All the abusive clauses you can find in your Spanish mortgage

Fresh article at our website:

https://www.costaluzlawyers.es/2018/08/21/list-of-all-abusive-clauses-that-a-mortgage-may-contain/

1. Clause of limitation to the minimum interest rate (floor clause): It is usually located in the stipulation 3 bis with the denomination. “Límite a la variacióndeltipo de interés variable” It usually coexists with another upward limit (or ceiling). The abusiveness of the clause due to imbalance arises when there is a disproportion between the floor and the ceiling so that it is the Bank that is covered against the mortgagor. 87% of mortgage users were not informed by their bank of the inclusion of said clause.
2. Multi-currency clause: The Supreme Court, in its Judgment of November 15, 2017, declared the partial nullity of the multi-currency clause for generating a serious imbalance against the requirements of good faith
3. IRPH clause: Although the Spanish Supreme Court declared the validity of this clause in its Judgment of December 14, 2017, several questions have been referred to the CJEU by first instance courts of Barcelona, ​​Reus and Almeria as well as by the Provincial Court of Salamanca, against the criterion of the Supreme Court. These courts affirm this clause lacks transparency. We are waiting for the decisions of the European Court.
4. Upward rounding clause: The interest rate is rounded by a quarter of a percentage point and always upwards and for the benefit of the bank. The Supreme Court has issued repeated decisions in which it is made clear that these stipulations were not negotiated individually and are against the requirements of good faith, causing, to the detriment of the consumer, a significant imbalance of the rights and obligations of the contract parties
5. Review of interest at the request of the borrower: Bank unilaterally establishes the need for the user’s request to activate the revision of interest on a loan which was granted at a variable rate. The Supreme Court declared these clauses null and void on December 23, 2015
6. French depreciation system: Using this system, although the capital is being amortized, the interest does not decrease because it does not take into account the capital already amortized.
7. Clause on the computation of interest to 360 days: Bank of Spain considers this as malpractice if the formula does not clearly show that a 360 base is being used and the loan contract just simply mentions a generic statement such as “days object of the liquidation, expressed in commercial days”or equivalent expression.
8. Delay interest clause. In cases of loans without a real guarantee, the Supreme Court considers that the default interest must not be more than two points higher than the remuneration interest agreed in the contract. In cases of loans secured by mortgages, Article 114 of the Mortgage Law sets a limit of three times the legal interest.
9. Anatocism pact. Suppressed, for mortgages, in the reform to the Mortgage Law of 2013. Delay interests can never become part of the capital.
10. Imposition of personal guarantors: The validity of clauses inserted by the Bank by which they force the inclusion of a guarantor is questioned for two reasons(1) The capital is already insured by the debtor’s personal guarantee and by a mortgage (2) Lack of transparency when this clause (a) imposes the waiver of division and excusse benefits without explanation of these benefits or (b) the absence of indication of the joint and several nature of the guarantee. It produces an over-guarantee which is disproportionate to the risk assumed by the bank
11. Waiver of the benefit of excussion, division and order by guarantors and guarantors

The guarantor is hence placed in the same place as the debtor, and for the sole purpose of shielding the interests of the bank. Consequences of this resignation are not explained by the bank when adding these clauses to contracts.

12. Mortgage Expenses Clause: Clause by which Notary and Registry fees, property valuations, management fees, taxes… were imposed on the borrower in full. Most of them have to be paid by the bank.

13. Clause on lawyer’s fees in case of litigation: Declared null by Supreme Court decision dated December, 23rd 2015 because they suppose a waiver or limitation of rights granted by Law to the consumer or user.
14. Opening Commission: There are several Courts in Spain that consider the opening commission abusive as they do not respond to the provision of an effective service to the user.
15. Study commission: By imposing these costs to the consumer, the Bank is transferring to the consumer the costs that the study of facts before mortgage granting implies.
16. Subrogation Commission: For the same reasons as the Opening Commission: they do not respond to the provision of an effective service to the user.
17. Clause of referral to the rates of the entity for the setting of commissions: The Supreme Court Sentence dated December 16th, 2009 confirmed the abusive nature of stipulations that referred to the “book of fees and commissions”. The information must be provided directly to the client at the time of signing the loan agreement
18. Postal expenses. Costs for postal notification to the user are imposed on the consumer. These clauses do not provide any kind of equitable distribution between the parties.
19. Commission for claiming debtor positions: This commission must be agreed and signed in the loan contract and banks must act in accordance with the following principles:

