1) WHAT IS A FLOOR CLAUSE?
A floor clause is a term in a mortgage document meant to allow lenders to continue earning in interests through a fixed interest rate, regardless of the Euribor rate. Therefore, it is said that on an average mortgage, the consumer has been paying an additional 170£ per month, totaling 2.040£ per year.
2) DOES THE FLOOR CLAUSE AFFECT BRITISH CITIZENS?
From 2003-2004 until recent years, the majority of Spanish mortgage agreements included a floor clause. There are currently about 500.000 UK citizens residing in Spain and most of them own property for permanent or holiday use.
3) ARE FLOOR CLAUSES EVEN LEGAL?
On May 9, 2013, the Spain’s Supreme Court said that those clauses where null but at the same time established that the reimbursements would not apply retroactively. It was a shocking decision as the Supreme Court has the responsibility of ensuring that our government never violates the rights of individuals and these clauses had been abusing customers for years.
4) WHAT DOES EUROPE SAY ABOUT IT?
On December 21, 2016, the European Court of Justice overruled the Supreme Court of Spain and ordered lenders to reimburse their clients in an amount equal to the retroactive application of the clause. That is what is known as the “total reimbursement criterion”. According to the Bank of Spain, the economic impact of the floor clause is about 3.3 billion British Pounds and the banks must pay back the clients affected after an extrajudicial or a judicial claim.
5) HOW DO I GET MY MONEY BACK?
The affected clients are seeking advice and assistance from Spanish law firms fearing new “tricks” that the banks may try to offer and implement on their customers. If someone chooses to go with the fast settlement route, it might mean less than the full amount in reimbursements. Additionally, the customer must be the one to initiate the process as it is not a legal obligation for the banks to reach out to those affected.
6) HOW DO I KNOW IF I AM ONE OF THOSE AFFECTED?
Currently, 50% of the mortgage agreements are on a fixed or mixed interest rate, however, within the past 5 years about 90% of the homeowner loans were on a variable interest rate, meaning they depended on the Euribor rate. Therefore, this kind of mortgage, which were the most popular ones during that time are the most affected by floor clauses. Because loan agreements tend to be very long, it is crucial for an expert in this field to thoroughly read it and double check the terms and conditions of the loan.
7) HOW DO I GET A RELIABLE SPANISH LAWYER?
When choosing a lawyer to handle your case, you can ask for their registration number and then verify with the local bar association (Colegio de Abogados). Although, registration does not guarantee honesty or competence, it is a good start when choosing who to take care of your legal matters.
8) HOW DO I START THE PROCESS?
First confirm that you are affected. Then submit a claim through the established bank´s claim system. Once this claim is submitted, the bank has 3 months to settle and pay the due compensation. Should you not agree with the compensation amount that the bank offers, or the bank does not make an offer within the required 3 months, you can begin court action.
9) WHAT HAPPENS IF MY MORTGAGE IS ALREADY PAYED?
Keep in mind you have 4 years to file a claim from the date of your last installment. Otherwise, there is no time limit set up as of now.
10) HOW LONG WILL THE PROCESS TAKE?
While the process depends on the judicial party and the court in which the lawsuit is filed, it is estimated that it will take a minimum of six or eight months and up to a year.
Published with kind permission of Fernando Sanahuja, Founding Partner of Sanahuja-Miranda Law Firm.