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I am in the position like many others of wanting to hand back the keys on my Spanish property. I believe you said that there is a legal right to do this. My lawyer in Marbella says it is not a right. Can you please tell me what you think?
I have just come to the end of the interest only period and will not be able to make full payments. I asked the bank to extend interest only or come to some arrangement. They have declined my request.
They have now said that they will take the full payment but if the money is not in the bank they may come to some payment arrangement.
I understand that Dacion en Pago is not an option if there are arrears. Is this the bank's way of avoiding this option?
I would appreciate any advice you can give.
Kedge
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Your lawyer is correct, it is not your legal right.
It is actually up to each bank as to whether or not they will accept a dacion en pago for a property. In the current climate I think very few are, unless where the value is considerably higher than the outstanding mortgage.
And yes, if there are arrears you also cannot even consider it.
Your only other option is to try and negotiate an extended interest free repayment and say to them that you will default if they don't accept. They really probably don't want to have to take your property.
Best of luck with it.
Justin
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Schools in Spain Guide | The Expat Files | Learn Spanish | Earn a living in Spain
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In my experience banks will not consider it if you have not missed a mortgage payment so you have to miss payments then try and negotiate whilst keeping back funds so that you can clear the arrears at point of signing the dacion en pago. Bear in mind there will be penalty charges. Our own lawyer on here is adamant it is a consumer right.........many lawyers in my experience know nothing about it
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This is what my solicitors say
First of all please note that as your Lawyer says Dacion en Pago is a not a legal right of the debtor, this is just a possibility if both parties, (debtor and creditor) agree on it. Please bear in mind that every single case is different. There are different circumstances which may lead to different situations. Such as;
1 - Depending on the bank
2 - Depending on the oustanding Mortgage
3 - Depending onthe Market value and the equity
4 - Depending on the existance of other assets in Spain (other property , bank accounts etc.)
Grupo Marbella Solicitors is highly experienced in negociating with banks in this type of case, obtaining as a result of the negociations Dación en Paga, extensions of interest only period, etc.
Finally please be aware that Banks do not intend acquire and sell properties they just want to receive back the loan plus the interest and on some occasions if the debtor cannot pay back the Mortgage it could be worth it for the bank to recieve the property as payment of the loan when there is still equity. I would suggest that you contact Marbella Solicitors and have a meeting with them to discuss your personal case. This introductory meeting is FREE of charge and without obligation.
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I differ from these points of view and deffend that through dation, considering the value the Bank gave to the property, you have the right of liquidating your debt by returning the house to the Bank.
This is a post we wrote on this in January 2009: http://www.eyeonspain.com/blogs/costaluz/1094/legal-tip-27-dation-in-payment-a-right.aspx
If you default and are on arrears, there are still possibilities, before they start the repossession and even after this: some Banks actually prefer the house to be in arrears for accepting the dation.
A repossession procedure can be contested through a dation- covenant for payment answer. I am sure many judges will sympathise.
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Maria L. de Castro, JD, MA
Lawyer
Director www.costaluzlawyers.es
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Dear Maria,
Due to us being unable to pay our mortgage, La Caixa bank agreed to a dacion en pago. It was very easy I just asked and they agreed. By reading all your posts on this website I was well informed on the process.
La Caixa have sent a surveyor to do the valuation and the figure they propsed is 410,000 euros. However the outstanding mortgage is 460,000 and therefore there is a 50,000 euro difference.
We were asked to go and see the bank manager yesterday and he is proposing that they adminstrate the difference with a unsecured personal loan. He expalined that he knew we could not make any of the payments on this persoanl loan and that after we missed the first payment he would write to their head office and tell them that the loan was no going to be repaid and therefore it would be cancelled
He expalined that this reason was the best way the bank could do the dacion en pago.
The downside for me is that it will effect my credit rating in spain, although I dont intending buying here again and he says that as it is a unsecured personal loan the bank or its debt collectors will not try and track me down.
Do you think the bank is being fair and resonable with me and that they do not have a hidden agenda and are trying to catch me out in the future.
He assured me that this credit "black mark" would only be valid in Spain and not effect my credit reference anywhere else in europe.
It is a very sad time for us as we built the house ourselves and spent another 300,000 euros of our own money as well as the mortgage money back in 2008 to construct the house of our dreams.
Regards,
Mike.
This message was last edited by lfc1000 on 25/10/2012.
