por Gabriella Trussler | May 18, 2017 | Property
The procedure when buying a property from a developer in Spain differs significantly from buying from a private party, which is why the subject requires its own article as the pitfalls vary meaningfully from one another.
The Deposit Contract
It is important to remember that, in most cases, you are paying a deposit on a property which does not even exist yet and will not be completed for a couple of years. New constructions have an inherent element of risk associated to them, entirely different to that of resale properties.
Developers or real estate agencies will often encourage you to sign a deposit contract, which takes the property off the market for a pre-agreed period of time (usually around 30 days). The deposit contract is a succinct document and the amount paid will be deducted from the final purchase price at completion.
It is highly recommended that you hire an independent conveyance lawyer from the outset (prior to signing a deposit contract), rather than the lawyers recommended by the developer, much less use their own lawyers. You must remember that it is the developer’s best interests they will be concerned with, not your own, and this can be an expensive mistake in the long run.
Furthermore, no deposit should be paid unless the developer or estate agency have supplied you with an approved building licence. If there is no building licence it could void the bank guarantees securing your stage payments, that is to say that you would lose all your money without any legal recourse.
In addition to all of this, reservation deposits are normally non-refundable unless the contract expressly states otherwise.
Finally, before buying any property in Spain you will need and NIE number (for more details on this and other general information on buying in Spain see our article “Conveyancing in Spain: If you a buyer or a seller be”).
Signing a Private Purchase Agreement
Before the period set out in the deposit contract is up you will be expected to sign a private purchase agreement.
By this stage your lawyer should have already supplied you with a report on title, so you are fully aware of the legal situation of the property you have decided on buying before signing the private contract. This report on title will allow your lawyer to ascertain whether:
- The developer is creditworthy
- The developer owns the land where the property is to be built
- A valid building licence has been issued by town hall
- There are any challenging planning issues surrounding the development
- The construction site complies with Spain’s Coastal Law
Ordinarily, on signing a private purchase agreement you are expected to make a down payment, as well as approximately 35% of the final sales price in the stage payments, which will be deducted from the final sales price upon completion. This amount of money is non-refundable, in the same way as the deposit.
It is of the utmost importance that the deposit and all stage payments should be secured by bank guarantees. This will safeguard your money in the event the development is not finished or should the developer file for bankruptcy.
Bear in mind that a developer cannot amend the delivery date of a property as agreed in the private contract without the buyer’s written authorisation.
The signing of the title deed before a Notary Public is what is referred to as completion, and it is when the balance owed on the property is paid off. If mortgage finance is required a second deed is also signed called a mortgage deed.
It is strongly advised never to complete the sale before having a copy of the Licence of First Occupation. Otherwise it will mean you are unable to take out a mortgage, unable to benefit from official utility supplies, unable to rent the property, potentially responsible for planning illegalities and reduced offers from future prospective buyers.
Employing an experienced and impartial lawyer pays for itself with all the money you stand to save by avoiding the most common pitfalls involved in buying a property in Spain.
Make sure you are assisted on your house-hunting by reputable experts (such as a long-established real estate agency, a reliable mortgage broker or a seasoned lawyer) to benefit most from the wide range of available bargains.
And finally, it is important you are not pressured into completing and take your time to fully assess the information you are being given.
Gabriella Mary Trussler Rowland
4408 Ilustre Colegio de Abogados de Almería
por Gabriella Trussler | Feb 13, 2017 | Contracts, Property
I am sure you have all heard of the infamous “floor clauses” (“cláusulas suelo”) contained in Spanish mortgage contracts. However, as much as I am sure you have heard I am just as sure that you are not entirely clear on what they are or what they entail. This confusion, which already exists in the Spanish community and more so in the foreign community, is due to huge amount of contradictory, and sometimes outright false, information spread by the media. Though I must admit this is not helped by the zigzag course taken in Spanish judicial precedent.
I hope this post will help to clarify the situation and any doubts you may have as to whether they could apply to you, and how to submit your claim.
