House illegally built, buyers given 100% mortgage !!!!

Spanish Property Insight Forums Spanish Property Forums Real Estate Topics, News & Discussion​ House illegally built, buyers given 100% mortgage !!!!

This topic contains 18 replies, has 6 voices, and was last updated by  Anonymous 8 years, 10 months ago.

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  • #55467


    My parents in-law bought a new build in Spain almost 4 years ago. The builder organised the purchase of the house and a 100% mortgage with the bank.

    When signing the documents at the notary the director of the bank was present. The documents they have is an”escutaurer” and a “certificate habitacion”. excuse my spelling .

    4 years later, they have discovered that although the house was correctly built, the builder did not have permission to build on the “rustic Land ” and that they are no longer allowed to have electricity.

    They discovered this after the electricity company came to turn off the electric supply. In trying to sort the electric out, they learnt that the house was built on this rustic land and should not be there!

    How can it be that the bank can give them a 100% mortgage? i find this very irresponsible.

    They would like to leave Spain and were hoping to sell their property and at least walk away with some of the money they have paid towards the mortgage payments. But who is going to buy a house which should not be on the land its on.

    What should they do?

    Obviously the builder is ” missing “

    They have very little money, certainly nowhere near enough money to take anyone to court.

    I do know that the builder did once say that if ever they wanted to sell the house, he would buy it. That’s if we find him, but would he have said that through fear of being found out ???

    My parents in law are naturally absolutely devastated. They purchased this property in good faith and find that if they leave Spain it could be with nothing mad a sour taste in their mouths.

    I really do not know which way to turn.

    I do hope you can help me.

  • #97412


    I am really sorry to hear about the problems your parents are suffering with their house.

    The first thing they need to find out is what sort of rustic land is, as if the rustic land is not specially protected, the infringement can expire after 4 years from the time the construction was finished. First of all, they should clarify what type of rustic land is is, and secondly try to find evidences of the age of the construction. If the construction is registered at the land registry, we can know that the property existed at least from the time of the registration.

    After that, your parents can obtain a certificate from the Town Hall statintg that the infringement has expired, so the construction would be considered legal and they should be able to sell the property without problems.

    My advice is that your parents hire the services of an independent lawyer who can assist them in the legalization of the house and also in the sale.

    Should you need any further information or clarification, please do not hesitate to contact me, I would be more than happy to assist.

    Best regards

  • #97413


    Hi, Many thanks for your reply.

    When my parents landed in Spain, they were taken around by the builder to chose the land ! They were always under the impression the builder was sowing them sites that he had planning permission on. Therefore, they chose their land and the house was built. So in other words, they are the first and only owners of the house.

    The town hall are saying the land is protected. Is there anyway this can be proved?

    More to the point, how can the bank give a mortgage for a new build when their is no permission?

  • #97415

    Aunty Val

    Did they use a lawyer to buy the property?

    The first thing I would do is talk to the lawyer that bought the house for them – see what he has to say for himself.

    Fundamentally, the lawyer was employed to protect them (all other people, agents, builder etc should be considered as on the “other side”) so if he didn’t protect them he should be culpable.

  • #97420


    i dont think they used a lawyer, not sure why they did that, but I will check. I didnt think you could buy anyhitng without one.?????

  • #97421


    The urban law can be checked at the Town Hall, so if they are already saying that the land is protected, then it will be much difficult to resolve the situation. In any event, you should discuss the case with a lawyer to see if there is anything to be done (as depending on which region the property is, the urban law is different).

    In case it is not possible to legalize the house, I find in principle quite difficult to take actions against the vendor, as your parents could have found out by themselves at the time of buying which was the urban qualification of the land by checking it at the Town Hall instead of trusting in the word of the vendor. However, once again, to be in position to give you more specific advice, you will need to supply all the documents related to the operation to a lawyer and allow him to study the case properly.

    In case your parents were assisted by a lawyer when the bought the house, as the previous post says, you could study the posibility of claiming responsibilities to the lawyer. Also, if the construction was managed by an arquitect, he could be responsible as well. Once again, this must be checked.

    Regarding your comments about the bank, again, the bank is not a legal advisor. Sometimes the director of the branch has faculties to approve the mortgage (this depends on the internal rules of each bank) and sometimes they don’t. Obviosly, they can make mistakes.