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A family member of mine is going through this very process and up until now has had no problems with the bank (Banesto), well infact they actually offered it to her as it was clear that there was no income in the household and renegotiating the mortgage would not achieve anything. I believe it is your right only once the Bank has adheared to the Code of Ethics published by the Government on the BOE. I think most banks have, although they are still saying that they have the right to decide and will study each case individually.
As far as arrears are concerned, it is impossible pretty much to be even considered for a dacion en pago unless you have arrears, and atleast three months so if the dacion en pago goes through you will not be expected to pay for these arrears at any time, acording to Banesto. One has to distinguish between what is a real dacion en pago and what is just simply the bank buying your house back at the valuation price. A dacion en pago is for the total outstanding mortgage, arrears, outstanding community charges and outstanding IBI charges. You are left clean with no personal loan payments of any kind. Any other arrangement is simply the bank buying your house back off you at a market valuation. naturally to get a real "dacion en pago" your situation must be pretty grim and fullfil all the requirements necessary; no or virtually no income, no social benefits, no other properties, no assets etc.
I am not an expert on this and I am just speaking on experience gained through our family members experience with Banesto.
Hope it helps.
This message was last edited by eos_ian on 27/10/2012.
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Ian : EOS TEAM MEMBER
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www.eyeonspain.com/blogs/ianandspain.aspx
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I agree with Ian. The bank will not do anything as long as you continue to make any payments . I'm afaid you have to be persistent in requesting a dacion and request one through a solicitor .
I sympathise with all those facing this situation. Good luck !
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Thankyou to all who have replied. We are still negotiating through the lawyer and hope for a successful outcome.
It is reassuring to know that some of you have had success. I appreciate your support.
Kedge
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This is a fascinating thread and hopefully it offers certain solutions to some.
Sadly however for many who purchased with substantial mortgages over the last few years where the valuations at purchase we high - and so the resulting mortgages were high compared to the assessed value at purchase - the borrowing is now significantly "underwater" - meaning negative equity.
As an alternative to a Dación en Pago, many banks are faced with the choice of whether or not to undertake formal repossession proceedings. These are very costly and at the end of the auction process the bank effectively "buys back" their mortgage lending to enable them to enforce the repossession. Once recovered the bank will then be required to place the property back into its stock of unsold assets and look for a new incoming purchaser.
We have had success in assisting banks with a process called a "Posesión Pacifa". To achieve a success here the owner(s) of the property must be willing to accept that they have lost all or the majority of any equity that they introduced when purchasing. With fallen valuations this is a bitter pill that many have to accept.
Once back in the bank’s hand by way of this procedure they will invariably internally provision – as they are increasingly obliged to do by Banco Espana/ECB pressure etc - against the value of the property and place it back on the market at a very viable sales price. This can be achieved as the costs of this form of recovery are modest compared to formal repossession.
Following a successful sale the rebated mortgage debt - that the bank is willing to accept - will be recovered by the bank and the debts relating to the property (Community Fees IBI and utilities) will be settled in full to ensure that the property is "clean" for a new purchaser.
This offers a clean break solution for the borrower and the bank as part of our solution requires the bank to give a Certificate of Discharge to the borrower confirming that there is no long term damage to their credit rating. This results from a discharge of the personal debt for the mortgage and the security offered by the property.
We have extensive bank connections at very senior levels and I’d counsel anyone who is in default to consider whether this offers them a more attractive solution. Please remember that a Spanish mortgage is not a “no recourse” product and in simply walking away from the debt you will not leave it behind. For appropriate cases a more structured solution is feasible and should be considered as a viable alternative.
Regards,
Mark
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At the end of the day it just depends how pushed you are. If you can negoiate do that with smart lawyers, if not just run. One way or the other you cannot wind back the clock.
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We tried everything to keep our house. We got loans and re negotiated our mortgage despite both our paros running out. Then my eldest had a host of medical issues that required we pay for very expensive equipment like back braces and insoles. It meant that we were destitute and we just couldn't pay the mortgage. We'd been honest with the bank. When the paro ran out we went to the bank and told them. They told us to move in with friends and rent o ou our appeasement, eventhough it wouldn't even come close to covering the tree negotiated mortgage. They refused the dacion. Eventually we started missing payments and would receive endless nasty calls demanding payment. Eventually we moved back to the UK and looked for work. The bank said it would take our assets in the UK. We told them, they were welcome to try as we had nothing. We were in the UK seven months before they finally agreed and that was after the government took over. It took ages as the valuation of the property wasn't enough to cover the re negotiated mortgage we were forced into several years before which turned out to be more expensive than our original one. We had to basically tell the bank to go eff themselves. We weren't able to pay the mortgage without starving ourselves, we had no other assets and as we were now living in the UK, they were more than welcome to take us to court. We wouldn't show up. After spending 3 years being honest and begging the bank for help as we were both out of work and receiving nothing we eventually gave up. And only when CAM were taken over and a new branch manager was involved did they start negotiating the dacion. We still had to, pay plusvalia which was exorbident, but it was much less per month than the mortgage we had. Persistence is key with the banks and sticking to your guns.
