English speaking lawyers in Malaga (Andalucia / Costa del Sol) specialized in urban & rustic property law

Archive for mortgages


floor clause mortgage spain


The first thing I would like to do is inform you that C&D Solicitors has signed a collaboration agreement with the Sevillian law firm Gallego & Rivas, which specialises in financial and banking law.

On the basis of this agreement, Gallego & Rivas have offered to study the documentation of homeowners who may be affected by a “floor clause” (cláusula suelo) in their mortgages, free of charge. At the end of this article, we will explain how those affected can get access to this service.

First of all: What is a “floor clause”? A mortgage is said to have a “floor clause” when, in a variable-interest mortgages, there is a clause in the Deed of the Mortgage Loan establishing that the interest for this mortgage cannot be lower than a certain threshold.

In other words, in this case, the mortgage cannot benefit from a low interest rate and from the successive drops that may occur, as the minimum interest rate is “shielded” and any interest rate set below the one established in the “floor clause” cannot be applied. For several years, the Euribor rate has been very low and these clauses have represented considerable losses for many customers.

For the last few years, there have been many legal proceedings in Spain brought by people affected by “floor clauses” in their mortgages. In fact, almost five years ago, we published our first article about this matter, echoing the first judgments. We should keep in mind that mortgages with “floor clauses” were common until 2009 or 2010.

Most judgments have sided with the complainants. Likewise, the Supreme Court pronounced itself in May 2010, declaring these clauses null.

So far, the legal arguments are clear so people with a “floor clause” in their mortgages have a very good chance of obtaining a favourable ruling. Such ruling would order the bank to eliminate the “floor clause” of the mortgage, as well as to return the money that customers have overpaid in their mortgages, in addition to the legal costs of the proceedings.

In its judgment of May 2013, the Supreme Court, in its legal reasoning, only ordered the banks to return the money unduly charged to customers from 9 May 2013 and not since the clause started to be applied to the customer. I.e. what was unduly charged before that date was not eligible for a refund.

The Supreme Court appealed to the economic turmoil that it could represent for banks to return the total amounts unduly charged to customers before 9 May 2013 as, considering that there are thousands of mortgages affected by a “floor clause”, banks would be forced to refund billions of euros to their customers.

Due to the controversial nature of this legal reasoning, a Commercial Court in Granada raised a prejudicial question to the Court of Justice of the European Union (CJEU) so that it would pronounce itself on whether banks should refund the amounts overcharged to their customers from moment that the “floor clause” in their mortgages was applied instead of from 9 May 2013.

On 26 April, the CJEU held the public hearing on these proceedings and, on 12 July, the advocate general of the CJEU will present his findings. At the end of the year, we will know whether Spanish banks will have to return everything unduly charged or just the amount overcharged after 9 May 2013.

It seems that there are good chances that the CJEU considers that everything unduly charged to every customer with a “floor clause” must be refunded. The decision is transcendental since –according to some sources– we are talking about 7 thousands millions of euros.

These 7 thousands millions of euros would be added, to the 5 billion euros that banks are estimated to be required to refund to customers, for everything unduly charged from 2013 to the present day.

Regardless of the date set by the CJEU, “floor clauses” are abusive and those affected have the right to file a complaint to get their money back. This is why we have signed an agreement with the law firm Gallego & Rivas, which has offered to study the documentation of homeowners who may be affected by a “floor clause” (cláusula suelo) in their mortgages and provide them with a short report on their situation.

The study of this documentation would be free of charge and legal advice would also be provided to recover the money lost and the cost of the proceedings. Customers can then decide whether they want to initiate legal proceedings.

Later, according to the number of persons interested in taking legal action against their banking institution, we could set up a day at our office in Torrox-Costa (Malaga) so that those affected by a floor clause in their Mortgage Deeds can get first-hand contact with Gallego & Rivas.

Ultimately, the affected person will get a specialist lawyer to study his case at no cost and advise him of the potential actions he may take to recover the money, as well as the cost of the proceedings.

If you are interested in getting this consultation free of charge, the way to proceed is to contact us at info@cdsolicitors.com, giving us your contact details and sending us a copy of your Mortgage Deed as well as the latest invoice for your mortgage loans. We will be happy to help you and clarify your legal status.


