Mortgage abusive fees

Introduction

In December 2015, Spain’s Supreme Court ruled that mortgage clauses introduced by Banco Popular and BBVA that forced borrowers to pay for all fees associated with taking out the home loans were abusive. Instead, the Supreme Court ruled that the banks should pay for all or at least part of these set-up expenses, because it is the lenders (that is, the bank) who have an interest in making a formal record of the mortgage deed. Ever since then, various Trial Courts and Appellate Courts have handed down decisions both in favor and against borrowers.

If you are a homeowner in Spain who paid the full amount of the fees that come with taking out a home loan, the following tips may help you determine whether you are entitled to a refund on some of them.

Mortgage Clauses / Floor Clauses

The fee claims (mortgage clauses) represent an additional headache for Spanish banks, who were recently told by the Courts that their widespread practice of setting floors on mortgages – i.e. levels below which monthly repayments cannot fall, regardless of the interest rate – are abusive, and that they may have to return millions of euros to clients who were systematically forced to overpay.

Recently, the Spanish Government has approved a Royal Decree-law that establishes the extrajudicial system of resolution for the floor clauses, trying to encourage the extrajudicial agreements and to avoid crowded Courts. That said, if the client do not agree with the bank offer, the judicial way still available.

That said, we recommend that customers first try approaching their bank’s ombudsman or claims department, before taking the matter to Court. 

MB Lawyers can assist you in both extrajudicial and judicial processes. 

Who can claim (Deadlines)

The Supreme Court’s ruling of December 2015 affects everyone who is currently paying a mortgage or who paid it off up to four years ago. Claimants should try their bank’s ombudsman or claims department first, and later turn to the Courts if necessary. The deadline for filing a claim is four years after the Supreme Court ruling (December 24th, 2019).

For borrowers who have already paid off their mortgage, they may claim a refund if the full payment was made four years prior to the ruling (that is, on or after December 23rd, 2011).

The ruling applies to individuals, not corporate borrowers, and to primary residences and second homes alike.

What Mortgage Fees can be claimed?

People who have already filed claims are asking for a refund on the fees they paid for the notary, the mortgage land registry and the gestoría -the company that ensures the property and the mortgage are correctly registered in the land registry- (only if the gestoría was imposed by the bank). Claimants have also asked for a refund on the stamp duty (Documented Legal Acts tax or AJD to give it its Spanish acronym).

While there is no hard-and-fast rule that applies to all cases, these mortgage set-up fees typically represent between 2.5% and 3% of the home loan.

How much can You ask for?

That depends on the amount of the loan. According to OCU’s calculations, if every fee is returned (including the AJD stamp duty) it could be in the range of 3.000 € for a 150.000 € mortgage.

That said, by now only a portion of the mortgage fees is recoverable: Some Judges are ordering a refund on notary, mortgage land registry and gestoría fees, but not the AJD stamp duty, which in fact represents 75% of the associated expenses when taking out a mortgage… Based on rulings by the Supreme Court and the Provincial Appellate Court of Zaragoza, it is the banks who should pay the cost of processing the stamp duty. On the other hand, the provincial Appelate Courts of Oviedo and Pontevedra have ruled that this fee should be paid by the client.

In any case, there is no refund for the Property Conveyance Tax, which always falls to the home buyer.

Docs. required to file a claim

• The mortgage deed
• The notary’s invoice
• The land registrar’s invoice
• The tax form documenting payment of the AJD stamp duty (form 600)