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How to claim a refund of overpaid interest due to floor clauses in Spanish Mortgages

Can I claim if my mortgage has already been paid off?

Yes, you can. Deadline for the claim is 15 years.

Can I claim if I have already received a refund of overpaid interest from the date of the Spanish Supreme Court Sentence in May 2013?

This matter will depend on a new Court ruling by the Supreme Court which is expected to be issued in the next couple of months.

My bank has informed me that my mortgage has a floor clause.  Does that mean the Bank is also refunding voluntarily?

No. The Royal Decree makes it obligatory for Banks to “ensure that this system is known by all consumers with floor clauses in their contracts”. However, it also clarifies that Banks will only do the calculation of the amount to be returned to those customers who they consider need to be repaid.  Banks will inform other customers why they consider they should not be refunded.  Banks may refuse to refund the amounts if the bank believes that the customer was a financial professional who was fully aware of the clause and/or that the bank fully and transparently informed the customer at the time of taking out the mortgage about the inclusion of the clause in the mortgage and its effects.

When is a Floor Clause transparent?

a) The consumer must have been expressly informed that when the variable interest rate linked to the Euribor goes lower than a determined point, the interest rate effectively becomes fixed at a higher rate.

b) The consumer must have been informed that with a Floor Clause he will not benefit from the drop in the EURIBOR below a certain point.

c) The consumer must have been informed in a clear and transparent way regarding the inclusion of the clause.

d) The consumer must have received information on other products without a floor clause as a comparison before accepting the mortgage.

If the bank is not going to give me back the money, should it still provide me with the calculation of how much extra I have been charged due to the clause?

No. They will only provide the calculation if they consider that the inclusion of the clause in the mortgage was not transparent.

Will all customers receive their refunds in cash/credited to their bank account?

The first offer must be in cash/credited to the customers bank account, however the customer and the bank may agree on different compensatory measures, such as a reduction in the amount outstanding on the mortgage.  In this case, the acceptance by the client will be in writing, having been duly informed of the economic value of the alternative measure.

What are the consequences of initiating the claim with the bank?

According to the decree, “the consumer may decide to go to court directly but once the extrajudicial proceeding has been initiated and until it has been resolved, the parties may not exercise any alternative judicial or extrajudicial action in relation to the same claim”.

Is the procedure with the bank free?

The extrajudicial claim procedure is free. There is also a substantial reduction of notary and registry fees resulting from amending the mortgage contract that may result from the acceptance by the client of alternative measures other than cash repayment.

What if I have sued the bank and now I want to negotiate with them?

Those judicial proceedings that are already in progress can be, by mutual agreement, suspended to submit the claim to the extrajudicial procedure.

Can I go to court after negotiating with the bank?

Yes, although you must wait until the out of court/negotiation process is completed.  In regards to court costs, mechanisms are established in the Royal Decree that encourage the entity to resolve properly and in good faith.

If the consumer claims against the bank in court after failing to reach an agreement in the out of court/negotiation stage and the judgment that he obtains is economically more favourable to him, the bank will be ordered to pay legal costs.

On the other hand, if the consumer goes to court directly without using the out of court/negotiation procedure and the bank fully settles prior to the process of answering the claim, the entity will not be ordered to pay costs.

Can I pay costs if I go to trial?

Yes, if a customer claims in court and the judge grants an amount lower than what was offered by the bank, the judge may see bad faith in the need for going to court and the Judge may not impose costs on the bank.  Therefore, you will pay your own legal costs.

Will taxes be paid after receiving the money claimed?

It is not clear at all.  For the time being, the Government has said that in order to adapt the tax treatment of the amounts received, “The IRPF Law will be reformed so that, in case of refund of amounts wrongly collected by floor clauses, either by agreement or by judicial or arbitration decision, fiscal neutrality is ensured to the buyer”

1. What is a Floor Clause? (Cláusula Suelo)

Many property buyers in Spain were sold mortgages by Spanish Banks at a variable rate linked to the Euribor (the Eurozone base rate). However, a large number of those mortgages also included a ‘floor’ (Cláusula Suelo) which was normally set anywhere between 2.5% & 4.5%. Most consumers were unaware that the Floor Clause was included in the small print of their mortgage.  Even as the Euribor fell during 2009 to 2016 to a record low in the wake of policy easing from the European Central Bank, mortgage holders continued paying additional interest due to the effect of the Floor Clause in their mortgage.

2. Is the Floor Clause illegal?

The Floor Clause was ruled illegal due to lack of transparency by the Spanish Supreme Court in May 2013.  The Court said that the Floor Clause was unfair because consumers had not been properly informed of the consequences of such a clause.  Banks were ordered to refund the overpaid interest, but only from the date of the Supreme Court Sentence in May 2013 and not from the time the Euribor began to fall rapidly during 2009.

3. How do I know if I have a Floor Clause in my mortgage?

If your monthly mortgage payments have remained at the same amount over the past few years then it is likely that you have a Floor Clause applied to your mortgage.  We can check this for you.