Author: Gustavo Calero Monereo, C&D Solicitors (Lawyers)

Torrox-Costa (Malaga/Costa del Sol/Nerja/Andalucia)



Mortgages in Spain to buy property

Mortgages in Spain to buy property

Fixed rate, variable rate interest & Euribor

If you want to buy a property with a Spanish mortgage you should know that the standard in Spain is the variable interest. The Euro Interbank Offered Rate, also called Euribor, is the reference rate for variable-rate mortgages and is currently at very low levels. Most mortgages in Spain are established according to the Euribor plus the interest rate offered by the bank.

Some banks offer fixed-rate mortgages but the number of fixed-rate mortgages obtained in Spain is very low compared to that of variable-rate mortgages.

A mortgage in Spain or another country?

In Spain, for people who are non tax residents, mortgages have higher interest rates than for tax residents, about +1,50% to +2,00%.

If you are non-tax resident in Spain and you are thinking of getting a mortgage to buy a home in Spain, it is very likely that a bank in your tax-residence country can offer you a better interest rate than a Spanish bank. Therefore, you should try to find out which banks in your country give mortgages in Spain.

Ways to reduce the interest rate 

In Spanish mortgages with variable-interest usually offer a series of extra products are offered that may reduce the interest rate of your mortgage loan. Each of these financial products / conditions can reduce the interest rate between 0,25% - 0,50%, with a maximum of non residents of 0,75% en 1,00%.

Some of these products / conditions are:

  • Setting up a direct credit of your salary or pension
  • Keeping a minimum monthly balance in the account linked to the mortgage
  • Signing up online banking or a virtual mailbox
  • Direct debits of service companies (water, electricity, taxes, etc.)
  • Having a debit/credit card
  • Having a pension plan with a minimal yearly contribution
  • Taking a life insurance and a house insurance / contents insurance

Starting the procedure with the bank

If you already know the bank where you want to apply for your mortgage, we suggest that you apply for the financial approval of the mortgage.

At this stage you will provide the bank with a complete list of your income and loans as well as your employment status and the amount of the mortgage loan you need. The bank will enter all these details into the system and tell you if they would approve the mortgage at your income level.

Through this, you can save time and money since you can find out, right from the start, that the bank will not give you a mortgage and it will not be necessary for you to provide all the financial documentation at the beginning. Besides from this it´s not necessary yet to pay the taxation of the property by the bank. This documentation for the bank, by the way, needs to  include an extract (´nota simple´) of the Land Book Registry, the Registro de la Propiedad, of the property you are interested in buying. If the bank analyses your financial details and cannot grant you a mortgage, you always have the possibility to go to a different bank.

Extra costs of the Spanish mortgage

In addition to the financial conditions of the mortgage, obtaining a mortgage in Spain has a number of associated expenses:

  • Legal expenses:

These are usually between 3% - 4% of the amount of the mortgage. They refer to taxes, the notary´s invoice (the Mortgage Deeds are different from the Title Deeds and so they are charged separately), the invoice from the Land Book Registry and processing fees. These expenses are the same regardless of whether the mortgage is obtained from a Spanish or a foreign bank.

  • Solicitor fees:

Even though you can negotiate your mortgage directly with the bank, it is advisable for your solicitor to help you with this process as you will obtain professional advice. Besides of this his work with the bank will be more efficient because he knows the different conditions of the banks, the can check the Spanish general Terms & Conditions and he can negotiate on your behalf.

  • Extra bank expenses:

Opening fee (usually 0,5% - 1% of the mortgage), obliged home insurance (contents insurance) and life insurance for each mortgage account holder.

On this point, I would like to make a special mention about the life insurance policy that most banks usually require to obtain. This insurance policy is obtained for the mortgaged amount and guarantees that the bank can collect the amount due to the bank from the insurance company in the event that the account holders die.

Life insurance is an interesting product for mortgage holders but it may involve a high premium, especially if the insured people are elderly or have any health problems. This is because, in these cases, the premium will be higher as the risk that the mortgage holders die increases. It´s important to know that after the first year you can switch from insurance company to one that offers you better conditions on your life insurance.

