Have you got a mortgage loan in Spain? Are you wondering whether you should claim your Mortage Stamp Duty or not?
[alert style=”warning”]The Spanish Supreme Court has decided 15 to 13 in a plenary session that borrowers should pay the tax but Government changes the law to make banks pay.[/alert]
That’s a very good question. It all comes down to this:
The Plenary of the Supreme Court will decide on November 5 if it confirms the “jurisdictional turn” of the High Court after the judgment issued by the administrative court of this body that ruled on October 16 that Mortgage Stamp Duties should be paid by the banks instead of the clients.
Yes, you read correctly: Mortgage Stamp Duties (Impuesto de Actos Jurídicos Documentados) might end up being paid by the banks instead of you, the client.
So, continue reading to clarify what at best, can be described as a rather complex state of affairs!
Background on the Stamp Duty in Spain
Back in December 2015, the Supreme Court determined that a clause written in all mortgages in Spain was null because it was abusive. In this clause the Bank imposed on the user 100% of the costs of formalising the mortgage, i.e. Notary, Registry and Stamp Duty.
Once this nullity was declared, the debate was opened. What should be returned to each user?
Some judges said that everything, including the stamp duty. Others offered different versions.
And the Supreme Court’s last decision clarified that the tax must be paid by the Bank.
What changes the Supreme Court’s judgement on Mortgage Stamp Duties of October 16th?
The Supreme Court’s judgement dated October 16, 2018 issued in the cassation appeal 5350-2017 at the request of the municipal housing company Rivas Vacia Madrid S.A. against the community of Madrid, dictates that the mortgage creditor is the payer of the legal act documented.
What the Supreme Court is doing is moving the weight of the stamp duty from the borrower to the bank. The borrower is no longer the passive subject, the banking entity that grants the loan is – having the latter the duty to pay that tax.
What are the reasons given by the Supreme Court for annulling the stamp duty?
1st reason: The lender is the only one interested in having the mortgage recorded in a public deed.
Who benefits from the registration of the mortgage?
For the mortgage to be valid, it must be recorded in a public deed. In addition, this public deed must be registered in the property registry.
The mortgage loan is granted in public deed with the sole purpose that the mortgage can have access to the property registry because otherwise the mortgage would not exist in itself.
This registration requirement is the first reason given by the Supreme Court to confirm that the bank must pay the stamp duty, because it is the mortgage lender who benefits from this registration.
2nd reason: The tax base is not just the loan amount.
What constitutes the tax base of the documented stamp duty?
The tax base of the documented stamp duty is not only the amount of the loan, but it is constituted by the loan amount plus all the amounts for which the borrower is responsible in case of default on the loan payment.
In other words, the tax base is constituted by the sum of:
- The total loan amount itself
- Legal interests
- Legal costs and expenses incurred by the entity if it had to exercise the mortgage action if the client did not pay their fees.
3rd reason: The bank is the only beneficiary and interested in the mortgage.
The mortgage – the mortgage loan contract – is a complex contract stating two main legal matters.
On the one hand the loan contract and on the other hand the constitution of a real guarantee, which is the mortgage.
The mortgage is a burden on a property that responds in case the first contract is not paid and that guarantee only and exclusively benefits the creditor.
Then, as it is constituted to guarantee the creditor who is the only beneficiary and the only interested party, the Supreme Court has concluded that the interested party is the same as the acquiring party of a right. In this case, the party acquiring a right and the interested party are not the same.
The borrower is interested in obtaining the loan.
In the mortgage, the bank is the main interested party because without that mortgage and without the granting of the deed it could not directly execute the debtor should he or she not be able to meet his or her repayments.
In addition, the civil procedure law has a specific process covered by the mortgage action and the only party legitimised to execute it is the bank creditor – in this case, the bank.
This law grants these mortgage lenders a special procedure that allows them, in case of non-payment of 3 or more instalments, to directly claim the property or property that has been mortgaged.
These are mainly the three reasons why the Supreme Court claims specifically that what is now appropriate is to accept this new criterion and correct and modify the previous doctrine.
“The banking entity must pay the documented stamp duty and not the person who receives the loan, as it has been done thus far”, summarises Águeda Maldonado, lawyer expert in litigation against banks. “But to claim it we will have to wait for the full sentence.”
What expenses can you claim if you have or have had a mortgage in Spain?
Anyone who has or has had a mortgage can claim the expenses, regardless of when it was signed or cancelled.
The costs of formalising the mortgage are the amounts derived from the payment of notary, agency, taxes and appraisal that you paid when you signed your mortgage, including the opening commission, if any.
- NOTARY invoice corresponding to the Mortgage Loan Deed.
- PROPERTY VALUATION expenses.
- Invoice from the PROPERTY REGISTRY for the registration of the Mortgage.
- GESTORIA expenses, if imposed by the bank.
- DOCUMENTARY STAMP DUTY TAX. This is the most controversial item pending the Supreme Court revised decision on November on who will be responsible to pay 5.
Does it sound like a legal nightmare? It can be! But it’s potentially a positive step forward for mortgagees! So, if you want to find out how you can be prepared should the Supreme Tribunal decide on your favour, talk to us!
The procedural team at Fuster & Associates methodically analyses each mortgage loan in depth and any other abusive clause that might be included in your contract.
We also verify that you are not affected by the “Floor clauses” and currently paying more than what you should.
Talk to us obligation free. Our moto is “no win, no fee” for our clients!
We want to help you navigate all the legal complexities that come with your home buying in Spain, but this article is legal information and should not be seen as legal advice.
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