4. What has the European Court of Justice said in its Judgment of 21 December 2016 on Mortgage Interest Floor Clauses?

The European Court of Justice (ECJ) has ruled that if a Spanish Court declares the Floor Clause as abusive and therefore null and void, the consequences of this are that the Bank must refund ALL the overpaid interest from the start of the mortgage and not only since the Spanish Supreme Court ruling in May 2013.

In its decision the ECJ stated that “The finding of unfairness must have the effect of restoring the consumer to the situation that the consumer would have been in if that clause had not existed.  Consequently, the finding that ‘floor clauses’ are unfair must allow the restitution of advantages wrongly obtained by the Bank to the consumer’s detriment.”  With regards to the Supreme Court ruling that the refund of interest only applies from May 2013 onwards the ECJ stated “Such a limitation makes consumer protection incomplete and insufficient and is not an adequate and effective means for preventing the use of unfair terms.”

5. Does the Floor Clause still need to be declared null and void by a Court?

Yes, or it must be acknowledged as such by the Bank.  All the main Spanish Banks removed their Floor Clauses after the Supreme Court decision in May 2013.  Only two large banks maintained them: Sabadell and Liberbank, although several savings and rural banks also keep them.

6. Can the Bank still refuse to remove the Floor Clause and refuse to refund the overpaid interest?

Yes, it can.  The Bank may try to “persuade” you to sign an agreement by which you agree that the Floor Clause is removed in return for waiving your right to receive a refund of the overpaid interest.  We would strongly advise against entering into such an agreement with your Bank.

In our opinion, these agreements even if already signed are also null and void and a new claim for a refund of the overpaid interest is possible.

7. Does this affect mortgage customers of all Banks?

It affects mortgage customers of all Banks except BBVA, Abanca (Novagalicia) and Cajamar, whose cases have already been decided by the Supreme Court.  This is due to the application of the legal situation of “res judicata” (matters which have already been decided by Courts and cannot be judged again).  However, some Courts have ruled recently that “res judicata” does not apply in these cases.

8. What difference will the removal of the Floor Clause make and how much am I likely to receive as a refund of overpaid interest?

We would need to review your mortgage documents to give you exact figures.

However as an example:

If you took out a 130,000 Euro mortgage in 2006 over 30 years at an interest rate of Euribor + 1% and had a Floor Clause of 4.25%, your monthly mortgage payments with the Floor Clause would be around 675 Euro.  If the Floor Clause was removed then currently you would pay around 475 Euro per month, a saving of around 200 Euro per month.  The overpaid interest on the above example would amount currently to around 15,000 Euro.

We can give you an accurate appraisal of your particular case after reviewing your mortgage documents.

9. Will the Spanish government implement a general procedure for the removal of the Floor Clause and refund of overpaid interest without consumers having to file Lawsuits in the Courts against their Bank?

We are waiting for an announcement from the Spanish Government.  However, it is looking likely that this issue may have to be dealt with on a case by case basis.

Therefore, if you have not seen any reductions in your monthly mortgage payments over the past 7 or 8 years then it is likely that you have a Floor Clause applied to your mortgage.

Contact us now and we will review your mortgage, negotiate with your bank for the removal of the Floor Clause together with a refund of all overpaid interest and, if necessary file a Lawsuit against the Bank.

Islantilla (Huelva, Costa de la Luz, South western Spain)

IF YOU HAVE A MORTGAGE IN SPAIN YOU COULD CLAIM A REFUND FOR SOME OF THE FEES YOU PAID WHEN TAKING OUT THE MORTGAGE

In December 2015, the Spanish Supreme Court ruled that mortgage clauses introduced by Banco Popular and BBVA that forced borrowers to pay all fees related to taking out the mortgage were abusive.

The Court ruled that the banks should pay for all or at least part of these mortgage opening expenses, because making a formal record of the mortgage deed is for the benefit of the bank.

Since then various First Instance and Provincial Appeal Courts have issued Sentences in favour of mortgage borrowers.

The Supreme Court Sentence 705/2015 dated 23 December 2015 declared abusive the following clause in which BBVA imposed on the borrower the payment of all expenses, taxes and commissions associated with the mortgage loan:

“Borrower must pay all taxes, commissions and expenses incurred in the preparation, formalization, correction, writing, modification – including division, segregation or any change that implies alteration of the guarantee – and execution of this contract, and for the payments and reimbursements derived there from, as well as for the constitution, maintenance and cancellation of its guarantee, being also in its charge the premiums and other expenses corresponding to the insurance of damages, that the borrowing party is obliged to have in force”

Nullity declared by the Supreme Court is based on the lack of detail in the loan agreement, with regards to expenses, commissions and taxes, being imposed in a generic manner.

If you paid all the fees related to taking out your Spanish Mortgage then you maybe entitled to a refund of some of those fees.

Who is eligible to claim?

If you are currently paying a mortgage in Spain or if you paid it off up to four years ago, you may be entitled to claim a refund of fees based on the Supreme Court ruling of 23 December 2015.

If you have already paid off your mortgage then you may claim a refund if you fully paid off the mortgage up to four years prior to the Supreme Court Sentence, so on or after 23 December 2011.

