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



10 November, 2008

The owners of houses in the Los Monteros urbanisation in Marbella have said they will formally accuse the Town Council of peddling political favours if Antonio Banderas’ house there is legalised. The film star’s beach front house was on the list of those to be demolished for building irregularities but will be regularised under the provisionally approved General Urban Plan (PGOU). Apparently Banderas has agreed to pay an unspecified amount in compensation and to relinquish some thousand square metres of garden. The other residents claim that the star – a known supporter of the Socialist regional and national governments – is being given special treatment because of his political affiliation.


10 November, 2008

Juan Antonio Roca, the alleged brain behind the Malaya and Saqueo 1 corruption cases in Marbella, denied in court last week denied that he had used his own companies to divert public money from the Marbella Town Hall between the years 1991 and 1995. He suggested that someone in the Town Hall had taken advantage of his accounts. When asked why his companies and other assets were in his mother’s name, the former municipal urban planning adviser Roca said he had always used her name “for tax reasons”. Another man charged in the Saqueo case, former legal adviser Jose Luis Sierra, told the court: “Nobody even breathed in Marbella without the express order of Gil”, referring to the late Mayor Jesus Gil y Gil. He added: “If anyone did anything without his permission, even if it was the logical thing to do, they would be looking for a job the next day.”


10 November, 2008

Former Marbella Mayor JuliAn Muñoz, who was recently granted an open prison regime after being found guilty of real estate irregularities, thought he was onto a good thing when he did a deal to sell his story to the Tele5 TV channel for €350,000. Presenter Ana Rosa Quintana even came down from Madrid last week to record the exclusive in Marbella only to have it cancelled at the last minute after the judge hearing the cases against Munoz instructed the prosecutor to look into the matter for tax purposes.


10 November, 2008

You can’t get a mortgage but you’re desperate to buy a home of your own? Well, head north to Bustarga in Leon province. It’s one of the most beautiful – and coldest -areas of the country, in a nature park close to the Las Medulas mountains. There you can pick up a real bargain – a 100 m2, three-storey stone rural dwelling dating back to 1920. Its walls and wooden beams are in tip-top condition, but there are a couple of drawbacks: it doesn’t have electricity or running water – but what else can you expect for the paltry sum of €14,500.


3 November, 2008

Mijas Mayor Antonio Sanchez was forced to call in the Local Police to remove members of the Association for the Regularisation of Irregular Buildings who protesting outside the Town Hall during a council meeting last Thursday morning. Some 8,000 families are affected by the Mijas council’s plans to demolish illegal constructions or impose hefty fines their owners. It was just another incident in the increasingly confusing scenario surrounding illegal properties. While Mijas and other councils are threatening demolition, Marbella Mayor Angeles Muñoz said two weeks ago she would do everything possible to regularise all illegal properties, and in the interior it seems the local councils are beginning to get tough as well. At least two illegal home-owners in the Coin-Monda area are facing fines of just over €100,000. One of them said he had received notification from the regional tax collection office that he had to pay the fine by November 5th. Failure to do so would mean an added bill the following day for interest on that amount, which should have been paid three years ago. The property will be embargoed the same day and if the fine is not paid within six to eight nine months, it will be put up for auction. But there’s a catch. Not being legal, in the eyes of the law the building does not exist, therefore only the land will be auctioned. The owner said he does not have that amount of money in the bank here and even if he had it in his account in England he would not be able to get it transferred in time. Given the amount involved, the transaction would have to be made through the Bank of Spain and he would have to present a document explaining why he wanted the money. All that takes time, the owner said, adding that even if he abandoned the property and left the country, the Spanish authorities could still catch up with him further down the line. The worst thing of all is that he knows that all this could have been avoided if he had taken a friend’s advice and tried to sort out his property’s papers while there was still time.


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.