What was the issue?
In the past, a client would potentially only see any conditions imposed by the bank attached to taking out a mortgage, at the notary on the completion date. The effect of this was that the client was put under pressure to accept the conditions because, if they were not accepted, the purchase and sale would not take place. This was considered as an abuse of power by the bank with respect to its customers and so this law seeks to address this imbalance.
What has changed?
This law now stipulates that the bank must provide information relating to the conditions of the mortgage to the client or their lawyer, providing the client has given them POA, 10 days in advance of the completion date of the sale of the property. The acceptance of the mortgage is now agreed as an extra step in the process in advance of the purchase.
How will this work in practice?
10 days prior to signing the mortgage deed (and consequently the sale and purchase), the bank and the client (in person or represented by their lawyer) must attend the notary to agree and accept the conditions of the loan by signing a deed of acceptance of the conditions of the mortgage. This will replace the private document which in the past was part of the deed of mortgage and did not require a separate signature.
On completion the client will still need to sign the purchase deed and the mortgage deed but there are no surprises as the conditions have been already accepted and agreed in the acceptance deed.
How does this affect non-resident foreign buyers?
This extra signature, 10 days prior to completion, will mean that if the buyer does not live in Spain, they will have to travel to sign these mortgage conditions before a notary.
Obviously, if the foreign buyer, or non-resident, decides or prefers not to come to Spain beforehand, they will have to provide his lawyer, or his legal representative, with the necessary powers of representation (power of attorney) to do so.
Granting a POA:
Since Powers of Attorney in Spain are protocoled in a different way than in other countries, and also, powers granted abroad need legalizations that may take a while, we recommend to all those who are buying a property in Spain with a Spanish mortgage, or who have the intention to do so, consider this new requirement with their lawyers and consider granting powers of attorney to their lawyers or legal representatives.
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