• It must be linked to the effective existence of a claim. A simple letter is not enough
• It cannot be reiterated when claiming for the same balance
• The amount will be a fixed one, regardless of the amount of the claimed balance

20. Early expiry clause: This clause violates the principle of proportionality. The Bank can request the full amount of the loan just after one to three payments default. Both the Supreme Court and the General Directorate of Registries and Notaries have affirmed so. According to the postulates of the Court of Justice of the European Union in the Sentence of March 14, 2013, the full loan can only be claimed if the consumer has incurred in an essential breach and in a high amount with respect to the amount of the loan.

Nor can there be early expiration in cases of:

• Seizure of assets of the borrower or decrease in his solvency
• Declaration of insolvency of the debtor
• Non-payment of community expenses or any taxes levied on the property
• Decrease in the value of the property
• Impossibility of registration of the mortgage guarantee
• Death of the debtor or guarantor
• Other generic breaches of the obligations contained in the writing

The Court of Justice of the European Union is about to issue a ruling on a question referred by our Supreme Court in which this asks about foreclosures that include this clause. The response of the European Court of Justice may affect the Law on Real Estate Credits, now in the Congress of Deputies. In its articles, the advanced maturity is established with 9 instalments or 2% of the total loan.

21. 21. Clause limiting ownership rights: Both the Supreme and the General Directorate of Registries and Notaries state that the clauses by which the Bank prohibits selling, leasing or encumbering the property without the prior consent of the creditor are null and void.
    22. Clause prohibiting linking of the real estate to professional activity: They suppose an unjustified limitation of the principles of freedom to contract and of freedom of ownership.
    23. Waiver of the right to be notified in case of sale of credit: Although Article 242 of the Mortgage Regulations allows the debtor to waive knowledge of the mortgage loan sale contract to a third party, this provision does not prevail over the Consumer Law. The Supreme Court says so in the Judgment of December 16, 2009. The cession can notdeprive of the rights that he himself has, that is, to free himself by paying the person who was the holder of the credit if he has not been notified.
    24. Consent clause for the consideration of the executive power of all authorized copies of mortgage deeds requested by the Bank. It mocks the need for acceptance that the law requires the debtor to provide.

21. Clause fixing the appraisal value for auction. The appraised value for auction can not be less than 75% of the appraised value of the asset if the credit is not going to be securitized. If the loan contract is going to guarantee the issuance of titles, it will be of 100%.

In addition, the adjudication of the property by the entity, in the absence of auctioneer, must be at least 70% of the auction value. Any clause contrary to these criteria is null.

26. Clause for which the entity is entitled to collect compensation for loss of property There is no need for this clause because Article 110.2 of the Mortgage Act awards the bank the amount of compensation granted or owed to the owner provided the loss it would have taken place after the constitution of the mortgage.

The clause that allows the bank to hire fire and damage insurance at the borrower’s expense is also null.

27. Election of Notary: Consumer/ debtor has the right to choose the Notary provided it keeps a reasonable connection with any of the personal or real elements of the business. The Notary must also assist the contractor who has a weaker legal position.
28. Clause of express submission and waiver of the jurisdiction itself. Prohibited by the Civil Procedure Law itself.

This is an interesting and informative post. I doubt the average man in the street would have much idea what he/she was signing up to when taking out a mortgage other than to maintain payments. I doubt either the bank staff or the borrowers lawyer ever explains the mortgage contract, probably because neither understand it themselves.

Maria, why is there so much abuse and why is there no effective regulation to stop it?

Kavanagh:

That's how it went. Neither the client who signed nor the employee who proposed were (and are) aware of the dominant and abusive position of the bank in that contractual relationship.

Financial Consum Law and abundant Sentences of judges at national and international level are putan ting order in the savage financial world that has enjoyed a lack of regulation due to a lack of political and legislative will. Now informed citizens, good lawyers and good judges are stopping the monster.

There is still a long way to go

Absolutely Maria, which is why there has been a growing need to pose questions, gain understanding and greater transparency to all of these abuses and this has been an essential part of the “ whistle blowing” exercise relating to all of these uncomfortable realities.

