The first rulings from courts specifically designated to adjudicate disputes between individuals and banking institutions concerning general terms included in mortgage loan agreements have now been issued.
The Agreement of 25 May 2017 of the Permanent Commission of the General Council of the Judiciary, which assigned exclusive yet non-excluding jurisdiction to certain courts—each with defined territorial competence—to adjudicate matters relating to general conditions in real estate secured financing agreements where the borrower is a natural person (the “Agreement”), was published in the Official State Gazette (BOE) on 27 May 2017. The Agreement designated 54 Courts to resolve conflicts between individuals with mortgage loans over their residences and banks, whether regarding floor clauses, or mortgage expense clauses relating to constitution, novation, or cancellation.
This measure has resulted in uniform judicial decisions. Prior to the Agreement’s entry into force, court rulings varied, with some granting full reimbursement of all mortgage-related expenses, while others only granted partial recovery. The legal landscape could then be characterised by:
(i) legal uncertainty in deciding in which court to bring a claim, and
(ii) discrimination among claimants receiving different outcomes on identical issues, depending on the court.
Now, the outcome of legal proceedings concerning the nullity of expense clauses (constitution, novation, or cancellation) and the reimbursement of amounts paid is standardised.
Current case law has unified its position, recognising that both the action to claim the nullity of a clause assigning all mortgage constitution costs to the borrower, and the ancillary action for restitution of amounts unduly paid, are not subject to limitation.
The recoverable expenses related to constitution, novation or cancellation include:
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notary fees for the mortgage loan,
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land registry fees for registering the mortgage,
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agency fees if imposed by the bank, and
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appraisal fees when the valuation was commissioned by the bank.
Courts hold that notary fees must be borne by the lender, as it is the bank’s own interest, pursuant to Royal Decree 1926/1989 of 17 November and Article 63 of the Notarial Regulations.
Regarding land registry fees, since the bank files for registration, it must bear these costs, in accordance with Annex II, Rule Eight of Royal Decree 1427/1989, of 17 November, approving the Fees of the Property Registrars.
Agency fees must be paid by the bank, as it benefits from the services. Furthermore, the bank often imposes the use of a specific agency, without informing the borrower of alternatives, in breach of Article 40 of Royal Decree-Law 6/2000, of 23 June.
Appraisal fees are also the bank’s responsibility, as the appraisal is necessary to formalise the mortgage and is used by the bank for foreclosure proceedings (Article 682 of the Civil Procedure Act) and to determine the loan amount pursuant to Law 2/1981, of 25 March, regulating the mortgage market (Article 5.2).
Finally, contrary to the Supreme Court ruling of 23 December 2015, the Stamp Duty (AJD) must be paid by the borrower, in accordance with Article 68 of Royal Decree 828/1995, of 29 May.
In conclusion, under current judicial doctrine, the borrower may claim from the bank the expenses paid for mortgage constitution, novation, and cancellation, including notary, registry, agency, and appraisal fees.