For many years now we have been experiencing a series of legislative reforms, and essential changes in the way in which the process of obtaining mortgages in Spain has been developing historically. Spanish banks have been subjected to great stress when it comes to legally confirming the positions and conditions in which they have been working, as well as the demands they have been request in from citizens, and, as a result of this, there have been issued battery of laws, reforms , regulations, judgments, penalties, etc., which have been a revolution in the Spanish mortgage process.
One of the latest demands of the new mortgage law will come into effect on June 16 2019. That is to say, next week, a substantial change in the form and process of obtaining mortgages in Spain will be generated.
What is that change ?. It is very easy, until the entry into force of this law, banks, usually, agreed the particular conditions of mortgage loans directly with customers. That is, the client went to the bank to request a mortgage, the bank studied the case and, in the event that the bank approved the mortgage, such approval was formulated through a document that the same bank presented to the client, but that it was not normally signed until the day of the notary appointment to sign the title deed of the purchase. So, the acceptance from the client about the mortgage conditions was done in the same act and notary’s meeting for the signature of the title deeds of the sale (we call this usually “completion”). On that moment, the client, as a step prior to signing the mortgage deed, he was presented to sign the private documentation of the mortgage, with all the mortgage conditions, and presented as an essential step prior to signing the mortgage and the deeds of the sale.
However, that way of “mortgage approval” has resulted into cases in which the bank, having agreed with the client the specific conditions for the approval of the mortgage, such conditions were not formally accepted until its signature at the notary on the same day of the sale. Whereupon, in the event that the bank made last-minute modifications, the client could be in the position to not have been informed until the moment he is at the final meeting for completion in front of the notary.
In other cases, sometimes happened that the bank simply did not inform its customers in detail about the loan conditions, being informed at the last moment, and submitted under the pressure that, if those conditions were not accepted, the purchase and sale would not take place.
This has been considered as an overpressure to citizens, who, were left in defenceless against the bank for this last minute information, so, generally forced to accept the imposed conditions if they did not want to lose the sale.
Therefore, this disinformation with respect to citizens has been considered as defencelessness, and considered as an abuse of power by the bank with respect to its customers.
To solve this, what the law raises is that the client signs WITH THE NOTARY bank with the acceptance of the loan conditions with a sufficient period of time before the end of the purchase process.
The term that is established is 10 days.
How it works ?: By notarial deed. That is, as a step prior to signing the mortgage deed (and, consequently, of sale), bank and client must attend to the notary (client may go in person, or represented by its lawyer), with a term of 10 days in advance, to formalize the deed of acceptance of the conditions of the loan.
In this way, the pressure that can be exerted on the client is avoided since, in the case of not accepting the conditions established by the bank, the client is not subjected to the pressure of accepting these conditions in the same meeting for the signature of the purchase deeds.
Therefore, the process up till now was the following:
– The client requests the mortgage, and the bank accepts it
– Date and signature of deeds of sale and mortgage are established
– On the same day as the signature established at the notary, the client signs the deed of mortgage and deed of sale. Acceptance of the conditions of the bank is done by private document (which is attached to the content of the same deed of mortgage).
So, the client signs two deeds: Deeds of the sale, and the Deeds of the mortgage.
The new mortgage law which establishes the following:
– The client requests the mortgage. The bank approves it
– The bank makes an appointment with the client at the notary to sign a deeds of acceptance of the conditions of the mortgage with a minimum of 10 days before the date set for the signing of the final mortgage and the sale. The client assists to this appointment by personal presence or by power of attorney from its solicitor.
– The client assists (in person or through Power of Attorney) the date in which the client signs the purchase deeds as well as the mortgage deeds.
So, the client signs THREE notarial deeds:
1.- Deeds of acceptance of the mortgage
2.- Deeds of the sale + the Deeds of the mortgage.
In this way, better guarantees are offered to citizens in their right to be informed in detail and free to confirm their decision to obtain the mortgage loan.
Therefore, as a summary, banks are obliged that, at least 10 days in advance, their clients have to assist at the notary office to sign in person, or by power of attorney, the deeds of the acceptance of the mortgage.
How does this affect non-resident foreign buyers? As we are seeing, the mortgage purchase process, until now, allowed non-residents in Spain who bought property in Spain, that, just in one day, they could afford both: the purchase of the property and its mortgage. That is, in ONE they could complete the act to purchase the property, and obtaining mortgage.
However, through this reform, there is another previous action to do. So, it is becoming necessary that the non-resident customer, or who does not live in Spain, have to travel to Spain prior to completion of the purchase process to formalize the acceptance of the conditions of the Bank. This supposes that those who do not live in Spain, have to travel on a trip before completion to sign these mortgage conditions before a notary.
With this, it is important that, for all those who buy homes in Spain, and who apply for mortgages in a Spanish bank, you must bear in mind that you may have to move to Spain, not only to formalize the purchase process at the end of the process, but also, about 10 days before the end of the process.
Obviously, if the foreign buyer, or non-resident, decides or prefers not to come to Spain beforehand, he will have to provide his lawyer, or his legal representative, with the necessary powers of representation (power of attorney) to do so.
SOLUTION: So, a solution for the client to avoid this additional displacement would be that he grants a POA to his lawyer.
Since Powers of Attorney in Spain are protocoled in a different way than in other countries, and also, powers granted abroad need legalizations that take a while, we recommend all those who are buying a property in Spain with a Spanish mortgage, or who have the intention to do so, to consider this new requirement of personal visit to Spain prior to completion with their lawyers, to give the best solution, including if it is possible to grant powers of attorney to their lawyers or legal representatives.
In this way, those who cannot come so far in Spain, their lawyers will be able to sign any type of document that their bank requires to formalize the purchase and mortgage process.