By Antonio Gabriel Aguilera, Lawyer
Many times I have been asked what is it necessary to do to win the claim to the so called “Floor Clause” and have the Bank refund the overpaid amounts to the Client.
In this article I will try to explain how.
Legal arguments for Spanish mortgage floor clause claims
The first thing you have to evidence is that the client has the condition of a “consumer and user” in accordance to the Spanish Legislation.
Article 3 of the Spanish General Consumer and User Protection Act establishes who is a consumer and user:
“Consumers or users are individuals who act with a purpose other than their business or trade activity, job or profession …” Considered consumers for the purposes of this rule are also the legal entities and non-legal entities that act non-for-profit in a non-commercial, and non-business activity field”.
Therefore, the first thing you need to evidence is that the property will not be destined to any type of business or enterprise.
In the 99% of the clients, this is quite easy because the majority of these clients bought a property with residential purposes in Spain, and on the same date of the purchase they signed the mortgage.
For this reason, there is a doubt about the viability of a floor clause on mortgages signed on commercial properties or parkings, unless, in the latter case, the parking was purchased in conjunction with the the residential property, or this parking was located in the same housing development.
Another thing to evidence that the client is not a business person can be found in the same mortgage deed or in the purchase deed, where the profession of the person purchasing the property is stated. In most cases, it does not say this is a “business person”.
Once you have evidenced the condition as a consumer, the Bank needs to prove some parameters. These parameters are of such importance that if the bank fails in doing so, it will be sentenced to refund the overpaid mortgage fees paid by the client, as set by the Spanish Supreme Court, Sentence of 9th May 2013, paragraph 225.
These floor clause claim parameters are as follows:
- That the bank has given the client sufficient and clear information that the floor clause is a key element in the mortgage contract.
- That this clause has been negotiated with the client individually.
- That this clause has been communicated to the client by means of simulations, divers and likely scenarios on the predictable evolvement of the interest rate throughout the years.
- That the client has been informed of the existence of other products in the bank, as well as of the comparison with other mortgage modalities available in the same bank.
- In default of the above, the bank must prove that the client has been warned that due to his or her profile these products are not offered to him or her.
And what it is most important, the Bank has to prove that all the aforementioned points were done before the client signed the mortgage, and if it is possible, that there is documentary record and evidence of this.
Of course, while the client can relatively easily prove everything said at the beginning of the post, the bank finds it extremely difficult to prove that everything was done in accordance to the Spanish Supreme Court established, basically because the bank did not.
Del Canto Chambers is the leader firm for British Clients in counselling on floor clauses claims’. We will analyse your mortgage deed and will provide you an honest assessment, so that you can decide whether or not it is worth for you to place the claim.
© Antonio Gabriel Aguilera, Del Canto Chambers
Lawyer Expert in Banking Law and, Money Laundering Prevention.
Contact Del Canto Chambers
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