With that in mind, has it now become necessary to highlight and feedback instances where Bank(s) purposefully fail to comply with Supreme Court rulings that have taken years to achieve, by submitting “ perverse” cassation appeals with mal intent to further exacerbate and delay the system of justice? In such instances, who oversees such behaviour and who does this get reported to? Is it the ECB or the Bank of Spain? 

Also when an arbitration route, presumably developed to alleviate the “ collapse “ of the Spanish court system, is also abused by the Banks, leaving mortgagees with little option but to go to court, who ultimately regulates against this behaviour? Is it the ECB given their involvement with regulatory matters that impact customers?

In other words who is ultimately responsible for monitoring and enforcing penalties against Banks that behave in such a manipulative and “ monstrous” fashion. Do lawyers see it as part of their role to report back such instances to the relevant bodies?

Ads: Adding comments below in bold green:

where Bank(s) purposefully fail to comply with Supreme Court rulings that have taken years to achieve, by submitting “ perverse” cassation appeals with mal intent to further exacerbate and delay the system of justice? In those cases, interest and costs will be imposed on the bank. That causes the deterrent effect you mention. The judicial principles and the law of civil procedure itself establish it.

In such instances, who oversees such behaviour and who does this get reported to? Is it the ECB or the Bank of Spain? As explained above, Spain justice system and its laws and regulations are in charge of this.

Also when an arbitration route, presumably developed to alleviate the “ collapse “ of the Spanish court system, is also abused by the Banks, leaving mortgagees with little option but to go to court, who ultimately regulates against this behaviour? Is it the ECB given their involvement with regulatory matters that impact customers? The Spanish Supreme Court has agreed that the banks pay all the costs of the "ground clause" cases. This same measure will be applicable in other cases in which an abusive clause is involved.

In other words who is ultimately responsible for monitoring and enforcing penalties against Banks that behave in such a manipulative and “ monstrous” fashion. Do lawyers see it as part of their role to report back such instances to the relevant bodies? Yes, Lawyer will be in charge of asking for interests and costs to be imposed against the Bank in these cases and the judicial system is in charge of punishing these behaviors.

Thank you Maria.

Where you identified the following 

 " where Bank(s) purposefully fail to comply with Supreme Court rulings that have taken years to achieve, by submitting “ perverse” cassation appeals with mal intent to further exacerbate and delay the system of justice? In those cases, interest and costs will be imposed on the bank. That causes the deterrent effect you mention. The judicial principles and the law of civil procedure itself establish it."

Is it not the case that where monies have been deposited into the court by the Bank ( following earlier successful provincial court rulings i.e. prior to any "perverse" cassation appeal  submitted by the Bank), that interest stops accruing at that point of deposit, which means that the Bank will no longer be accountable for ongoing interest beyond that point?

During this process does it also mean that judges will not award costs due to the fact that any outstanding cassation appeal submission will be deemed to have created an outstanding element of doubt (even though it might ultimately be thrown out!) ?

Thus it fails to act as a deterrent to the Bank's ongoing challenges to good SC rulings already established?

In effect the Banks will be incentivised to behave in this way as an attempt to prevent awards of costs for all outstanding similar cases during the lengthy periods prior to the SC recognising this problem......

My point being that there appears to be no opportunity to correct and prevent purposeful attempts by the Banks to affect award of costs and ongoing interest for all outstanding similar cases during these interim periods?

Or have I misunderstood the complexities?

ads you are at it again. Are you asking a question, making a statement or answering a question?

I'm requesting clarification if this is another manipulative ploy on the part of the Banks, which would also need resolving.

It's yet another complex scenario that would help to explain what is happening in order to gain greater transparency for all those affected.

Ads I appreciate you seem to have a bit of an obsession with Spanish banks. How much and when were you personally diddle out of by a Spanish bank. This knowledge may give us a better understanding of your crusade.

Suffice to say, this is not an obsession but an attempt to gain clarification of complex issues which sadly affects all too many.

.

Stop dodging the question, you are not on the Andrew Marr show.

Please stop personalising.

Thank you, that answers the question in full.

It would appear you are treating this area under discussion as a practical joke. You have by no means had a disagreement with a Spanish bank or been implicated with the Spanish legal system over anything.

There is nothing remotely amusing about the need to gain clarification of complex legal issues for those subjected to banking abuse of this nature.

Sadly personalising in this manner only detracts from the serious subject matter of this thread,

Back on thread....and apologies if this has caused confusion.

