Spain: Mortgage pain in Spain - Peter Esders, Chebsey & Co

Know what you are letting yourself in for

I was speaking to somebody recently who had a problem with a property in Spain. They had bought a property in Spain a few years ago. It doesn’t look like they used a lawyer when they bought the property but weren’t entirely sure. In fact they think that they had a lawyer because the estate agency told them that they had one, but they never had any communication from any lawyer and “assumed” that the person leaving the Notaries office immediately before they went in was their lawyer.

Anyway, the purchase of their property went through and they were happy with the property for a year. Unfortunately after the first year the fixed rate mortgage ended and the mortgage payments went up significantly. For some reason this was a surprise to them as they didn’t realise that their mortgage would change after the first year.

After the rate changed the couple struggled on for a year making the mortgage payments but in the end ran out of money and ended up handed the property back to the bank and walking away. By this stage they were something like £150,000 down on the deal and had lost their life savings.

Now you would have thought that that would be the end of the story. However, a year after handing the property back to the bank the couple decided to contact me to see whether there is anything that they could do to recover the money that they had lost. Their initial reaction was to go after the Estate Agent who sold them the property. I saw a couple of problems with this tactic. Firstly the Estate Agent was there to sell the property. They are not lawyers. They are not mortgage advisers. They sell the property and get paid a commission for doing so. Secondly, and probably most decisively, the Estate Agent had long since gone out of business and closed. What on earth is the point in going after a company whose responsibility it isn’t and who no longer exists? That is right – none.

What amazed me about this situation was the complete lack of understanding about what actually happened and the failure to take even very basic steps to protect their situation at every single stage. The clients could not tell me who arranged the mortgage. It appears that they took no advice on the suitability of the mortgage. I suspect, although I may be wrong, that they took over the existing mortgage on the property. This can be an easy way of doing things but doesn’t necessarily mean that the best mortgage is obtained. If they had taken advice they would have known about the change. The clients couldn’t tell me who their lawyer was. In fact there is some doubt as to whether they actually used a lawyer at all. They “assumed” that their lawyer was the person who left the Notaries office before they went in was their lawyer but had no evidence to back this up. When the situation with the mortgage came to light they didn’t speak to anybody or take any advice. When they got to a stage where they could not afford to make the mortgage payments any more they didn’t speak to anybody to take advice. When they handed back their property they didn’t speak to anybody or take any advice.

Then comes the most astonishing thing. One year down the line, after the whole issue is resolved they think about taking advice and want to do something to protect their interests. If they had come to us before handing back the property we may have stood a chance of doing a deal or coming up with some sort of solution. After the event is impossible. I don’t think I have ever seen a better example of trying to shut the stable doors after the horse has bolted in my life.

So why am I telling you this? I suppose mainly to remind people that they should do things in another country just like they would do at home despite the differences in the systems. I very much doubt that this couple would have acted in this way back home.

Peter Esders

Peter Esders is a UK Solicitor who studied Spanish law in Spain and who has been dealing with Spanish law for over 15 years. He can be contacted at Chebsey & Co, 51 London End, Beaconsfield, HP9 2HW