Archive for January, 2017

Banks Told to Pay Compensation for Floor Capped Mortgages in Spain

Posted on: January 23rd, 2017

Dozens of Spanish banks in have been told to pay compensation for floor capped mortgages in Spain or face legal action by up to 2.5 million property owners.

During the international property boom, thousands of UK investors and families looking for a holiday home in the sun bought a property in Spain. Many took advantage of mortgages offering a low introductory interest rate followed by a variable rate linked to EURIBOR. What many did not realise was that the mortgage agreements included a “clausula suelo” or “floor cap” clause that stipulated if the EURIBOR rate went below a certain level, lenders could apply a minimum interest rate.

The EURIBOR rate was slashed in 2008 following the worldwide collapse of the property market. However, rather than charging less interest on the outstanding property loans, more than forty Spanish banks applied a similar or higher interest rate as before – causing considerable financial hardship for property owners, multiple mortgage defaults, and 90% of evictions. Many property owners felt they had been treated unfairly, as the “floor cap” clause had never been explained and was often only briefly mentioned among lengthy and complicated terms and conditions.

Attempts to recover compensation for floor capped mortgages in Spain were initially unsuccessful. Courts often found in favour the banks, who argued it was the purchaser´s responsibility to read and understand the terms and conditions of the mortgage before agreeing to it. However, in May 2013 – during a court case against Spain´s second-biggest lender BBVA – Spain´s Supreme Court ruled that BBVA´s floor cap clauses were unfair, and – although not prohibiting them – ruled that the clauses should be voided in all past and current mortgage agreements.

As a result of the Supreme Court´s ruling, 15,000 property owners brought a class action claiming compensation for floor capped mortgages in Spain. In April 2016, Judge Carmen Gonzalez found in the claimants´ favour and said that “quantities improperly charged” since May 2013 should be refunded. The verdict caught the eye of European Commissioners, who felt that, if the unfair clause was to be voided, it should be voided from the beginning of the agreement and compensation paid in full.

Spanish banks contested the Commissioners´ view – arguing that, if they paid compensation for floor capped mortgages in Spain from the start of every eligible mortgage agreement, their liabilities would exceed €4 billion. The banks claimed the liabilities would cripple the already unsteady banking sector. The Commissioners disagreed and, in December last year, the European Court of Justice ruled that compensation for floor capped mortgages in Spain should be paid in full.

Conscious of the potential for up to 2.5 million claims, the Spanish government acted quickly and last week announced the process through which banks would pay compensation for floor capped mortgages in Spain over a three-month period. The process starts with the lenders identifying which customers signed mortgage agreements containing the contentious clause. Banks then have to write to each customer with an offer of settlement.

If the offer of settlement is considered inappropriate and no agreement can be reached within three months, or mortgagees are not contacted by their lender within three months, the “extra-judicial procedure” will be considered concluded, allowing property owners to pursue compensation for floor capped mortgages in Spain through the courts. As ever, we advise those affected by this latest development to seek professional legal advice from a solicitor familiar with the Spanish real estate market.

Company Sentenced for Health and Safety Breaches at Work and Fined £150,000

Posted on: January 5th, 2017

A Tyne and Wear engineering company has been sentenced by Newcastle Crown Court, and fined £150,000 for health and safety breaches at work.

The prosecution against PSL Worldwide Projects Ltd resulted from a workplace accident in July 2014 due to which two employees suffered severe chemical burns. The two men had been cleaning a pipe system at a site in Cramlington, Northumberland, when a chemical reaction occurred between the Sodium Hydroxide granules they were using and some water.

The reaction caused the cleaning solution to heat up and create pressure within a hose. The hose disengaged from its mounting and sprayed both men with the chemical solution – one suffering life-threatening burns to his back, arms, legs and head. The second man suffered slightly less serious burns to his back, left arm and head.

The accident was investigated by inspectors from the Health and Safety Executive (HSE). The inspectors found that an inadequate risk assessment had been conducted that led to the two men being provided with a hose not suitable for carrying out the work. It was also discovered that neither of the two men had been provided with adequate personal protective equipment.

The company was prosecuted for health and safety breaches at work that caused an avoidable accident. PSL Worldwide Projects pleaded not guilty to the charge of breaching Section 2(1) of the Health and Safety at Work Act 1974, but were found guilty at Bedlington Magistrates´ Court last November. The case was subsequently referred to Newcastle Crown Court for sentencing.

At the sentencing hearing, judges heard that PSL Worldwide Projects Ltd had subsequently gone into liquidation. Although unable to order costs against the company, the judges issued a fine of £150,000 for the health and safety breaches at work. Speaking after the hearing, HSE inspector Laura Catterall said:

“If a suitable risk assessment had been undertaken it would have identified that the equipment being used was not right for the chemicals or the work being carried out. All companies who work with high hazard chemicals should learn from this case and ensure that their workers are properly protected.”