Adding mortgage default to the cost of splitting-up in Spain

 

mortgagedefaultspainAn all too common problem faced by many separating couples in Spain today is: how to deal with a property should the relationship ends? It is a cruel twist of fate that the emotional turmoil that many suffer at this time is exacerbated by the fact that the resale value of the property is not sufficient to fully repay the mortgage.  So, simply  opting to sell the property and splitting the proceeds is often not an option. What then is the legal position of a couple who find themselves in this position and what options do they have?

Family Law Client Testimonials

Client reviews of our family law services, as uploaded by clients directly to the Wufoo survey platform:

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    Wendy Dickson, Marbella
    Tuesday, June 19, 2018
    It was all done very quick. Very good value for money. How easy it all was to communicate via email.
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    Liezl Pulido, Philippines
    Monday, April 23, 2018
    Rosa never stopped working very hard, she went way above what she needed to do...she never gave up on me and always did more than I thought anyone would.

    I am so blessed I got Rosa to help me I co...uldn't have gotten a better lawyer she's the best.

    Thank you Rosa from the bottom of my heart you are a wonderful person, I am so grateful to you.
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    Julie Smith, Torrellano
    Friday, April 20, 2018
    I can't compliment my solicitor enough.

    From our initial meeting right through to my ultimate divorce (with no unpleasant surprises the entire duration of the entire process), he immediately respo...nded to my many enquiries, always had mine and my daughter's best interests at the forefront of any considerations and was well worth every penny of his extremely reasonable fee.

    Excellent value for money, totally approachable and very professional and understanding. I highly recommend him and will continue to retain his services for other matters in the future.
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    David Pratt, Alhaurin del Grande
    Friday, April 13, 2018
    Alvaro gives me confidence that he understands the issue and gives me practical solutions. He works rapidly and efficiently. I would strongly recommend his services.
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    John Burchell, Arroyo De la Miel
    Tuesday, March 20, 2018
    Alvaro was very professional, helpful and friendly. Understood things quickly. Explained things well in English. Very easy to contact at any time.
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    Robert Davies, Mallorca
    Monday, March 12, 2018
    Very supportive and clear on producing a suitable divorce settlement. Efficient, understanding and professional.
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    Adam Clark, Tenerife
    Friday, March 09, 2018
    Oliver was very professional. He explained things very clearly and honestly at all times and in the end we got the best result possible in my particular case.

    Many thanks to him for his high level ...of service.
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    Holly, Lanzarote
    Friday, February 23, 2018
    The divorce process could have been explained more clearly and accurately so that a more realistic time for completion can be attained.
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    Tamara Malcolm, Mallorca
    Tuesday, February 20, 2018
    Rosa was and is extremely knowledgeable and helpful. Her advice was excellent and i will definitely be using her expertise again in the future.
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    Eric Van Der Straeten, Belgium
    Friday, November 17, 2017
    Mr. Sempere Gelardo was a pleasure to work with. This lawyer has an understanding of difficult matters that surpasses most of his colleagues.

    He replied to my demand the next day and in fluent Engl...ish assisted me in the case I presented to him.

    His professionalism, together with a lot of empathy, gave me a feeling of security. The results were of the same high standard.

    I can only thank him and would recommend him to anybody who is in need of legal assistance in the region of Alicante.
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    S Smith, Estepona
    Tuesday, September 12, 2017
    Being English in Spain and fighting a child custody and divorce case here is extremely difficult.

    I originally had an only Spanish speaking lawyer and after 2 years of everything taking ages inclu...ding just responses from my lawyer plus with the language barrier I decided to make the difficult decision to change my lawyer to Alvaro.

    Immediately and quickly Alvaro got an understanding of the case and was able to advise me. I was now able to understand myself what was going on and he worked to a new pace that had previously been lacking and that was needed to win the case.

    Communication and response from Alvaro was always immediate and his recommendations were always correct. He is very professional and approachable person, and a very good lawyer. With his help and guidance I won the case and without any hesitation I would highly recommend Alvaro as a lawyer to anyone.
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    Aaron L, Oregon
    Wednesday, August 02, 2017
    Very satisfied with the service provided. Helen was knowledgeable, helpful and responsive to communication. Will definitely use again.
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    Maya M, Canada
    Monday, July 31, 2017
    My overall experience with Rosa was a positive one.

    Value for the money? Yes.

    In my opinion, Rosa is a very knowledgeable and professional lawyer, who is able to not only understand the situat...ion at hand, but also suggest different approaches and customized solutions for unique, non-standard situations, which was the case with me.

    And for that I am really happy and grateful to have worked with Rosa, and wish her the very best in the future.
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    N. Gardiner, Mijas
    Friday, June 16, 2017
    Rosa was value for money, really easy to deal and very efficient. Highly recommend.
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    D slocombe, Spain
    Friday, May 19, 2017
    Jose is very friendly and understanding. I am very satisfied and I would you use the same lawyer again in the future.
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    KSC, Ireland
    Tuesday, October 18, 2016
    She was very helpful, always happy to assist. I was very satisfied with the service.
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    Elena, Australia
    Tuesday, June 14, 2016
    Rosa was straightforward, friendly, polite and cheap. I was very satisfied and I definitely would use the same lawyer again in the future.
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    Kate Godbehere, Granada
    Thursday, February 25, 2016
    From the outset, Rosa was extremely professional, approachable, efficient and competent. Her level of English is extraordinary, something very much appreciated as it made life easier for me during an ...inherently difficult time.

