What are the mortgage costs that the banks will need to repay?
By Armin Gutschick & Anja Sämann-Gutschick
There has been much talk in the press recently about the latest rulings stating that the banks should have to pay back to their customers at least part of the additional costs of setting up a mortgage. Until recently, there was a clause in the general conditions of mortgage loans that determined that the client, as the borrower, had to assume all additional costs. These include, primarily, the costs for the notary, the land registry and the accountancy, as well as the “impuesto sobre actos jurídicos documentados”(IAJD), a tax paid by the buyer at the time of closing.
In this regard, at the end of 2015, the Supreme Court established in a ruling that, according to the law of consumer protection, banks are prohibited from imposing additional costs which, in view of their legal nature, should be paid by them. However, this decision does not signify automatically that the banks will have to bear these costs. The court concluded only that there is a possibility that the clients will be reimbursed the additional expenses. In each particular case, the corresponding contractual clause will have to be examined. Only those clauses that indiscriminately pass on additional expenses to the borrowers are illicit and therefore void.
The banks have been arguing that the clauses in their contracts are written in a transparent and unambiguous manner and thus have full validity. However, it is the banks that actually require the lien of the debt placed on a title deed, not the borrower, so they should be responsible for the associated fees. This was backed by the Supreme Court that concluded that the only party with an interest in getting the loan certified by a notary is the bank as this will allow them to initiate foreclosure proceedings if the borrower defaults on payments. It stated that “the party with the main interest in the documentation and the inscription of a mortgage-secured loan is, without a doubt, the moneylender,” namely the bank.
In the case of a standard mortgage, fees for the notary, the entry in the register and a legal adviser come to around €1,000. However, the IAJD, which in the Balearic Islands is set at 1.2% of the amount of the mortgage, can easily amount to several thousand euros on top of that. The reimbursement of this tax, therefore, would present a clear economic benefit for the home buyer. Nevertheless, the banks argue that, according to the law, the borrower who should bear the cost of the IAJD. In October 2018, the Supreme Court ruled in favour of the consumer, stating that the lenders should be liable for mortgage stamp-duty payments. It seemed that this was the position adopted by a majority of the Supreme Court judges but instead, in a new and controversial judgment on 6 November 2018, its decision was reversed to state that the borrower should have to pay the tax. A few days after this, in a clash with the Supreme Court, the government announced that it would override the decision so that banks will have to foot the bill for future stamp-duty payments on property purchases.
When taking out a mortgage, one should read the clause relating to the costs carefully to avoid any confusion over the recovery of additional costs. On one hand, the clauses that relay bank charges to private customers are illegal and therefore null and void, but on the other hand, presumably, there are clauses that differentiate sufficiently between bank charges and customer charges. As a first step, the consumer should attempt to claim any fees from their bank and if they are unsuccessful, they should consider turning to the courts. It should be possible to claim fees going back four years.
In short, the claim of additional mortgage costs will be more complicated than it may seem at first sight. Banks can count on the time factor and a judicial process for them is simply a compensatory arrangement. They definitely won’t go out of their way to clarify the facts for their clients. Therefore, it is advisable to hire a lawyer for any of the preparatory work even in the case of an extrajudicial claim. •