The latest ruling by the European Court of Justice brings excellent news to mortgage holders in Spain whose contract includes “abusive clauses”. Under the sentence, if such a clause exists, banks are liable for multiple mortgage expenses, previously paid by consumers. The ruling opens the doors to 8 million homeowners in Spain who are now eligible for refunds from their bank.
A history of abusive clauses
The European Court of Justice (ECJ) is no stranger to claims from consumers against Spanish banks, particularly when it comes to abusive clauses. Included in many mortgage contracts, these are clauses contract that are not sufficiently transparent to the consumer, who, as a result, pays more than necessary.
Mortgage expenses are one such clause and in the past banks have passed on the cost of these to the consumer. In 2015, the Spanish Supreme Court ruled that clauses obliging costs to be paid by the mortgage holder to be null and void. However, in January 2020, the Court backtracked and decided that costs should be shared between banks and lenders equally.
The latest ECJ sentence overturns this decision and rules that banks are liable for all mortgage expenses if there is an abusive clause. The judges base their decision on Directive (93/13/EEC) that came into force in Spain in 1993. This law aims to correct the imbalance between providers and consumers.
Which mortgage expenses can be refunded?
This ECJ ruling opens the doors to 8 million consumers to claim back mortgage expenses such as:
- Notary fees
- Registry fees
- Mortgage management fees
- Property Valuation
- Opening Commission
- Legal costs
The only excepted expense to be paid by the mortgage holder is Stamp Duty Tax (AJD in Spanish).
Grounds for a refund
Holders of mortgages in Spain who have paid the above expenses have the opportunity to reclaim them from the bank. The claim will be successful if a Spanish judge deems the clauses allocating the expenses to the consumer to be abusive.
The onus is now on Spanish judges to determine whether the clauses are “clear and understandable”. If the judge rules that the clauses are not transparent – i.e. the consumer was not fully aware of their implications – then the door open for a refund claim.
Refund for opening commission
The latest ECJ ruling specifically mentions the cost of opening commission. While previously the Spanish Supreme Court regarded this commission as an intrinsic part of a loan, the ECJ has ruled that it is not.
The ECJ judges believe that the payment of the opening commission creates an imbalance against the consumer. Its ruling states that banks need to show that they provided effective services in exchange for payment of this sum.
Refund for legal costs
The ECJ also rules that this type of costs cannot be imposed on the consumer. This is because it would be a disincentive to the weaker party (the consumer).
Timeline for claims
The ECJ has decided that the 5-year time limit for claims to be fair and just. There are, however, exceptions to this. Contact us for more details.
How can I claim back my mortgage expenses?
If you believe that you have paid mortgage expenses that meet the criteria in the latest ECJ ruling, get in touch with Costaluz Lawyers.
We will be happy to look at your mortgage contract to ascertain your grounds for a refund claim.