    Her correspondence was always relevant, detailed, simply and clearly explained and expressed. Rosa was kindly, matter of fact, calm, patient and always reassuring.
    Her pro-active, intelligent, thoughtful and knowledgeable advice helped very much during a particularly delicate and worrying stage of the process.
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    Peter Gural, La Linea
    Thursday, October 08, 2015
    What I liked about this service: Value for money.

    The level of professionalism and excellence in service was not compromised in the reasonably low fee charged for the service.

    All details were... explained in a simple format that an ordinary citizen could understand, sparing the bureaucratic procedure that only lawyers can understand.
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    Elena Todd, Almoradi
    Friday, July 18, 2014
    Our lawyer was very understanding of our situation, and took a lot of time to strategise for the best possible outcome.

    Her passionate performance in court exhibited a heartfelt commitment to our ...case.

    Her fees were very reasonable and she was willing to consider payment terms at difficult times.

    I strongly recommend her and will use her again in the future.
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    Christine B., Spain
    Thursday, July 03, 2014
    Very fast and comprehensive responses to all my queries.

    Always available via email and telephone.

    Very reasonable fees.Extremely helpful and thorough. Polite, perfect English. Absolutely prof...essional.

Legal Position

Firstly it should be understood that when a couple sign a mortgage agreement each person becomes individually and severally liable for the repayment of the mortgage. The term ‘individually and severally liable’ means that both partners are liable for the entire mortgage. To illustrate the point, in an extreme case, should either die (and in the absence of mortgage protection insurance), the other becomes liable for repayment of the entire mortgage. One-half of the liability to repay the mortgage does not end with the demise of the other mortgagee. While this may seem unfair it is considered a necessity by the banks before lending to a couple.

So, given this illustration of the legal framework, what happens if one of the joint mortgagees is no longer able to – or simply decides that he or she no longer wishes to – contribute to the mortgage repayments?

In fact this problem does arise not infrequently, for example when a relationship breaks-up due to infidelity and one partner leaves the home to begin a relationship with another person. It can be the case that the partner who has left the home is unable or unwilling to continue contributing to a mortgage in a property in which they no longer live.

Whatever the reason for the ending of a relationship there are a number of options available with regard to the continuing liability for repayment of a bank loan on a property in Spain. If there is no possibility of reconciliation, the couple have the following options:

 

Take on the responsibility for the other’s share of the mortgage.

While perhaps the ‘ideal’ solution, this will typically require  that partner to ‘subrogate’ the other partner’s half  of the mortgage. This will mean that the bank or other financial institution that initially granted the mortgage must agree to this. The bank will carry-out the same analysis as they did at the time that the original mortgage was granted and will be most concerned that the income of the partner wishing to take over the entire mortgage is sufficient to cover the repayments.

Another version of this solution would be to have a third party take over the other half of the mortgage. This could be a friend or relative of the partner staying in the property. However, if the bank refuses to approve the subrogation then the situation becomes similar to where…

One partner assumes responsibility for all repayments

When one of the spouses/partners simply leaves the other partner in the lurch so-to-speak and the party left behind has to assume responsibility for all of the repayments. In this case, the partner making all of the repayments will at least be entitled to an equitable share of the party equivalent to the additional repayments that they make. This does not mean that they own the entire property since the partner who left will still be entitled to a proportion of the equity equal to the contributions that they have made. However, at least the additional mortgage payments made are not ‘lost’ but rather they may be added together and reflected in the ownership of the property.

Should you wish to sell the property, it should be borne in mind that it will be necessary to obtain the approval of the other partner. For this reason, at some point it is necessary to reach a legal agreement with the other partner which may even recognise that partner’s equity in the property.

One partner formally cedes their share in the property and the other takes responsibility for repayment of the entire mortgage

This can be quite common in cases of divorce where the bank refuses the subrogation of the mortgage and in the divorce agreement one partner ‘cedes’ their share to the other. This option is often tempting when the desire remains for a complete and absolute split. However it is not to be recommended since the partner ceding their share of the property will continue to be liable for repayment of the mortgage as far as the bank and, more importantly, as far as the law is concerned. Should the partner who remains in the property default on repayments, the partner who has cedes their interest will still be liable for repayment of the whole mortgage.

Sell the property

Another option is to sell the property to a third party and agree to either split the proceeds or, as is possibly more likely, to agree to continue to be jointly liable for any outstanding balance. Possibly the least attractive option since no-one wants to have to pay a debt with no discernible benefit.

Rent the property to a third party

Depending on the rental values in the area, renting the property to a third party may be an option that covers, or almost covers, the mortgage repayment costs. In this way any financial benefit that may be obtained from the property is equally shared. It may be the case that renting the property for a number of years enables the mortgage to be repaid in full and the property can then be sold and the proceeds shared.

Default

The final option is to default on the mortgage. It is possibly the worst of all options since the bank will charge in full for the entire repossession procedure including legal and auctioneers fees and this will be added to the bill. It may of course be that there is no option if either or both of the spouses/partners do not have a sufficient income to meet the mortgage repayments jointly or separately and are unwilling or unable to agree to any other option. It will often take the bank a not inconsiderable amount of time to arrange the repossession and eviction proceedings where necessary. It should be borne in mind that the financial liability travels with you in this case and can be enforced in other European countries via a European Enforcement Order.

Conclusion

The  situation outlined above is quite common nowadays and what is clear that the best results are going to be obtained where the spouses/partners are able to maintain a good level of communication and cooperation so as to manage the property asset in a way that minimises any financial loss. What is clear is that those who stick their heads in the sands and avoid discussing the matter with their ex-partners are really only building-up a bigger financial headache at a later date.

 

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