  • #97429


    If I were in that situation and the mortgage was 100% I would walk away and write it off. Don’t throw good money after bad and don’t believe all those stories about the spanish banks chasing you in the UK it’s just an internet myth.

  • #97431


    Thanks all for your replies. I think that unless they locate the builder, they have no hope. On the plus side of that, his father does still live in the village where their house is built. Not that you can go and harrass him.

    If I have anymore info I will post it for further very helpful comments.

    Thansk again

  • #97433


    I agree with Katy. It’s a mess created by Spanish builders, lawyers and bankers and hopeless administration by the town hall. Your parents are victims, it’s not their mess.
    Pack up, walk away and send the keys to the bank by registered post in UK.

  • #97434


    Regarding the comments about walking away and giving the keys to the bank, plese note that this would not resolve the problem that easily. The property is just a guarantee for the repayment of the mortgage loan, but the debtor is liable for the repayment of the mortgage loan with his assets world wide, so in case the the value of the property is not enough to cover the outstanding mortgage, the bank would be entitled to pursue any other assets owned by the debtor either in Spain or in the UK or anywhere.

    The fact that the bank hasn’t checked the urban situation of the house properly doesn’t mean that they are responsible for that, as they will suffer the consequences as well. It only means that the special guarantee that the property is for the bank has much less value than if it were legally built.

  • #97435


    If the bank presented this case to the British courts they would lose. Uk courts would not make a ruling for repayment. They (the banks) would also be faced with high legal costs. Were I to be in a situation of having a mortgaged illegal property I would welcome my day in a (UK) court!

  • #97437


    The bank would take legal actions in Spain, and the Spanish court resolution can be enforced in the UK according to EU Regulations, which would be fulfilled by UK courts. In any event, the bank will decide what to do depending on the amount to be claimed and the assets that can be found by the bank.

  • #97439


    luckily or unluckily for them they have no other assets. So if they walk away they will be homeless and pennyless. They were hoping to walk away with at least the monies they had paid off the mortgage.

  • #97441


    For the bank to take action against your parents in UK they would have to spend thousands of pounds. The case would have to be heard by a British court no matter what judgement took place in Spain. Counsel fees and appeals your parents could make would probably in the end cost the bank more than the mortgage.
    In any case, without substantial assets in UK I would be astonished if the bank took it that far. These people are victims of a corrupt system. The bank failed to make proper checks before doling out their money. No UK court would by sympathetic to that.
    Your parents will get legal aid in UK and a good barrister will laugh it out of court. Investigations would be made by counsel into the relationship between the builder, bank manager and town hall. A murky chain no doubt exits.
    I think your parents should view what they have already paid as rent, walk away and start a new life.

  • #97443


    They should consider themselves very lucky if they can walk away from the mortgage without being pursued in the UK or having their credit rating hit.

    They can forget about getting back their mortgage payments to date. That’s just never going to happen.

    They are victims of a corrupt system but they have also been very foolish. I guess they realise that now, but someone has to point it out. If people weren’t so foolish when buying property abroad, there wouldn’t be so many sharks in the business.


  • #97445


    “They have been foolish”

    Not as foolish as the bank who gave them a 100% mortgage on an illegal house. Would have thought it is the bank who deserves to lose. I am sure if a a bank was offering me a 100% mortgage I would assume everything was kosher.

    I would walk away, return to the UK. Was just going to say what Logan has said re. legal aid etc until I saw his post. Absolutely agree. The UK courts would throw it out.

  • #97447


    To the best of my knowledge Mark UK credit rating agencies would not attach a bad debt incurred abroad unless it was owed to a UK bank. There are data protection issues.
    There was some talk a while ago about setting up a EU wide credit rating system but I do not think it’s happened yet. France has it’s own system run by The Bank of France. Not sure about Spain but it’s likely just an interbank thing.

  • #97468


    Thanks all for your comments, has been most useful.

  • #98959


    The situation is such that no search was carried out on the property. Apparantly this is normal in Spain.

    The sad thing is that my parents in law have nothing. If they walk away they will be homeless.

    Surely the bank has to take responcibility for this ??? They have been taking payments each month €250 of which was toward interest and approx €620 towards capital. Capital on what, a house that shouldnt be there??? How can the bank take this money with is supposedly towards the capital of a property which in fact isnt at all. Is there a banking ombudsman in Spain we can contact??

    I cannot believe they can be so irresponsible.

    My parents in law used lawyers etc and believed that they were doing everything above board.

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