What is a “floor clause”?
A “floor clause” is a clause of a mortgage contract that establishes a minimum for the mortgage payments, regardless of whether the ordinary interest agreed upon with the financial institution are below this minimum.
The majority of mortgages given in Spain apply an interest rate which is fixed according to a reference rate, usually the Euribor, although there are others, plus a spread that varies depending on the financial institution in question.
Therefore, the “floor” of the mortgage exists when there is a minimum fixed percentage, even if the interest resulting from the Euribor and the spread is less. In addition, there is also a mortgage “floor” when a minimum value is assigned to the Euribor, despite its market value being inferior.
On some occasions a mortgage “roof” may also be applied, maximum amount of interest to be paid. However, this is usually, quite cleverly, far above the normal market values, so the consumer never benefits from this clause.
Are “floor clauses” illegal?
Due to all the contradictory information and rumours that have been spread regarding “floor clauses” there is a lot of confusion on this subject.
“Floor clauses”, in themselves, are not illegal. These clauses are deemed illegal when they are applied unfairly and when the financial institution does not properly inform the consumer of their presence in the contract. Banks are, therefore, obliged to explain the terms of the mortgage contract in a comprehensive way to all kinds of consumers.
There is a series of legal precedent that outlines the exact conditions that need to be met so as to consider that the financial institution has complied with this obligation, and they are fairly demanding. If these conditions are not met the clause will be considered null and void.
Confusing precedent surrounding “floor clauses”
Lower courts started ruling the removal of “floor clauses” from certain mortgage agreements in 2010, but precedent was not created until 2013 when the Supreme Court ruled non-transparent “floor clauses” to be null and void. This meant that the amounts overpaid by consumers due to the application of these clauses were to be returned.
However, another Supreme Court ruling of 2015 created outrage among the legal community by ruling that the amounts overpaid by consumers under these clauses would only be able to be claimed as far back as the date of the 2013 ruling. This political decision clearly contravened a basic principle of law, which is that something that is null and void is as if it had never existed from its origin, and consequently the consumer would be entitled to the total amount overpaid.
What does the EU have to say?
On the 21st December 2016 the European Court of Justice ruled against the Spanish government on the matter of “floor clauses”, ruling that any claims granted must be fully retroactive, and consequently the entire amount overpaid by the individual from the origin if the clause is to be repaid. This, of course, was the logical legal conclusion.
What is the current position?
The Spanish government passed an act on the 20th January of this year, by which it approved urgent measures of protection relating to “floor clauses” to benefit the mortgage holder, the most important of which are:
- Compulsory negotiation: Banks are now required to enter into some form of negotiation with the customer before resorting to court. The banks have 3 months, from the date the claim is submitted to them, to make any offer for an out-of-court settlement they intend to make.
- Notification and calculation: Banks are now required to inform their customers if their mortgage contains a “floor clause” and present them with a calculation of the amounts overpaid (even if they do not make an offer of said amount). This calculation serves as considerable ammunition in the event of a court case.
If you have been the victim of the unfair application of these types of clauses in your mortgage agreement, you may be able to recover a significant amount overpaid over time and, just as importantly, have the clause removed from your contract for the rest of its duration. This can result in lifting a great financial burden, as the amounts overpaid due to these clauses can be significant.
As making this kind of claim requires following a recognised procedure, and could result in legal action having to be taken, it is important that you obtain legal advice from the very beginning, so that you are in the best position to understand your chances of success and how much you could be entitled to.
Gabriella Mary Trussler Rowland
4408 Ilustre Colegio de Abogados de Almería
por Gabriella Trussler | Sep 18, 2016 | Property
The negative effects of the financial crisis on Spanish society are well known, with the high number of bank
repossessions being the most widely publicised side-effect. Whilst this has created a social problem, it has also given way to a huge opportunity for property buyers and investors in Spain thanks to the incredibly low prices these repossessed properties are being offered at, with an estimated increase of 15% in property sales for this year. (más…)