For the first time in Spain’s history a court has ruled that the delivering the keys of a house subject to repossession proceedings to the lender represents “full settlement” of the mortgage debt.
The sentence was set by a provincial court in Navarro and, as such, is not legally binding but it does “set an important precedent” according to the Platform for those Affected by Mortgage Debt. A spokesperson said: “This opens judicial possibilities for anyone whose house has been auctioned by their lenders for less than their debt”.
The decision prevents the BBVA pursuing their client for the residual debt after auctioning the property off at half its market value, which is permitted by Spanish law.
The bank had alleged that the property, which was auctioned for 42,894 euros , was worth less on the day of sale than the original value of 75,900 euros, and thus the sale proceeds were insufficient for the full settlement of the debt. The bank claimed 28.225 euros in lost capital plus 8,438 in interest, costs and expenses. The Court ruled against the bank but allowed the claim for interest and costs.
The Judge ruled: “The financial crisis is directly responsible for the loss in value of the property: fruit of bad management in the financial sector which has resulted in an economic crisis without precedence since the Great Depression of 1929.”
He also reminded the Bank that it was responsible for the “over estimation” of the value of the property during the housing boom.
The Bank has announced they will appeal to the Constitutional Tribunal. Any decision by the Tribunal is legally binding on all lenders.
The sentence was laid down by the Audiencia Provincial of Navarro, ratifying a previous sentence by the Juzgado de Primera Instancia of Estella (a lower court).
