Inverted mortgage decisions create chaos in Supreme Court, bank exchanges and securities

Inverted mortgage decisions create chaos in Supreme Court, bank exchanges and securities

This week has seen unprecedented Supreme Court action that has unleashed all kinds of mayhem on an internal level, not to mention the consequences this has had on the financial sector. Over the past few years, we have seen thousands of court cases revolving around the financial sector and their methods when it comes to granting mortgages. The primary issue was in relation to the infamous Floor Clause inserted in mortgage agreements (in many cases without advising the mortgage holder!) but a Supreme Court ruling in favor of mortgage holders obligated banks to reimburse any benefits obtained which could be a few thousand euros per case. The secondary issue and the one this article refers to has to do with reclaiming the Stamp Duty paid on the Mortgage Deed

Inverted mortgage decisions create chaos in Supreme Court, bank exchanges and securities

In February of this year, the Supreme Court by means of its Civil Court issued a ruling that stated the mortgage holder is responsible for payment of the corresponding Stamp Duty, however, this same ruling was OVERTURNED by its own Court for Contentious-Administrative Proceedings in an unprecedented action last Tuesday 16th October 2018 and recorded under Ruling Number 1505/2018. This ruling corrects the existing ruling that was passed only a few months ago and determines that in fact, the BANK and not the client/mortgage holder is responsible for payment of any Stamp Duty due when a Mortgage Deed is granted before a Notary Public. How has this come about and what was the reasoning given for this surprising turn of events

Mrs. Lourdes Amasio Díaz, a barrister who represents the company known as "Empresa Municipal de la Vivienda de Rivas Vaciamadrid S.A." initiated an appeal to reverse a ruling against her client as recorded under Recurso de Casación 5350/2017 and this is what was considered at the Court for Contentious-Administrative Proceedings. As stated previously, this appeal made Magistrate Jesús Cudero reconsider the Supreme Court's previous ruling and side with her client. The criteria used to arrive at this decision was the fact the only interested party in registering a mortgage loan at the Land Registry Office is the bank because it is the only way they can make claims against the mortgage holder in the event of non-repayment of the loan, therefore the bank should be liable for the resulting tax

This about-turn can seem conflictive but as it turns out when the matter was apparently resolved in February 2018 at Civil Court, the same issue was already on the table at the Court for Contentious-Administrative Proceedings which now does not hold the same point of view

The result of last Tuesday's ruling is a massive dip in the stock market which has affected Spain's major banks, primarily, Bankia, Bankinter, BBVA, CaixaBank, and Banco de Sabadell. The one major factor that has not been detailed in the ruling is whether the Stamp Duty for mortgages signed over the past four years can be reclaimed or whether it only applies to new mortgages. Of course, the banks interpret the ruling to apply only to new mortgages, so this point must be clarified

It would appear the Spanish banks' reign of tyranny is over and they are being made accountable for their one-sided dealings with their own clients, however, this ruling has stirred up a hornet's nest and it is far from over... Not even 24 hours after this latest ruling was passed, the Supreme Court has made yet another astonishing decision to review this sentence.       Mr. Luis María Deiás Picazzo, President of the Administratively Disputed Proceedings Tribunal, decided that it might be wise to postpone this ruling until other cases were tested

. By this he is referring to the effect this has had on the stock market and what it would mean if the banks have to reimburse what experts estimate between 6.000 and 24.000 million euros

Inverted mortgage decisions create chaos in Supreme Court, bank exchanges and securities

A Plenary Session of the Court must be held within the next few weeks in which 31 magistrates must decide whether the latest ruling that determines the banks are responsible for any Stamp Duty that arises from mortgage deeds will be accepted or not. What is going to happen in the meantime? Well, in theory, a legal ruling was passed so notaries will continue to advise that according to the ruling of the 16th October 2018 and applicable from Thursday 18th October 2018, it corresponds to the banks to pay the tax. The shock attempt on Friday to reverse that sentence is a mere Memo but does not qualify as legislation until such a time the plenary session decides which ruling stands

Some clients who were due to sign for mortgage loans at Notary that Tuesday postponed their appointments until the outcome of the court case was known but even though the ruling is now debatable, Stamp Duty in the Canary Islands, for example, is payable within 30 days of signing the deed (in other autonomous regions the deadline is 60 days) so I expect the banks will until the last moment before paying in case they can pass that expense back to the mortgage holder

What we have here is a split decision within the Supreme Court itself with two very different rulings issued by two different chambers. My personal opinion? A matter of this magnitude should have been determined at a Plenary Session in the first place instead of allowing two chambers to pass a sentence on different cases which have allowed this gross conflict to occur. We'll have to see what the outcome of the Session is and hopefully, it will be in favor of the little guy to help put an end to what I call the Banks' Reign of Tyranny

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