6 August, 2009

The Poor Man’s Solution

Mike Walsh

Handing in the keys by hard pressed homeowners unable to meet their mortgage payments can lead to collateral damage that worsens the problem.  The banks, the biggest unwilling estate agents in the UK and Spain are not happy. Repossession proceedings are time consuming and expensive. The procedure can take up to three years and there is the additional haemorrhage of lost interest and legal fees.

The legal procedure known as a Dación en Pago may be a better option for the defaulter who may otherwise face years of legal wrangling and even bankruptcy: The outstanding mortgage is still an obligation as are the additional costs in the event of default.

Put simply it means surrendering the keys to the bank by formal declaration before a notary. In return the bank agrees to cancel the balance owing and release the mortgage holder from further liability.


The credit consequences of the cancelled debt do not transfer. If the defaulter returns to their own country they can start off with a clean sheet.

The Dación en Pago is established by Article 1.175 of the Spanish Civil Code (SCC) and the transfer, unless otherwise agreed, is limited to the value of the mortgage which corresponds to the value of the property. In other words if the outstanding mortgage is 100,000€ but its value is only 80,000€ there will be a shortfall of 20,000€.


There are three important requirements for the Dación en Pago to be acceptable: The borrower should not have already defaulted. The lender should not have already commenced repossession proceedings. Thirdly, the property should not be in negative equity exceeding (as a rule of the thumb) 20 per cent if it is to be considered.

There is no obligation on the bank to accept the Dación en Pago solution but there is equally good reason for their doing so. As commonsense suggests these procedures must be conducted by legally qualified professionals.

Turn your house into income



3 November, 2008

A new regulation introduced last week stipulates that taxes and other extra charges can no longer be hidden in advertising for airline tickets. Airlines have to show the final price in all their publicity from now on, with fuel surcharges and airport taxes included. The regulation is part of an EU initiative designed to allow the public to better compare offers in the marketplace.


27 October, 2008

Mijas resident Isabel called on the Town Hall last Thursday to knock down her house and stop fining her. Sra Mart�n, 56, and her husband began building their house four years ago in the La Rosa urbanisation in La Cala but the Town Hall paralysed the work because of town planning irregularities. Accompanied by Antonio Blanco, president of the Association for the Regularisation of Housing in Mijas, Sra Martin told a press conference that her husband had then gone into a deep depression and died a few months ago. She said: “My husband lost the will to live, his dream had died.” Her lawyer had written to the Town Hall on July 11th asking them to demolish the house but had not received a reply. Sra Martin said she had received three fines – the last one on October 3rd – of €2,356 for a house measuring 288 m2 when in fact the building only measured 100 m2. She said it was “not even a house, just a structure”. She added: “If they are going to demolish it, then they should do it now and stop fining me because my health is not good and I’m going down the same road as my husband.” Antonio Blanco compared the situation to Marbella where the mayor has announced that she will fight to ensure that not a single illegally-built property is knocked down.


27 October, 2008

A Madrid court has granted paternity leave of 13 days to a lesbian after Social Security had told the woman she was not eligible. Carmen Diaz married her wife in 2006 who gave birth in February 2007 to a son, who she adopted. The Workers Commissions union said that when she applied for paternity leave, the Social Security Authority had made extra demands which were never made when men claimed, A union spokesman said it regretted what he called “these situations of discrimination”, and considered the court’s decision an important one because it would encourage gay and lesbian couples to apply for the paternity leave which they were entitled to.


27 October, 2008

According to a report in El Pais newspaper last week, the United Kingdom and Germany have asked Spain for explanations about what they consider to be abusive expropriations of property owned by their citizens here. Britain has already asked for information from both the Foreign Minister Miguel Angel Moratinos, and the Spanish ambassador in London. Thousands of foreigners and Spaniards are affected by the Ley de Costas, Coasts Law, which came into force in 1988, but remained largely unenforced until 2004 when Cristina Narbona was appointed Environment Minister. The law forbids building on coastline land and states that those built before 1988 will be expropriated by the state, which will give the owners a 30-year use of the property, to be extended to 60 years in some cases. The paper cites the case of the Briton Cliff Carter and others at the La Casbah urbanisation in El Saler in Valencia. In a statement, the Environment Ministry said it has no intention of changing the current legislation. British consuls are reported to be recommending British citizens to complain to the Defensor del Pueblo, the Spanish ombudsman, or to take their case to the European Parliament which has already been informed of the problem. Britain said she understands that Spain wants to limit construction along the coast, but they do not share the method by which they are expropriating property, considering that it affects those who have purchased in good faith.


13 October, 2008

A delegation from Alozaina village met Junta de Andalucia officials last Friday to demand changes in the gun law arrangements around their village during the annual three-month shooting season that began on Sunday, October 12th. A local resident reported that Junta workers have been putting up “hunting land” notices on all the roads around the village without consulting local homeowners and without any consideration for the safety of local people and their domestic animals. Last year, weekend hunters and their dogs indiscriminately killed cats and protected birds such as eagles in a succession of blazing shooting sprees. Shotgun damage to an electricity pylon resulted in a major power blackout and one homeowner standing outside his house was hit by shotgun pellets. Since last years successive “invasions” killed off all the local cats, rats have been free to proliferate and have now become a serious problem. Local residents want the Junta to enforce national laws that are supposed to regulate shooting and protect homes and special agricultural areas such as their commercial olive and orange groves. But they suspect the Junta has been ignoring the controls because it has been making a lot of money from selling hunting licences. It is estimated that in 2006, the Junta may have made nearly €500,000 from licence sales. The Alzoaina delegation included representatives of Spanish families who have owned local land for generations as well as expat owners including Dutchmen, British and Danes. Between them they own about 100 acres, most of which is supposed to be out of bounds to hunters, but the latter claim that the Junta notices free them of any restrictions.


13 October, 2008

Madrid City Council introduced a law last week to take human billboards off the streets, along with pamphlet distributors and cars with huge ads on their roofs, at the beginning of next year. Madrid Mayor Alberto Ruiz-Gallardon announced the clean-up two years ago, although not all advertising symbols will be banned. The familiar chemist’s green cross stays, as do Tio Pepe and Schweppes. The city’s famous Gran Via and Puerta del Sol will still light up at night but the neon lights will disappear from most of the oldest parts of the city. And the new law also limits the amount of light output for the ads. But there will be no more two-legged billboards offering to buy gold, discounts on all and sundry, or advertising the services of African witch doctors “littering” the streets and causing “visual contamination”.