Spanish Off-Plan Property - Bank Guarantees - LEY 57/68

~~The Supreme Court cancels eight Ground Clauses in Mortgages (Cláusula Suelo) for lack of transparency

The First Chamber of the Supreme Court rejects the argument of the bank that the contracts were read by notaries and customers were advised of the possibility of reading, as this does not replace the duty to explain to users.

The Civil Chamber of the Supreme Court has annulled eight Ground Clauses (Cláusula Suelo) in mortgage contracts of the bank Caja Segovia (now part of Bankia) because the entity breached a special duty of transparency regarding these clauses it had with customers who signed mortgage contracts.

The high court rejected the argument of the case that the contracts were read by notaries and customers were advised of the possibility of reading, as this does not replace the duty of explanation and transparency by the Banks to users.

The Supreme Court is unable to examine the consequences of the declaration of nullity of the Ground Clauses relating to whether the amounts charged by the bank under this clause would be returned to consumers, because that question was rejected in the first instance and was not challenged on appeal by the aggrieved party.

The statement reaffirms the criteria established by the Supreme Court in its first judgment on ground clauses, of May 9, 2013 - which annulled ground clauses of three other entities - in a more detailed explanation of Banks special duty of transparency and the real understandability of such clauses to clients.