Spanish StreetSpain’s Civil Code provides that when the sale proceeds of a mortgaged property do not cover all the debt contracted with the bank, the debt continues to subsist and the bank may go against any other asset belonging to the customer, with the exception of properties that are untouchable, for the shortfall.

However, a Court in Barcelona has declared that an Unlimited Liability clause in a Mortgage document is void.

In its judgment of 7 December 2016, Mercantile Court No. 10 of Barcelona upheld, in full, the claim issued by the borrowers who had entered into a mortgage with a banking institution in June 2006. The mortgage included a clause pursuant to which the loan had not been extinguished even though the bank had repossessed and sold the property. The court held that the case involved an abusive clause because the bank had not proved that it had properly informed its customers about the conditions of the mortgage and the implications of the relevant clauses “in a way that is understandable”.

Read our full article in our Spanish Corporate-Real Estate Legal Update