On 23 January 2019, the rights of bank clients once again suffered a serious setback with the publication of Supreme Court Rulings 44/2019, 46/2019, 47/2019, 48/2019 and 49/2019, which set a definitive criterion on arrangement fees and mortgage origination fees, which do not benefit borrowers.
The Supreme Court considers that arrangement fees are not abusive, because they are not unrelated to the price of the loan; on the contrary, the interest and the arrangement fee constitute two items which are part of the price of the loan, insofar as they are the main payments received by the financial institution for granting the loan to the borrower and do not correspond to eventual actions or services. Both the remuneration interest and the arrangement fee must be included in the calculation of the APR, which allows the consumer to know what the actual cost of the loan will be.
The consequence is that as they are part of the price, they cannot be subject to control of abuses, only if there is a lack of transparency, i.e., if the client didn’t know about the existence of this commission prior to signing the contract.
The costs of these fees will depend on the type of deed and who is requesting them according to the “regulations in force at the time of signing the contract”:
Thus, the Supreme Court understands that the costs of the matrix -constitution- of the mortgage loan deed must be distributed in half, as well as the deeds of modification of the mortgage loan, since both parties are interested in the modification or renegotiation.
The cancellation costs, on the other hand, will correspond to the borrower, who is the interested party.
And finally, the cost for copies of the different notarial deeds related to the mortgage loan must be paid by whoever requests them, as the request determines their interest.
The Supreme Court understands that when registering the mortgage guarantee in favour of the lending bank, the lending bank will be responsible for the payment of the expenses incurred in the registration of the mortgage. On the other hand, the registration of the deed of cancellation is in the interest of the borrower, and therefore this cost corresponds to him/her.
These are expenses incurred in the interest of both parties (bank and borrower), so half the amount is payable by both parties.
Transfer Tax and Stamp Duty
The Supreme Court reiterates that the taxpayer of this tax is the borrower (doctrine established by Rulings no. 147 and 148/2018, of 15 March, and no. 1669/2018, 1670/2018 and 1671/2018, of 27 November).
It also clarifies that this jurisprudential doctrine is not affected by Royal Decree-Law 17/2018, of 8 November, which modifies the Revised Text of the Law on Transfer Tax and Documented Legal Acts and which establishes that for new mortgages, the bank will be the taxpayer of this tax, as it is not possible to apply this rule retroactively.
Property Appraisal and Home Insurance Expenses
Although the Supreme Court has not ruled on these two expenses, the majority of case law is in favour of attributing these expenses to the borrower.
Regarding the damage insurance, the financial institution will request, as a legal requirement, the applicant to take out insurance covering the value of the property appraised in order to insure the value of the guarantee. The client is obliged to take out this insurance, although he/she can choose the company with which he/she does so.
And with regard to the appraisal, as it is a document that is needed to study the guarantee, and to value or appraise the property, and it is a document that the applicant -future borrower- can take to as many financial institutions as he/she deems convenient, he/she must pay for it and can choose the appraisal company in charge of carrying out the appraisal, without having to conform to the one imposed by the financial institution.
Location and wording of these clauses
It should be remembered that these clauses appear in the Deeds, normally in Stipulation FOUR (arrangement fee) and Stipulation FIVE (formalisation costs) of the clauses, and that the arrangement fee clause is usually set at 1% of the loan granted, and the formalisation costs are usually worded as follows: “The borrower will be responsible for all the expenses arising from this operation…”.
At Bufete Salmerón we have dealt with numerous cases related to abusive clauses, and we have a team of highly qualified lawyers, so if you have any abusive clauses incorporated into your mortgage loan contract or others, such as: floor clause, early maturity, late payment interest, etc…, do not hesitate to contact us.