Question:
I finished paying my Spanish mortgage over 10 years ago. When I visited the notary to sign the sale of the property the buyers solicitor told me that I still have a mortgage and that we could not sign the sale until it was removed . What is going on?
Answer:
A mortgage is essentially two transactions wrapped up into one. It is a loan plus a charge on a property to secure it.
In Spain when you finish paying a mortgage, you have to instruct the bank to visit the notary and sign a cancelation deed. They will do this, but it is up to you to ask for this to happen. The do not do this automatically .The bank can not law charge to go and sign the cancelation deed but you will have to pay a notary fee, a registrars fee and someone to process the document. You can ask the bank to this for you or use your own lawyer. In total it will normally cost around 800 euro.
The trouble is that Spanish people are fully aware of this . This leads the Spanish banks to not remember to tell their ex-pat clients about this. It does not ring any alarms because some people like leaving the charge in place as it puts off potential creditors from litigating against them as it makes them look poor on paper and a difficult target for litigation.
Only when the deed of cancelation has been presented at the property register will the charge be removed from the property register allowing the property to be sold.
The organising and registration of a cancelation deed takes approximately one month.
Normally not having requested the cancelation when you finished paying off your mortgage should not cause big problems as it will simply cause a delay.
Exceptionally not requesting the cancelation of a mortgage charge immediately after it has been paid off can cause more serious problems that can be resolved it but can take time which could lead to loosing a sale and to considerable expense.
The problems can arise if the bank you took out the mortgage with no longer exists because it has gone out of business, has been taken over by another bank or has been part of a merger. (and all three things have been exceptionally frequent during the last 10 years )
If a bank takes over another they will normally have taken over all the bank accounts , loans etc and also the faculty to sign on behalf of the previous bank in relation to previous transactions , but we have in the last year come across varios cases that have caused a lot of difficulties.
One case involves Caixa Bank that has taken over various banks during the recession including Cajasol . When they took over Cajasol, it seems that where there was still a loan outstanding, the files from the data bases where moved over to the new bank so there is no problem as CAIXA has all the info. Unfortunately it seems that some loans that had been paid off 100% or where the clients no longer had an account, no information has been transferred over automatically as a database, so in our case where we have requested a cancelation the bank does not know what to do as even though the non existence of the loan on their data base in principle should mean that it has been paid they actually have to find the physical file to confirm it was indeed paid off. I guess not all files can be founds and if that happens they seem to delay the cancelation endlessly while they decide who in the bank takes responsibility for signing the cancelation deed. This is even worse if the loan we are attempting to cancel is still within the initial repayment period (i.e. that it would not have been paid of it it had not been for an early redemption).
The other mortgages you may have problems with would be those taken out with Caja Granada as they where merged with two other banks to create BMN which a few year later was in turn taken over by BANKIA . Again , only a problem if the loan was paid off before the bank disappeared as the banks where very careful with the takeover of the data bases containing unpaid loan but very bad at transferring data bases with information about already paid loans .
Finally loans taken out with CAM bank that has been taken over by Banco Sabadell and soon we will start to see problems with cancelations of mortgages taken out with Banco de Andalucia that was taken over by Banco Santander last year but with full integration completing last week.
Conclusion:
If you pay off your mortgage make sure you organise for the charge to be removed from the property register.
If you paid your mortgage and suspect you may not have had the charge removed contact your bank to find out what happened or do a search in the property register which costs just 10 euro and will tell you if the charge has been removed.
If you need help selling your property please take a look at our conveyancing page.
QUESTIONS AND ANWSERS
What do I have to do when I finish paying my mortgage in Spain ?
You must contact your bank and request they cancel at the notary. “CANCELACION REGISTRAL DE LA HIPOTECA”. They will ask you at what notary you wish them to have it signed. It normally takes them a week or two. After that you can either process the deed yourself , have your solicitor process it or ask the bank to recommend someone to do it for you. The complete process takes between 1 and 2 months.
When should I request the cancelation?
As soon as possible after you have finished paying it .
How do I know if my mortgage has been removed from the property register?
Ask your solicitor to request a search certificate in the property register. It costs just 10 euro and two days later you will know if all is in order or not.
