When does the second home dream become a nightmare? When the bank knocks on your door and tries to repossess your home in the United Kingdom, to offset a bad debt on a second home in Spain. Thankfully, the economic downturn has meant relatively few UK home owners have yet to see their homes repossessed but owners of second homes may be more exposed especially if they are carrying a higher level of debt and servicing that debt becomes a problem.
In a worrying development recently, a UK couple face action from a Spanish bank over money outstanding on a second home in Spain. The couple offered to return the property, used as a second home to the bank, but this was refused and the bank chooses instead to launch an action against them using a European Law.
Perhaps this should serve as a reminder that it is important to keep up payments on all mortgages, regardless of where the property is located and that banks are being pro active in obtaining monies owed to them. The value of property, as always can go down as well as up. The law is a little murky on this subject and it is far from clear whether the bank located in Marbella will in deed be able to succeed with their action, if they do, it could open the flood gates for other Spanish banks to seek to recover debts in this way.
The Spanish Bank, Banco de Sabadell recently obtained an EEO (European Enforcement Order) from a notary based in Spain. This document required a local UK court to impose an interim order against the couples main home. It was this order that first alerted the owners to their predicament, the local court posted the order and thus the first step was in place that may possibly lead to the forced sale of their property. One of the major problems for the owners is that they have now been informed, they can only challenge the EEO in a Spanish court which of course will generate a good deal of additional and unwanted expense.
However, there are a number of obstacles in the way of the case, firstly of course, there is a UK mortgage on the main residence and any sale of the property would not be permitted unless, this mortgage was first redeemed, Secondly, an EEO is meant to be used for uncontested claims in civil cases across EU borders, and it is not clear that the meaning of un contested.
has been strictly adhered to in this case. It is possible that the true meaning of uncontested may have been stretched a little to enable the Spanish Bank to bring this action. The UK Justice Ministry states that the originating authority in Spain must certify that the defendant has agreed to the claim or had the opportunity to object to the EEO. However, in Spain a buyer taking out a mortgage on a property gives up the right to contest the debt and the Spanish Bank are using this as evidence of agreeing to the claim.
This is a very worrying situation, not least for the family involved who face loosing both their main home and second home but to the thousands of other UK residents that may be behind with montage payments on their second homes abroad.