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Whilst i feel for all who end up in this position, the fact remains you and the Bank made a legal agreement, which is binding. so when you can't pay your mortgage and end up owing months of mortgage payments, regardless of circumstances you still owe the money. Other borrowers of the Banks end up with higher rates, savers end up with lower rates. The Banks are a business so they want the money back or the property or both. In the interim other Bank customers are paying the price for all of these defaults. Last week, there was a posting about how the process of getting a Spanish mortgage was much easier than in the UK. This is where the problem is, as I said last week, far to many Spanish mortgages have been issued, many to people who really wern't ever going to be able to sustain paying them. One man on my urbanisation bought 6 apartments on mortgages, every one has gone back to the Bank.This is where the Banks have been totally irresponsible and still are. The Spanish thought there was a never ending supply of buyers and there isn't. Many properties are worth than the price people paid for them 10 years ago. So thousands have lost money as their property is worth less, this may never be recovered. So should you know things are going badly for you, go to the Bank asap and go back to the Uk. This may seem hard but it is true, I'm afraid.
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This is such a huge problem at the moment, and the Evictions are now up to 500 a day. I feel so much for the Spanish people, yes they were given easy credit by the Banks, they were led to believe that the properties they were buying, would continue to rise in value and be an investment for the future. On top of this they were totally blind to the pending market crash, which would see a large majority of them without work. The Banks and the finanical insitutes knew this was going to happen but they kept milking the last drops, trying to make as much money as possible, GREED. The Spanish Banks continue to receive bailouts but who is there to bail the people out. They are not responsible for losing their Jobs, some are lucky and still have Paro, DOLE MONEY, but others have no income at all !! They have not enough money to feed themselves and on top of that they are going to lose their homes.
The Banks have to be held responsible to some extent, and the evictions that are being carried out at the moment should only be used as a very, very last resort. They say they are willing to negoiate with the people but this is so untrue, I have tried to speak to my Bank on many an occcasion and they have totally ignored my requests. We are still paying our Mortgage each month, but it is extremely difficult and each month even more so, with rising costs. Is it not better for the Banks to receive something each month,instead of the whole expensive procedure of going to court and getting an eviction order and then the property lying empty and falling into disrepair ??
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Well said Evento. The banks and all involved should shoulder some responsibility and be prepared to listen to those in difficulty.
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Dear Mike:
I would need to see your mortgage deed. Please email me to web@costaluzlawyers.es
Kindest,
Maria
_______________________
Maria L. de Castro, JD, MA
Lawyer
Director www.costaluzlawyers.es
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Does anybody know what costs are incurred ( apart from lawyers' fees ) when agreeing to a dacion en pago ?
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On a similar theme, could anyone advise. I own an apartment in Spain. I owe more on the mortgage than it is worth. I have a Spanish will leaving the apartment to my daughters. I have been advised by my solicitor that when i die, to avoid any tax, my daughters could simply refuse to accept the apartment, which would then pass to the Spanish governement. Is this correct? The problem is that if I die, the apartment would not sell in these economic times and I do not want them to be left with a tax bill.
Thanks for any help
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Many people are in this position, so you need to way up , sell for a lower price and accept a loss or hang on and hope the prices will rise, but IMO this won't be for some time, unless it is a gorgeous Villa which can still command high prices. I don't know your age but I would get your apartment properly valued and then decide. It could be it would be better it sell now, albeit for a lower price than you paid, but then consider how much interest you will be paying in mortgage payments, over what you will lose on the sale prices and taxes you will have to pay. It could be that it would be better to sell. For example if you are going to pay 20,000 in interest, but you can sell for up to 20,000 less than you paid, you would come out evens. Interest is always dead money. Add up your monthly payments for the mortgage term,( be prepared for a shock) then deduct the price you paid for the apartment, you will then see how much interest you will pay over the term of the mortgage. In any case I would sell long before your daughters stand to inherit, which will turn into a nightmare for them. good luck.
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