The recent Supreme Court ruling regarding mortgage loan expenses

It is well known that in recent years banks have received a huge flood of complaints about some of the products that were marketed to the general public, with Bankia being the most affected by this trend.

Obviously, mortgage guarantee loans cannot (and should not) be understood as “banking products”. However, these have also been in the consumer’s sights for many years now in what is undoubtedly a judicial ‘Crusade’ against the Banks.

These claims focus on the fact that these mortgage loans include abusive terms whose insertion is imposed by the lender.

Object of the claims

In view of the judicial decisions that have been handed down in recent years in banking matters, more and more consumers have chosen to use professional firms which, either in a specialized or in a “massive” manner, so to speak, have taken over the courts of Spain with their claims in tens of thousands of proceedings.

The content of these proceedings in the area of mortgage loans always came to claim the nullity of the clause regulating the distribution of mortgage costs, and the return of the following expenses:

• Notary fees.
• Administrative expenses.
• Amount of the property’s appraisal.
• Expenses derived from the registration of the mortgage.
• Property Transfer and Documented Legal Acts Tax (ITP-AJD).

Case Study Analysis

Although at the beginning, everything made us suppose that the demands for the mortgage expenses were going to pay off with a massive defeat for the banks, as it happened with the floor clauses or with financial products such as the famous “Acciones y Participaciones Preferentes de Bankia” or the already forgotten “Valores Santander”, the reality has turned out to be much more nuanced.

As we said at the beginning of this article, many have been the consumers who, after the collective action filed by the OCU following the STS 705/2015 of December 23 decided to take legal action against the banks.

And the reality is that from the beginning, there were many judgments in the First Instance that denied the consumer the restitution of the amount of ITP-AJD, on the understanding that there is no abuse with regard to the payment of it. This is always in accordance with the provisions of Article 8 of the revised text of the Law on Transfer Tax and Stamp Duty, which states that: “the party acquiring the property or rights in question shall be obliged to pay the tax as a taxpayer, regardless of the stipulations established by the parties to the contrary: a) in transfers of property and rights of all kinds, the party acquiring them (…)

With regard to the outcome of the appeals, which have been filed by both parties, the criteria of the Provincial Hearings were far from unified with regard to the AJD, although it is true that there was a slightly more pronounced tendency to reject the claims of the ITP-AJD.

The Sentence nº 147/2018, of March 15, of the Civil Chamber of the Supreme Court

The one that has come to settle the issue, has been the Ruling No. 147/2018 which has led  to a change in the prevailing trend in recent years, which was the absolute protection to the consumer.

Because, although the aforementioned ruling partially upholds an appeal filed by a consumer and declares the clause on costs arising from the mortgage as abusive, it makes a very relevant distinction in this regard to the different concepts claimed:

• The costs of the stamp of the notary’s office will be borne by the borrower (usually costs ranging from 10-50 €)
• The costs of authorized copies will be distributed between borrower and lender. For this concept, approximately 150 to 200 euros are usually claimed.
• The agency costs will be paid by the lender. It is an average of between 200 and 400 euros.
• The bank will also pay for the appraisal of the property and the Land Registry.
• But the important thing is that the payment of the Transfer Tax and Documented Legal Acts corresponds entirely to the borrower and this is the truly relevant item since it usually represents up to 75/80% of the amount of the claim.

Impact of the sentence ruling

As we can imagine, the impact has been double;

(i) On the one hand for consumers who see their compensation reduced by 75-80% of the expectations that had been generated (or that had been generated for them)

(ii) And on the other hand, for specialized professional firms, so famous that they do not even need to be named, since they lost in one fell swoop an important part of their sources of income. They lost their costs, since the claims are not going to be estimated in their entirety and they lost the amount on which to practice their success fee.

For this reason, the claims for mortgage expenses, presented before the Supreme Court ruling, have become – almost – a headache for everyone. Crossroads from which they are now trying to get out, using all possible procedural weapons, so that most of the claims are being modified in the same acts of the Preliminary Hearing and Trial, abandoning the ITP-AJD petition for compensation.

Most of the specialized law firms have opted for withdrawal (instead of waiver) in the hope that, in the event of a hypothetical and future change in jurisprudence, they will be able to claim again and res judicata cannot be alleged.

However, this is not being very successful either, since many judges do not admit the modification of the plea of the lawsuits, and in any case, even if the modification is admitted, it does not have any incidence on the sentence in costs.

Conclusions

• Although the jurisprudential trend of the Provincial Hearings was uneven, the Supreme Court Resolution has unified the jurisprudence, determining which expenses are recoverable and which are not, clearing the doubt about who should be in charge of the payment of the ITP and AJD.
• Such has been the impact of STS 148/2018, of 15 March, that many professionals have been forced to modify the initial petition of their claims, even attempting to do so at the time of the trial itself. Thus, by way of withdrawal (not renunciation), the firms defending consumers are waiting for their chance to claim the amount of the ITP and AJD in a new assault in the fight against the banks, in the face of a hypothetical change in case law that would come from a resolution of the Court of Justice of the European Union.

If this article has been of interest, we also suggest you to read the following article published on our website: The new Mortgage Law (2019)