El blog de Maria

What is the EU deciding with regards to assignment of mortgage debts to hedge/vulture funds? 

On 20 April 2018, the European Commission announced the admission for processing of the complaint filed by a Law Firm in Spain on behalf of 12 holders of Spanish mortgages for non-application of European law on credit transfer.

The European Commission informs that the conclusion of its investigation could lead to "an infringement process against Spain" for non-transposition or defective transposition of the community law.

What was the claim about?

The complaint states that in 2007, in the midst of the financial and real estate crisis, the Mortgage Law was reformed, and banks were then exempt from communicating to the mortgage holder that the mortgage debt had been assigned to a third party ( art 149 of Mortgage Act)

The regulations of the Mortgage Act also allows the borrower to renounce the right to be informed regarding the assignment of the mortgage and  this is now being abused by banks as they include a clause in the Mortgage contract by which consumers renounce those rights without full knowledge of the possible implications.

The complaint states that Spanish legislation is incompatible with art. 2 of the credit directive (2008/48/CE) that establishes that the consumer is informed in case the financial institution decides to assign its credit.  The same is mentioned in the recent Mortgage Directive 2014/17/EU which, despite not being transposed to Spanish Law, is applicable in Spain by the principle of primacy and effectiveness of European law.

Why is it important for debtors to know about the assignment of their debts?

The information on the assignment of a loan is very relevant because it is the only way to be able to exercise the right of pre-emption and buy-out contemplated in 1535 of the Civil Code.

The Credit Directive affirms that assignment of credits can never weaken the consumer's position. By not knowing who its creditor is, the consumer loses the opportunity to obtain a significant discount on his debt, which is enjoyed by a third party, a vulture fund, in an unjust enrichment.

Have financial regulation bodies in Spain supervised this?

The complaint also mentions passivity of (1) the Spanish National Stock Market Commission, which, according to lawyers directing the claim procedure, does not offer the transparency that is due to theses assignments and (2) of the Bank of Spain which allowed in its Circular 4/2004 for the transferred assets not to leave the balance sheets of the banks, encouraging a practice that only benefits the vulture funds and that seriously harms consumers

The famous street "Calleja de las flores", in Cordoba, Southe of Spain

A law from 1968 and the interpretation of that law by Spanish judges and courts in favor of off-plan buyers of first or second homes in Spain results in the return to six claimants the savings they lost during the real estate crisis in Cala del Sol, San Fernando.

At the completion date as stated in the purchase contract, the building licence had not even been issued and the developer Aifos then entered liquidation.

The Judgment states that purchase contracts were cancelled during the Bankruptcy proceedings as a result of the approval of the Liquidation Plan by the Mercantile Court; and it is also concluded as proven that the claimants had not received any refund from that procedure.  The defendant entity, Banesto, now Banco Santander, appears as a creditor in the aforementioned bankruptcy proceeding, thus having full knowledge of the buyers off-plan deposits.

The Judgment also states that it has been proven that BANESTO signed a General Guarantee with the entity AIFOS and that although none of the claimants received an individual guarantee, there are many individual guarantees issued in favor of other buyers on the same development.

Although the Bank tried to evade its responsibilities in the trial by alleging the speculative nature of the purchases and therefore, the non-conformance with Law 57/68 (law that protects first or second home buyers), this argument was rejected as it was not proven and the burden of proof is on the party that alleges it.

The bank also alleged a time limit on these actions of 2 years; however that argument was also rejected by the judge in favour of the 15-year statute of limitations.

The bank is also ordered to pay interest from the date Aifos declared bankruptcy, a limit that may be appealed by the claimants since the right to be paid interest, according to law and jurisprudence, is from the date of payment to the developer’s bank account.

The costs are also imposed on the Bank.

Almond trees in Mallorca (Spain)

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The development by Construcciones de Ideas Arquitectónicas Alicantinas SL (IDEARCO) should have been completed in 2009 and was still not completed in 2013 when the Lawsuit was filed.

The developer abandoned the development, leaving buyers without guarantees and therefore, unable to recover the off-plan amounts paid. Nor did the developer appear at the trial.

In a situation of abandonment as described, it is only thanks to the interpretative development of Law 57/68 of recent years, driven by the efforts of Keith Rule and the CostaLuz Lawyers-DeCastro Law Firms, that the buyers of this development can recover their money, which in many cases are their life savings.

Banco Popular is condemned to refund the amounts that are proven to be deposited by the agent Atlas International in the developers accounts opened in the Bank. The judge in Alicante cites the Sentences of the Supreme Court that contain the doctrine relating to these claims.

Interest was awarded from the date of payment of the off-plan deposits to the developers account and legal costs were also imposed on the Bank.

Field of lavender in Brihuega (Guadalajara. North of Madrid, Spain)

Caixabank condemned to return off plan amounts in Murcia development Frondoso Valley by liquidated developer Promilorci 

The claimant only had a photocopy of his individual guarantee but that was brought to Court by CostaLuz Lawyers-DeCastro teams as valid for the refund of his off-plan amounts.

The Bank's strategy to defend the claim alleging unfair delays and speculative profile of claimants was dismissed by the Judge.

- Unfair Delay: The fact that the claimant has been previously litigating for the return of these amounts by the liquidated company Promilorci, makes the date on which the action is filed against the bank as perfectly reasonable

- Investor / speculator profile of the claimant: The speculative character has not been proven nor can the Bank avoid applying the contractual clause that protects the purchase contract with the law 57/68, although the claimant was a real estate professional.

Interest from the date of payment of the off-plan deposits to the developer’s bank account was awarded in addition to the full principal amount & costs.

Los Pilones de la Garganta de los Infiernos in the Valley of El Jerte (Cáceres. South of Spain)