It is also common for some banks to require you to pay a single premium for this life insurance policy, i.e., when the mortgage is granted, the bank already charges you for the total insurance premium for the entire mortgage period.

It is important for you to have a summary chart of ALL mortgage costs, so you can know the net amount of the mortgage (after deducting expenses) you will have available to pay for the property.

Legally binding mortgage offer

Once the bank confirms that your mortgage is approved, the legal document that guarantees this is the binding offer (´oferta vinculante´). This bank document functions as a contract and binds the bank to giving you the mortgage under the terms established in the document. The binding offer is usually valid for one month but it may not be valid for less than ten days.

Recommendations when buying a property with a mortgage 

Since the final approval of the mortgage by the bank will take 2 or 3 weeks. Therefore it´s wise to start the mortgage procedure as soon as possible, even if you haven´t selected a definitive property yet.

Have you already decided on the property you want to buy, but you do not yet know if you are going to obtain a mortgage? In this case you could try to negotiate with the seller that the reservation document and/or private purchase contract are ´subject to mortgage´. This clause avoids that you would lose your reservation fees and/or down payment if no bank in the end doesn´t grants you a mortgage loan. However, most (Spanish) sellers do not like to sign contracts that are subject to the mortgage so the best thing is to have everything prepared with the bank so that it takes as little as possible to receive a reply.

Also please keep in mind that not all banks are willing to grant mortgages for house in the countryside, or only for a limited percentage.

Saving money by subrogation of a mortgage

If you are a home owner with a Spanish mortgage than -after one year- you have the right to subrogate your mortgage to another band with a lower interest rate of better conditions. In this case the new bank will pay the rest of the loan plus the transfer commission (if this exists) to your current bank and you will pay your mortgage from that moment to the new bank according to the new conditions.

The subrogation cost is very low compared to the cost of signing a new mortgage. Therefore, if the interest rate that the bank offers you is lower, it is very likely for subrogation to be beneficial to you.


Read the extended information about this subject in our pdf-file: Mortgages in Spain to buy property.


Author: Gustavo Calero Monereo, C&D Solicitors (lawyers)
Torrox-Costa (Malaga/Costa del Sol/Andalucia)



European vs Spanish legal protection for consumers with mortgages

About a month ago, the European Court of Justice (ECJ) ruling caused a great stir among Spanish media. This court judgment has been originated from a preliminary ruling handed down by the Mercantil Court nº 3 of Barcelona, as a result of the mortgage foreclosure procedure between an individual and La Caixa Bank. This preliminary ruling intends to clarify if Spanish legislation complies with the consumer protection requirements regulated by the European Directive 93/13/ECC. This Directive was approved to ensure consumers’ protection against their disadvantageous position with respect to a professional when contracting certain services.

In short, here below are the facts intended to be disclosed before the ECJ:

First: In regard of Spanish civil procedure in the matter of mortgage foreclosures, it was intended to be disclosed if Spanish regulations fail to comply with the aforementioned European Directive protecting consumers, because in Spain the “judgment debtor” cannot claim the existence of unfair terms set forth in this contract. In Spain, if judgment debtors want to claim the existence of unfair terms in this type of contracts, they should initiate different court proceedings which may not paralyse the mortgage foreclosure proceedings; for example, a situation may arise where a property is auctioned due to the unpaid mortgage and the judgment debtor may also obtain a favourable court decision declaring that the contract of that mortgage is null and void once that the property has been auctioned. This may arise because the mortgage foreclosure cannot be paralysed despite the contract may be considered to be null and void.

Second: regarding the substance of the matter, the concept of “unfair term” of the Directive is intended to be clarified in order to assess if the terms of the mortgage contract—subject matter of the main action and undersigned between an individual and a bank, are of unfair nature; these terms are the following: early termination of long-term contracts, fixing of default interests and the liquidity agreement. These are “cut and paste” terms (similar terms) appearing in any mortgage contract which anybody may have executed with a bank.

