homes. When the bubble burst they were unable to benefit from falling interest rates.

It is estimated that those affected pay from €179 (Euribor +0.5%) to €213 (Euribor +1%) more on a €150,000 mortgage than they would if they didn’t have a fixed minimum rate mortgage.

As the recession set in and people were unable to meet their mortgage repayments, they were evicted in growing numbers, peaking at an average of 500 a day in 2012. Under Spanish law homeowners cannot claim bankruptcy over a mortgage as it is regarded as personal debt.

So even after the banks foreclose and repossess a property the former owner still has to pay off the mortgage, as well as associated legal charges.

Some Spanish banks  have already removed the mortgage floor . Since the third quarter of 2015, Caixabank has eliminated most of its mortgage floor clauses. Banco Sabadell, the fifth-largest in Spain which has so far refused to get rid of the clauses, said they would analyse the ruling and take a decision later.

Banks including Barclays and Santander face a €5bn (£4bn) bill after a Spanish court ruled that millions of fixed minimum rate mortgages were null and void because of the “lack of transparency” in the way they were sold during the property boom.

Last October the European Commission asked Spanish banks to remove the clauses and even repay customers over the whole life of the loan, beyond the May 2013 limit. The European court in Strasbourg is expected to rule on 26 April whether the banks’ liability should extend beyond that date. The European commission has already said it believes the payments should be backdated to the date the mortgage was signed, on the grounds that if a clause is declared null, it’s null from the beginning.

So, it is clearly time to press your bank to get some of your money back. 

Javier Herrera Llamas

Mortgage floor interest abolished?. Take a look at your interest...

Do you have a mortgage loan? Do you monitor when your interest rate is reset? You certainly should...
As you know, a mortgage loan is made up of capital and interest that is repaid to the bank in monthly installments. Depending on the type of loan you take out, the interest rate may vary, increasing or decreasing as the case may be but the “floor clause” determines a minimum interest rate that would apply throughout the life of the mortgage. 

The floor clause was introduced by banks to compensate any economic loss they may suffer because of variable interest rates and many applied a floor clause of about 3,55% (or higher) so when Euribor reached historical lows, many did not benefit from it because the floor rate determined in their contract was higher.

On the 9th of May, 2013, the Spanish Supreme Court issued its first ruling annulling mortgage floor clauses. To sum the ruling up, it declared floor clauses in numerous mortgages null (though not all), consideringthis clause was agreed with a lack of clarity and transparency (there was a lack of information, it was included along with a ceiling clause, or was buried in an overwhelming amount of data, etc.).

The Supreme Court has outlined the following causes of complaint by the consumer as valid:

1. A lack of information regarding the nature of the floor clause or it is presented in a way that makes it seem irrelevant so the applicant doesn’t fully comprehend the impact it will really have in the long run. 
2. The bank does not provide simulations to show or explain how the interest rate may affect them further down the line.
3. The bank does not provide clear and concise cost comparisons about other mortgage alternatives that do not involve the floor clause. 
4. The floor clause in the mortgage contract is lumped in with a lot of other information so its importance is not apparent and the client’s attention is not immediately drawn to it

This means that every individual case must be looked at carefully, in order to rule out those that are illegal because they don’t meet the criteria, and keep those that were or are contracted with the full knowledge of the consumer. Also, shall be of interest that your solicitor checks up if your bank is one of those who has been awarded sentences against on this matter, and what is their current attitude. 

What can you do if the floor clause appears in your mortgage loan? 

1. Approach the bank in question and ask to speak to the manager.
2. If this initial meeting is not successful, you can write a claim to the bank’s complaints investigator who must respond within 2 months in a legal manner that must outline a valid line of argument. It is usually advisable this claim is formalised under supervision after checking with your solicitor the main content of it.
3. If the response is negative still, you should lodge a Claim before the Banking Ombudsman of the Bank of Spain, charged with resolving this type of dispute. Their response must be issued within 4 months and the final report may be used in court if it determines the floor clause to be abusive.

Before you rush madly to your local branch screaming and shouting, an important point to remember here is that not all cases are classed as abusive, especially if the floor clause was disclosed beforehand and even if a judge rules the clause to be abusive, it does not necessarily mean that compensation will be granted for losses sustained when the official interest rate fell below the floor rate established in contract.

Can I obtain my money bank?

Our High Court stated clearly that this court order was non retroactive, and would not affect previous payments already made. Thus, the TS declared that Banks could not be forced to the return of the interest overpaid, understanding that a general declaration forcing all the banks to pay back interests already overcharged, could have meant a serious problem to the economy of the country as a whole.


But, non following this criteria, several new court orders from other courts have been published, such as from the Provincial Court of Cuenca, where the Castilla La Mancha Bank was forced to remove the mortgage floor rates from the agreement and return the interests overcharged. Similar rulings can be found in court orders in Málaga, Ourense, Alicante, etc. Most of these Court Orders understand that these individual returns claimed for, by themselves and one by one, do not imply by their amounts any risk for the national economy and the banks must pay back the overcharged interests.

So, before you rush madly to your local branch screaming and shouting, an important point to remember here is that not all cases are classed as abusive, especially if the floor clause was disclosed beforehand. Even if a judge rules the clause to be abusive, it does not necessarily mean that compensation will be granted for losses sustained when the official interest rate fell below the floor rate established in contract. 

Javier Herrera Llamas