A few years ago, most of the mortgage loans signed for purchasing real estate included a “ground clause” – a minimum interest rate – that banks and other financial institutions applied to the loans and so the client would pay a minimum monthly amount even if the Euribor rate would fall below this limit.
It is important to know what the current conditions are during the time of repayment of a loan that is intended to be signed, to avoid later surprises. It is relevant to know the small print of the contract being signed, since the mortgage loan minimum interest rate to be paid is set beforehand.
During the month of March 2013, the Supreme Court stated in its ruling that in many cases the consequences of this ground clause had not been carefully explained to customers and they did not know or clearly understood the effects it would have in their monthly payments. In this ruling the banks or financial institutions were forced to withdraw the “ground clause” from the conditions of the mortgage loan and the loans title deeds. This directly affected at least 400,000 contracts from BBVA bank, 90,000 contracts in the case of Novagalicia Bank and 100,000 in the Cajamar entity.
This ruling was equally confirmed by the European Court of Justice on April 30th and July 17th of 2014. Following the declaration of nullity of ground clauses, several Supreme Court rulings have enacted retroactivity within the nullity of such clauses, solving the cases in favour of the bank customers who are entitled to the refund of the amounts charged illegally by the financial institutions.
Depending on the circumstances of each mortgage loan, the injured party is entitled to request the cessation, withdrawal, revocation or non-inclusion of the clause.
Daemi Zabalza & Asociados is a multidisciplinary firm of lawyers in Marbella, which specializes in the removal of abusive ground clauses from mortgage loan agreements. The most recent case law has upheld a number of borrowers and there are more than 100 banks and/or financial institutions involved in cases related to ground clauses in Spain. If you think that you are affected by unfair terms in your mortgage loan you may contact us to advise you properly and follow the right steps, either as an individual or collectively.