Regarding the first issue, the ECJ is clear and unambiguous declaring that the Spanish procedural regime reduces the effectiveness of the protection pursued by the Directive, because:

a) Possible unfair terms of the main contract cannot be challenged in the same mortgage foreclosure proceedings which may finish with the property put up for auction.

b)  Mortgage foreclosure proceedings cannot be paralysed by the courts, although they know that the judgment debtor has filed court actions challenging possible unfair terms.

It is worth mentioning that by virtue of a repeated European case-law, the national court is obliged to consider of its own motion the unfairness of all contractual terms under this Directive.

Regarding the second issue, the ECJ answer is not very revealing, or at least automatically, in order to know whether a term is unfair or not, as the ECJ considers that the national court is the only competent body to interpret and apply the national Law. However, the court ruling states that to decide if a term causes an imbalance to the detriment of the consumer in relation to bank—national regulations must be taken into account if that agreement is not signed between the parties, the court shall assess if this term leaves the consumer in a less favourable situation than this provided by the national Law in force in case this term exists. For example, if the term fixing the default interest in the mortgage contract (normally around 20%) is an exception and there is no other similar legal interest in national Law (i.e. default interest applicable to commercial transactions is at 7.75%), then this term may be considered to be unfair; an open-and-shut case, judge for yourself.

Finally and regarding ongoing and future mortgage foreclosures in Spain, it is worth mentioning that two rulings have been already issued in the last three weeks declaring mortgage contracts to be null and void, because default interests were unfair.



Author: Gustavo Calero Monereo, C&D Solicitors (lawyers)
Torrox-Costa (Malaga/Costa del Sol/Andalucia)


Government of Andalusia increases many taxes

Increase AJD stamp duty tax Andalucia

Increase AJD stamp duty tax Andalucia

I would like to update you about some new measures carried out by the Junta de Andalucía, containing many reforms in the different existing taxes (not exactly to re-boost the current market situation…).

Concerning those interesting, we will focus on the Stamp Duty (A.J.D.), a tax applied to those public acts formalized on public documents to be registered in the different Public Registry offices with an economic amount (e.g. new property sales, new building declarations, or a mortgage deeds, among any others).

So, last week, the 19th of June, the Junta of Andalucía approved the new Decree-Law 1/2012, of 19th of June, which contains a series of tax, administrative and labor measures, published in the B.O.J.A. (Official Journal of the Government of Andalusia) last 22th of June 2012. You can find it by clicking: http://www.juntadeandalucia.es/eboja/2012/122/BOJA12-122-00014-11216-01_00009593.pdf

Within these measures, regarding the tax ones, we can find an increase of the general rate on the Stamp Duty, going from 1.2% to 1.5% of the declared value.



Author: Francisco Delgado Montilla, C&D Solicitors (lawyers)
Torrox-Costa (Malaga/Costa del Sol/Andalucia)




More lifetime mortgages (reverse mortgage) Spain

More lifetime mortgages (reverse mortgage) Spain

Lifetime Mortgage (reverse mortgage)

According to the report published by “Optima Mayores” Advisers, the demand of lifetime mortgages has increased to 17% (19,900 applications) until April in comparison to last year same four-month period.

This increase in the lifetime mortgage demand matches the senior citizens’ growing needs to obtain an income and the better knowledge of this product in Spain, where it was first launched in 2004. Spanish Senior citizens’ pensions are at 40% below the European average, what indicates their necessity to face their retirement financing with a peace of mind. Regarding British senior citizens, the Euro and Pound Sterling exchange rate fluctuation has also reduce their earnings.

What is a lifetime mortgage?

A lifetime mortgage is a financial product that consists of a loan for seniors aged 65 or older or dependents, secured against the home where they live. They retain ownership of their home until they die, when their inheritors shall repay the loan or sale the property.

The maximum loan to be granted is based on a percentage of the property appraisal value. Then, the homeowner may receive a regular fixed amount or a lump sum payment.

Who qualifies for a lifetime mortgage?

The following requirements shall be fulfilled to qualify for a lifetime mortgage:

-        The applicant or the selected beneficiaries shall be aged 65 or older; or otherwise, they shall be individuals with high to severe dependency levels.

