Eaten alive - by abusive mortgage 'set up' costs (+Start your claim)

by Legal editorial team
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You could be forgiven for thinking that you would have been safer going into a crocadile pit than to your bank to borrow money!

In December 2015, the Spanish Supreme Court ruled that mortgage clauses introduced by Banco Popular and BBVA that forced borrowers to pay all of the fees surrounded or 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, not the borrower.

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 through which BBVA imposed on the borrower all of the expenses, taxes and commissions associated with the mortgage loan:

That clause typically read: “Borrower must pay all taxes, commissions and expenses incurred in the preparation, formalisation, 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”

The 'nullity' declared by the Supreme Court is based on the lack of detail in the loan agreement, with regards to expenses, commissions and taxes that are being imposed by this clause in such a generic manner.

If YOU have paid all of the fees surrounding and related to taking out your Spanish Mortgage then you are likely to be entitled to a refund of some of those fees.

What are the expenses, taxes and commissions can be reclaimed ?

* Notary cost * 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 * Commissions on lack of payments * Mortgage cancellation costs and commissions * Any judicial or extrajudicial cost which has been charged automatically to 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.

A question that is not fully settled is whether it 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 represents around 75% of the associated expenses of taking out a new mortgage.

Some claimants have claimed a refund of the Stamp Duty, with differing results.

Rulings 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.

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

There is a deadline for claiming these costs and expenses - which ends 5 years from the Supreme Court ruling of 23 December 2015 (i.e. 22.12.2020).

It is worth knowing that some banks have now changed their clauses relating to mortgage opening fees.

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.

It will take some time to see how big the retro

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active claims for registration costs can be but it has the potential to be even bigger than the floor clause issue, because it is likely to involve every client who has taken out a mortgage.

This includes British Isles (UK, Ireland) owners too - but of course most aren’t aware of the issue and that they may well benefit from looking into this aspect of their mortgage.

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