The
economic crisis has hit Spain particularly hard and the subsequent high
unemployment and economic hardship in this country has led to record levels of
mortgage arrears and evictions.
The recent Law 1/2013 of May 14, for mortgage holders, is intended to respond
to the growing demand to help home owners that are encountering issues with
their repayments, and those that might be facing possible eviction.
The new law
is complex but it is fair to say that it goes someway to reversing the recent trend
in evictions that have led to tragic suicides and instead begins to help home
owners find a solution with their lenders that means they can stay in their
homes.
For example, the new law offers the potential to suspend immediately and for a
period of up to two years evictions in cases in which the creditor (the bank)
is awarded the residence of the debtor.
This exceptional measure in reality refers to owners that are at risk of social
exclusion. In order for home owners to take advantage of this protection, they
need to meet a number of criteria. For example, these borrowers even in
negative equity, would need to continue to make some payment based on a minimum
interest rate.
In addition, this revised law means:
• The law establishes a limitation
for setting default interest, which may not exceed three times the legal
interest and may only accrue on the outstanding capital. It prohibits the
capitalisation of interest on arrears.
• In the case of extrajudicial sale
of the mortgaged property before a Notary, the sale must appear in the official
gazette, so genuine bidders can make offers
• If it is considered in a court
that the borrowers are being treated unfairly by their lender, the court will
bring both parties to a hearing:
• Costs are limited to 5% of the
mortgage in arrears
• The home owner is now liable for
no more than 50% of the debt of the mortgage
• For those wishing to bid for a property in arrears, the deposit is reduced
from by 20% to 5%.
• Once the auction is held and approved, the winning bidder has 40 days to
deposit the rest of the price (previously 20).
• If there are no bidders at the auction, at least 70% of the value of the
mortgage must be covered where it is a primary residence
• The type of auction may not be less than 75% of the appraised value to be
contained in the articles of incorporation of the mortgage loan.
• The bank cannot foreclose unless the mortgage is at least 3 months in arrears
These
measures are intended to make it fairer for the home owner to recover their
situation in a time of crisis.
It also
gives home owners the right to negotiate with their bank to find a sustainable
solution for their mortgage debt. The options for borrowers have been extended
so that mortgage holders have the right to live in the property for two years,
and pay 3% of the interest.
These new measures are not applicable when there is an ongoing foreclosure
proceeding and an auction date has already been agreed.
For full
details of the new mortgage law and how home owners can protect their rights,
please contact De Cotta Law.
De
Cotta Law (De Cotta McKenna y Santafé)
Head
Office Spain (Mijas):
Centro Comercial Valdepinos 1 y 3ª
Urb. Calypso
29649 Mijas Costa (Málaga)
Tel.: +34 952 931 781
Fax: +34 952 933 547
E-mail: [email protected]