In a 15 to 13 vote, magistrates from one of Spain’s top tribunals reversed the decision to make banks pay for a levy imposed when a notary documents both the sale and the loan
The Spanish Supreme Court has done a U-turn again: it is the clients who must pay for a controversial mortgage tax, and not the banks.
The decision was reached on Tuesday in the Administrative Division of the Supreme Court after two days of intense debate, and with just two votes of difference: 15 justices were in favour of making the client pay the levy, and 13 voted to confirm a groundbreaking decision reached by this same court on October 13 that it should be the banks who pick up the tab.
The vote comes after three weeks of legal chaos that have evidenced a fracture within the Supreme Court and damaged its public image. While bank shares started to gain value on the trading floor following news of the court’s decision, Spanish political parties consumer groups and unions immediately issued highly critical statements.
The Impuesto Sobre Actos Jurídicos Documentados (AJD) is a tax paid in Spain by the homebuyer at the time of purchase when a notary officially documents both the sale and the bank loan.
The Administrative Division of the Supreme Court spent Monday and Tuesday deliberating whether it should be the buyer or the bank who cover this tax, a decision that has been up in the air since earlier this month.
On October 19, the president of that section of the court, Luis Díez-Picazo, opted to revise the criteria that the court had established the day before, when a panel decided that it should be the bank, and not the client, who pays the AJD tax on the basis that it is the lender who needs a public document registering the loan, and not the homebuyer.
A total of 28 justices from the Administrative Division of one of Spain’s top courts gathered this week to debate the recently established criteria, which ruled that the bank was the only party with an interest in getting the loan certified by a notary, because this is what allows the lender to initiate foreclosure proceedings if the borrower defaults on payments. Because the lender is awarded this privilege through the public document, the lender should pay the fee, said the judges. This ruling in itself constituted a reversal of an earlier February decision confirming that clients are responsible for paying this tax.
Had the judges decided in favour of homeowners, they would have also had to decide whether to make the measure retroactive – and how many years back – opening the door to claims from thousands of clients.
Legal sources consulted by EL PAÍS argued that the decision should have been taken purely based on juridical reasons, but they admitted that it was very difficult to filter out the huge public reaction to the recent reverse ruling, and the resulting damage to the reputation of the Supreme Court, not to mention the economic consequences of the decision. Minutes after the first ruling in favour of the client was made public in October, the share prices of Spain’s banks began to plummet on the stock market. The sector is also still dealing with the fallout from a previous legal decision on abusive “floor clauses” on mortgages.
“Many of the decisions made by this division have consequences representing millions of euros,” said one judge. “We have to be aware of this to be able to make a very strict decision. But we cannot help that this fact has an influence on our decision. We are used to this.”
There were protests outside the court on Monday as the judges began their deliberations, with activists from the Madrid Mortgage Victims Association (PAH) calling for a ruling in favour of the clients.