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El blog de Maria

Your daily Spanish Law reporter. Have it with a cafe con leche.

Legal tip 1064. More on Illegal mortgages
12 November 2013 @ 20:04

Not because of ground floor neither because mortgages being granted to a buyer on a house without First Occupation License. 

Illegal mortgages for being knowingly granted by the Bank to  someone who is not the holder of all ownership rights on the house. Of course to someone who is a debtor of the Bank and therefore, Bank is financially benefitted by the illegal granting. 

 Banks taking advantage of the fact that off plan purchase contracts do not get registered in the land registry.

Another angle of corrupt behaviour of some Banks during the real estate boom and over financing.

Again, a behaviour that can be punished by good aplication of Law 57/68

Battle keeps being on... and will be for many years ahead


Legal advice

Street of Tarifa, Cádiz, Costa de la Luz, Southwestern Spain, at

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ads said:
13 November 2013 @ 12:10

Have I understood this correctly Maria.... that Banks are issuing mortgages to new purchasers on properties that were already contracted out to offplan purchasers who for whatever reason have not completed nor received return of their original deposited monies? I'm confused so could this be explained by an example please.
Many thanks.

Keith110 said:
13 November 2013 @ 14:15

Hi Ads

Maybe they are.........who knows...??

But that is not what is being described above. This blog post relates to the following situation:

Bank A provides funding to a developer for an off plan project. Bank A is a preferential creditor if ever anything went wrong.

Mr & Mrs X then reserve & sign a Purchase Contract for a property on the development and make their off-plan payments to the developers bank account at Bank A. Bank A fails to issue or verify the existence of the corresponding Bank Guarantees........nobody bothers about that........

The house is completed (with or without First Occupation Licence - nobody bothers about that) and Mr & Mrs X go to the developers office with the Agent to make the final payment.

Mr & Mrs X go to the Notary with 'their' Conveyancing Lawyer (yes...the Lawyer recommended to them by the developer and Agent.......all very cosy.....) to sign for the property.

Mr & Mrs X are told they will receive their Escritura (deeds) in a few months time.

Mr & Mrs X go regularly to 'their' holiday home in the sun year after year and always make a point to visit 'their' conveyancing Lawyer to ask for the Escritura..........surprise surprise....they never get it.

Some years later Mr & Mrs X are informed by 'their' conveyancing Lawyer that Bank A - yes the one who was funding the developer and receiving the off-plan payments without issuing or verifying the existence of the legally required bank guarantees - wants to repossess the house due to there being an unpaid builders mortgage on the house.

Mr & Mrs X's house that they paid in full for to the developer via the bank account at Bank A will now see their house repossessed and sold at Auction by Bank A unless they pay Bank A the value of the outstanding developers mortgage.........

Don't forget as I said at the start.........Bank A is a preferential creditor.

Many of these 'constructors mortgages' that are given to developers during the construction stage of a property are never paid off by the developer - the Bank never checks the status of the property..... And more alarmingly many of these 'constructors mortgages' are advanced or topped up after the off-plan property is completed and after the buyers have paid in full for the property to the the presence of the Agent and at the Notary with 'their' conveyancing Lawyer. couldn't make it up - but sadly it is true.

And this is NOT an isolated case..........


ads said:
13 November 2013 @ 21:56

Sincere thanks Keith.

How ironic when you consider that Ley 57/68 and its INALIENABLE RIGHTS was introduced to protect consumers and that Banks that failed to abide by this law are now trying to supersede this with their claims as preferential creditor.

Why is this extraordinary scam not being blocked by the Spanish Justice system at preliminary hearing stage when it is such an obvious violation of consumer rights?
I have to ask the question why should an innocent consumer have to defend such an incredulous scenario where they have already paid for a property as witnessed by Spanish legal representatives (notary and lawyer)?

Innocent consumers should not be made the scapegoat for what is indisputably lack of regulation of Banks coupled with compromising administrative deficiencies (some would suggest incompetence), relating to failures in the land registry system and non-issuance of legal deeds.

The sad aspect to this is it points to yet another instance in Spain of the innocent consumer being treated as a “pawn” in a game of corruption, where the words “good faith”, “trust” and “legal certainty” have been completely abandoned.

As these instances grow, the forewarning message “buyer beware” is creeping ever closer to a forewarning message “do not buy in Spain”, so long as retrospective action of this nature against unsuspecting and innocent owners is allowed to continue without swift compensation structures in place, or provision of early preliminary rulings that eradicate the requirement for long drawn out judicial proceedings (not to mention blighting of property in the interim).

I have to sincerely thank you both, Maria and Keith, for the courage and educative postings on this forum, and I still live in hope that this will serve Spain well in the future.

It’s the here and now that I remain fearful of when we witness so many exposed to such stressful, unjust and financially compromising retrospective actions.

May I ask another question please?
Following this crazy logic through…..…..If the developer never forwarded purchasers’ deposited monies to the Bank, could these deposited amounts in theory also be at risk from retrospective action for those who completed on properties (without the issuance of deeds) and subrogated the developer’s mortgage for the remainder? Might their properties also be blighted in the interim?

Doesn’t this need to be swiftly exposed to not only the Spanish authorities but also the European Authorities, who, as I understand it have a working party already looking into Spanish Property Rights.

ads said:
05 August 2014 @ 15:20

Do you have any legal updates on this scenario where constructor's mortgages were not paid off by the developer when the purchaser paid in full for the property, or where a developer illegally topped up their mortgage after the offplan property was completed upon? Have the Banks in the interim been prevented from repossessing or auctioning the properties?

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