The Supreme Court Sentence applies to mortgages on primary or secondary homes of individual consumers.  It does not apply to companies or corporate borrowers.

How to claim?

1. Initially a complaint must be made to the Customer Service Department of the Bank or Entity with whom the mortgage loan was contracted.  If the Bank with whom you took out the mortgage has now been taken over by another bank then it is that new bank to whom you must make the complaint.  We can send you a template for this initial letter.

2. After two months from the complaint, if the Bank Customer Service Department has not replied or if its answer has been negative, it will be necessary to file a Lawsuit against the Bank.

If legal action is required, what will be claimed in the Lawsuit?

The Lawsuit will request the declaration of the clause as null and void due to being abusive and the refund of expenses paid as a result of that agreement, which must be perfectly documented with their corresponding invoices.  To file a Lawsuit it is necessary to instruct a Lawyer who in turn will instruct a Barrister & Procurator on your behalf.

What expenses, taxes and commissions can be claimed?

* Notary costs

* Mortgage Land Registry costs

* Registration costs (Gestoría) expenses (the company that ensures the property and the mortgage are correctly registered in the land registry – but only if the gestoría was imposed by the bank)

* Property Valuation costs

* Attached abusive insurance costs (Life insurance, Mortgage repayment Insurance)

* Commissions on lack of payments

* Mortgage cancellation costs and commissions

* Any judicial or extrajudicial cost which has been charged automatically on the consumer, not following the perceptive rules of the Civil Procedure Act.

Mortgage set up fees normally represent between 2.5% and 3% of the mortgage value.

Is it possible to claim a refund of Stamp Duty?

Some Judges are ordering a refund of notary, mortgage land registry and gestoría fees, but not the Stamp Duty (AJD or Documented Legal Acts Tax), which in fact represents around 75% of the associated expenses when taking out a mortgage.

Many claimants have though also claimed a refund of the Stamp Duty.  Sentences issued by the Supreme Court and the Provincial Appeal Court of Zaragoza say it is the Bank that must pay the cost of Stamp Duty.  However, the Provincial Appeal Courts of Oviedo & Pontevedra have issued Sentences stating that the Stamp Duty should be paid by the consumer.

Of course there is no refund for Property conveyancing costs and Property Conveyance Tax which must always be paid by the home buyer.

What documents are required to make the claim and file a Lawsuit?

The mortgage deed, the notary’s invoice, the land registrar’s invoice and the tax form documenting payment of the AJD duty (form 600)

What is the deadline for the claim?

Deadline for claiming these costs and expenses is 5 years from the Supreme Court ruling of 23 December 2015.

Have any banks now changed their clauses relating to mortgage opening fees?

Yes, BBVA, Santander, Bankia, CaixaBank, Sabadell & Ibercaja have all changed their clauses relating to mortgage opening fees.  By doing this they hope to avoid future claims on new mortgages.  However, this does not prevent consumers claiming refunds for mortgages signed in the past with these banks.

Do I have a good case in Court?

Lawsuits should be well drafted and submitted with the correct evidences and documents.  Based on case law from the Supreme Court and other Provincial Appeal Courts you should have a good case.  However, any legal action should never be considered as easy, especially against Banks with enough resources to appeal any unfavourable decision.

The fact that many banks have now changed their own clauses following the Supreme Court decision (which called them ‘abusive’) means they are aware these fees were not properly established.

Contact us now and we will review your mortgage documents, negotiate with your bank for the refund of mortgage opening fees and, if necessary file a Lawsuit against the Bank.

Rota, Cadiz, Costa de la Luz, South western Spain

If you have lost money on an off plan development in Spain please contact us today for a free appraisal of your case.

We have won more than 230 cases against off-plan property developer’s banks on the developments listed below.

These are not just won cases, but won cases where our clients have RECOVERED THEIR MONEY.

When is a lawyer liable for a “bad result”?

The professional obligation of the lawyer is not determined specifically by the result but by using all the right means, using his knowledge and professionalism solely in the interest of the client and aiming to achieve the best result.

Lawyers work under the General Standards of liability and responsibility of the Civil Code and of the regulatory standards of his profession. (You can read about the Regulatory standards for Spanish Lawyers by clicking here)

Spain’s Supreme Court has stated:

Professional negligence of lawyers requires the following requisites:

(i) Breach of his professional duties.
(ii) Proof of breach
(iii) Existence of effective damage
(iv) Cause-effect relationship between breach and damage

All appraisals for professional negligence require an expert analysis as not all “bad or unexpected results” determine grounds for a successful action against the lawyer for negligence. However, THERE ARE acts and omissions by lawyers that can be clearly classified as negligence and be linked to real and quantifiable damage.

Compensation amounts will be calculated using the principle of proportionality between the damage caused and amount claimed.

All lawyers in Spain, as members of Bar Associations, have obligatory civil indemnity insurance.

Deadline for this type of action is 15 years.

Contact us now if you believe your Lawyer is guilty of professional negligence and we will provide you with a free appraisal of your case.