-        The borrower shall receive the money from the loan in regular fixed amounts or a lump sum payment (incomes).

-        Only the creditor (banks or savings banks) is entitled to demand the repayment of the debt and the mortgage foreclosure when the borrower dies, or if provided in the agreement conditions—when the last of the borrower’s beneficiaries die. The mortgaged property shall be valued and insured according to the Spanish legislation in force.

These are the official requirements to be protected by the Spanish legislation regulating this type of loans and to be entitled to the tax advantages established by this legislation.

Clients and banks may freely agree about lifetime mortgage transactions which include a varied set of terms and conditions; consequently, a professional advisor’s counselling in this proceeding is a determining factor for the good end of the agreement to enjoy the best advantages and conditions available.

Spanish legislation regulating lifetime mortgages

In Spain, this type of mortgages are regulated by Law 41 of 7th of December 2007—Mortgage Market Reform legislation.  This Law provides that the lending institution is obliged to offer an independent advice to individuals, so that the consumers’ rights are preserved and the economic and financial conditions suit their needs. This counselling and negotiation tasks are normally provided by specialised lawyers and companies offering this service to private customers.

If you are thinking about a mortgage which best suits your economic needs, take your time and ask for advice to specialised lawyers. They will ensure the best deal for you.

Author: Francisco Delgado Montilla, C&D Solicitors (lawyers)

Torrox-Costa (Malaga/Costa del Sol/Andalucia)



Nullity floor clauses mortgages Spain

Nullity floor clauses mortgages Spain

On the 30 September 2010, Court no. 2 of Seville gave judgment declaring the "floor clause” introduced by the respondent entities Spanish bank BBVA, Saving Banks Cajamar and Caja de Ahorros de Galicia in the mortgage loan deeds formalised with them abusive and therefore null and void, for considering that the minimum threshold interest rates set by them are abusive and detrimental for the consumer.

Although the judgment has been appealed by the three financial entities mentioned, the Court has ordered the provisional application of the resolution. Therefore, as from 27 January 2011, they will not be able to include the said clause in their mortgage loans, and from 11 April, they will not be allowed to charge the clients with the difference between the minimum interest rate as per Euribor plus the interest rate agreed with the client, and the minimum threshold interest rate or  “floor rate” set by the said bank entities in their mortgage loans.

The so called “floor clause” means that in times of low mortgage interest rates, such as the ones we have lived through and are living through at present, the client is committed to pay a set minimum interest rate, which means that even if interests go down, their mortgages cannot benefit from lower interest rates

According to ADICAE (Association of Banks, Saving Banks and Insurance Companies of Spain), in Spain, there are currently 3.8 million clients who have this “floor clause” included in their mortgage loans and have not been able to take advantage of lower mortgage interest rates over the last years. The said association considers that in 2010, Banks and Saving Banks obtained a revenue of 7,000 million euros thanks to these clauses. These results show the importance and relevance of this judgment.

Therefore, as from 11 April, the entities BBVA, Saving Banks Cajamar and Caja de Ahorros de Galicia are obliged to recalculate repayments in all loan agreements taking into account a variable interest rate according to the Euribor benchmark rate, plus the interest rate negotiated with the client, and not according to the minimum threshold interest rate or “floor rate” established in their mortgage loans. This means that, since the interest rates applicable will be lower, the monthly repayments of those clients who have a mortgage loan with any of these entities will decrease.

Commercial Court no. 11 of Madrid has currently admitted the biggest joint action filed in Spain against 45 bank entities for the application of these “floor clauses”. It is likely, that before the end of the year, we know if such a number of saving banks and banks have to follow the path of the other three mentioned, which will be the most logical and coherent outcome.

However, whichever the result, it is likely that this issue of "floor clauses” reaches the High Court, who will then be in charge of taking the definitive decision about these provisions being abusive or not.

In the meanwhile, I would advise you to check your mortgage loan deeds , so that you may see if you have benefited from this judgement and if from 11 March, your bank is applying the resolution.

We will keep you informed on new updates.


Author: Gustavo Calero Monereo, C&D Solicitors (lawyers)
Torrox-Costa (Malaga/Costa del Sol/Andalucia)




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