With this in mind perhaps it’s best if I reword my question to Maria.

Dear Maria,

In your experience are Banks now submitting “ unwarranted” cassation appeals in an attempt to create elements of doubt as a purposeful ploy to avoid award of costs for similar cases awaiting rulings, during the lengthy periods prior to the SC reviewing these appeals? 

If so, would this be deemed as bad intent, and do SC judges, when not admitting these appeals to the SC, have the power to award costs against the Banks at that point to act as deterrent? Or would this not be feasible for technical legal reasons?

Is this form of challenge to existing good SC rulings now a growing problem, and does this manipulative behaviour by the Banks now pose a serious threat to all clients ability to regain their costs associated with their ongoing litigation, during the interim periods?

Many thanks.

Answering you in bold green below ( same text as your email): 

In your experience are Banks now submitting “ unwarranted” cassation appeals in an attempt to create elements of doubt as a purposeful ploy to avoid award of costs for similar cases awaiting rulings, during the lengthy periods prior to the SC reviewing these appeals? Banks try to conquer the empty spaces that Case Law has, but, the body of case law is more and more consistent against them.

If so, would this be deemed as bad intent, and do SC judges, when not admitting these appeals to the SC, have the power to award costs against the Banks at that point to act as deterrent? Or would this not be feasible for technical legal reasons? The Supreme Court, before deciding, will communicate the cause of inadmissibility of the cassation appeal to the parties so that, within ten days, they make the allegations that they deem appropriate. There, the appealed party can ask for imposition of costs to appelant bank.

Is this form of challenge to existing good SC rulings now a growing problem, and does this manipulative behaviour by the Banks now pose a serious threat to all clients ability to regain their costs associated with their ongoing litigation, during the interim periods? I cannot see a problem there.

Many thanks Maria. This clarification is much appreciated.

P.s. Does the SC also have a time limit to respond to any request for costs?

Suffice to say, this is not an obsession but an attempt to gain clarification of complex issues which sadly affects all too many.

Ads, how many does this affect? Considering house's in Spain are being bought and sold every day with next to no problems, and also lets consider how many who are thinking of buying or selling for that matter, actually look at, and would read this forum, so unless you as one person could change laws it's hard to see where this is going.

Unless you are going to make a book about house buying in Spain, which I doubt you are, I fail to see the point of so many of the questions you ask,  the other point is you can give advice to thousands, getting them to take it is another matter, hence the fact many get into trouble.

In many, or should I say the few, cases where I have known of someone who has bought a property in Spain when you get down to the nitty gritty of how they went about it, it beggars belief how they could buy anything let alone a house in a foreign country.

Due to the amount of questions you ask many could have the assumption that every solicitor, house agent, builder, etc etc in Spain is a crook, which is not the case I have found. The laws of Spain are just that, the laws of Spain, end of, the UK has just as many rubbish laws in buying property but if you don't have a problem then you don't hear about the troubles.

No Baz, as Maria has pointed out at the start of this thread, the point is that it’s the BANKS who are being challenged here, and it’s the Banks who are now attempting to renegue on their responsibilities, their non adherence to guarantee law, their abusive use of highly questionable mortgage clauses, etc, not to mention all manner of manipulative litigious ploys that sadly has led to the almost collapse of the court system and placed enormous strain on the Spanish  Justice system.  The numbers striving for justice within the system tell the story in terms of the magnitude of this problem.

Innocent citizens of all nationalities including many Spanish nationals are attempting to gain justice and accountability from these powerful financial institutions, and as Maria has also identified the judiciary are now thankfully creating supportive case law. But as fast as this is created, the Banks continue to challenge and appeal  until such time as Supreme Court clarification is achieved, and even then they continue to challenge until SC doctrine is achieved. 

It’s a highly complex scenario that many who have outstanding legal cases are understandably confused by, so the questions and answers are attempting to address this problem by breaking down the detail as the ploys and uncomfortable realities that Banks are employing need to be highlighted and challenged. 

It’s an educative process, especially as Banks try to “ conquer that empty space that case law has” to quote Maria... It’s been a long haul but progress is being made but there appears a long way to go.

The sincere hope is that this will ultimately benefit all in the long run by making the Banks far more accountable for their abusive behaviour, that better regulatory structures and effective reporting mechanisms are achieved to enhance transparency, and ensure that risks in this regard are minimised going forward.

Time will tell....