The British newspaper The Times has published an article by León Fernando del Canto on the consequences, for British citizens owning a property in Spain, of the ECJ’s advocate-general’s decision with regard to the floor-clauses’ no retroactivity:
Bad news for Brits with a holiday home in Spain
The European Court of Justice’s advocate-general says homeowners are not entitled to claim back for overpaid mortgages.
As you prepare to jet off for some summer sun, beware of getting carried away and coming back wanting to buy a holiday home abroad.
Buying a bolthole in sunnier places can turn into a legal nightmare, with prospective homeowners taken for a ride with scams – and buying a home off-plan can also be fraught with risk as developers fall into financial difficulties and the promised complex is never finished. Deposits are lost and consumers can spend thousands trying to recover lost funds. Post-referendum, the picture is even less clear for those owning, or looking to buy, a holiday home abroad.
Last week many Brits, with a holiday home in Spain got a further piece of bad news -the European Court of Justice’s advocate-general, pressed by the banks, has given his opinion that European homeowners are not entitled to claim back for their overpaid mortgages, reiterating a 2013 cap on claims.
This opinion will be seen as a missed opportunity for justice for many Spanish and British homeowners -although we still expect that the ECJ will not be biased by his unfair opinion and may rule in favour of consumers, one of the tenants of the European Union.
Earlier this year, a court in Madrid ruled that these confusing and controversial mortgage-floor clauses, which prevent consumers from benefiting from a drop in interest rates, were null and void, after a successful class-action claim. These mortgage floors have unjustly benefited the Spanish banking system, to the detriment of consumers who purchased a home in recent years.
What we have seen in Spain is, to use current terminology, a “Bankxit”, with the Spanish banks trying to avoid European law. It wasn’t until April 2015, when the judge of the Granada Commercial Court raised the issue of the limitation of retroactivity to the Court of Justice of the European Union, that the Spanish banks put aside a significant provision to deal with the claims.
A big issue with this case and the potentially huge number of claims it could dive rise to is the precarious financial position some Spanish banks believe it will put them in. Indeed, the Bank of Spain has previously warned: “…the total retroactive cancellation of ground clauses would undermine the ability of banks to contribute to national recovery and welfare, damaging the welfare of citizens…”.
This week’s opinion from the advocate-general is a defeat for the common man and will badly affect many of the estimated 500,000 British citizens who own property in Spain -it is entirely unreasonable and unfair to put a limit on retroactivity. In essence, the courts and Spanish banks are expecting consumers of banking and real estate products to give up their rights; in fact transforming these rights into a new bailout for Spanish banks.
We expect this decision will be challenged, especially as it goes against Article 6 of Directive 93/13/EEC, which states: “it is not possible for national courts to moderate the return of amounts paid by consumers -to which the professional is bound- in application of a clause declared null due to lack of information and/or transparency”.
Buying a holiday home abroad, especially in these fraught times, can be a stressful process and unfortunately, this decision goes no further to reassure Brits that they’ll get a fair deal when investing in a Spanish bolthole in the future.
León Fernando del Canto is a barrister and managing partner at Del Canto Chambers.