When Victoria Holden bought her holiday home — a two-bedroom flat near the beach in the heat of the Murcia region, in southeast Spain — she took out a mortgage locally, like tens of thousands of British investors in the country.

Holden, 40, a dentist from Hungerford, in Berkshire, paid the setup fees for the loan, as is usual practice. And for the past 10 years, she has made her monthly repayments without fail. All fine. Yet now she, along with millions of other mortgage-holders in Spain, could be in for not one but two windfalls. The payouts follow two judgments, one from the European Court of Justice last month, and another from the Spanish supreme court, that deemed the banks’ treatment of their customers was “abusive�.

The first instance of financial foul play could become Spain’s equivalent of the PPI scandal. It hinges on what’s called a “floor clause� (clausula suelo) for interest rates, which banks sneaked into the small print of up to 4m mortgages, according to the Spanish banking consumer lobby Adicae. It estimates that there is about €4bn (£3.4bn) in refunds waiting to be claimed — with every Spanish bank potentially implicated, and the average British buyer due about €15,000 (£12,750).

“Floor clauses were common in loans taken out between 2007 and 2009,� says Mark Stucklin, director of the analysts Spanish Property Insight, who was contacted by 250 British buyers within 10 days of posting the news on his website. “They set a limit on the minimum interest rate a lender could charge — typically 3% — so regardless of how low the Euribor base rate fell, borrowers continued to pay interest at the fixed minimum rate, despite having variable-rate mortgages.

“Put simply, most borrowers with illegal floor clauses are paying too much.�

Floor clauses aren’t illegal in themselves — but failing to tell borrowers they have one is. Holden realised something was wrong back in 2010, when she noticed that her monthly payments weren’t going down, despite the plummeting interest rate.

“I called my bank to ask why,� she recalls, “and was told my interest rate wasn’t linked to the European interest rate — which made no sense. When I was applying for the mortgage, I was told I should be paying €500-€600 a month, but it was nearer €900.� Like many overseas buyers, she gave her solicitor power of attorney to deal with the mortgage for her from a distance — “So I never saw any of the documentation and never had any of the terms explained.�

The question on every borrower’s lips will be “How do I get my money?� — and, this month, the Spanish government came up with an answer. “It announced that banks must set up departments to deal with such claims and inform clients with floor clauses about the reclaim system,� says Peter Esders, legal director and solicitor at the international property law firm Judicare. “The bank must then calculate the amount that must be returned and, if the client agrees, make the payment. The whole process must take no longer than three months.�

That may work for residents and Spanish-speakers, but how easy will it be for owners to navigate their way through bank bureaucracy, in a foreign language, from 1,000 miles away, and to persuade them to cough up thousands of euros? Fernando del Canto, managing partner of the London- and Madrid-based law firm Del Canto Chambers, is sceptical. “It can take three months just to get an answer from your branch manager. This is such a huge and serious issue that the banks will put every obstacle in place,� he says.

He is collecting groups of clients according to their mortgage lender, and preparing to launch various group actions. “We want to avoid legal proceedings if possible,� he says. “We aim to force the banks to settle the proper amount out of court.�

His law firm is charging a £150 upfront fee and will take 20% of any money recouped from the bank. “As a barrister, I am 100% confident of success,� he says. “We will get the refunds. The question is when.�

As if that weren’t enough, Spain’s supreme court has shone the spotlight on another area where the nation’s banks have been remiss. This time it concerns the setup fees that borrowers have traditionally paid when they get a Spanish mortgage. They include stamp duty, notary, land-registry and admin fees, and they amount to about €3,000 on a €150,000 mortgage.

Last year, the court decided that the banks should pay all, or at least some, of these fees, as it is in their interest, not the borrower’s, to protect the loan by getting it notarised and registered. Now the ruling, known as 705/2015, is making headlines as it filters down to regional courts across Spain. Each region has its own interpretation, but all agree that claims can be made for fees paid since December 23, 2011, and that you have until December 24, 2019 to do so.

Several banks, including Santander and BBVA, have changed their policies in recent months, in an attempt to avoid further lawsuits: they now pay about 30% of fees. It’s early days, says Karen Storms, head of international sales for the Spanish estate agency Lucas Fox. “It will take some time to see how big the retroactive claims for registration costs can and will be,� she says.

Peter Esders, however, is in little doubt. “It has the potential to be even bigger than the floor clause issue, because it is likely to involve every client who has taken out a mortgage,� he says. “It affects British owners, but I suspect most aren’t aware. They may well benefit from looking into this.�

One person who will be doing that is Peter Higson, director of a plumbing and heating company in Altrincham, Greater Manchester, who took out a €177,000 mortgage on a villa in Torrevieja, near Alicante, in 2006. The news has come out of the blue. “It’s like sub-prime in the USA — people didn’t read or couldn’t understand the small print. It’s a bit of a case of buyer beware.�

This time, though, buyers might just stand a chance of fighting back.

https://www.thetimes.co.uk/article/whats-spanish-for-refund-2pp983wjh