Some 28 judges met on Monday to rule on whether banks or their clients should pay duty on new mortgages
Spain’s Supreme Court met on Monday to make a final decision on whether lenders or their clients must pay a duty on new mortgages as part of the property transaction costs, as well as to clarify whether payment of the tax will be retrospective.
In all, 28 judges will between them debate and come to a ruling on the issue, a process that is expected to take some time, so that the conclusions of their deliberations may not be known until late on Monday, or even Tuesday.
Putting on hold a judicial decision
The extraordinary session was called after the court reversed one of its own decisions. In October 18, the Supreme Court ruled that it is the lender who must pay the duty, but the day after the same judges unprecedentedly put on hold the decision.
The ruling on October 18 caused some controversy, including having a negative effect on Spain’s stock market, which prompted the judges to reconsider the decision. This led to some criticism to the magistrates in the court and to Spain’s judiciary.
Confusion over mortgage tax
Monday’s meeting is also aimed at clearing up the confusion in recent weeks over who must cover the mortgage costs.
Should the court decide banks must pay the duty, the judges will have to clarify certain aspects, such as whether the tax will be applied retrospectively, and if so whether the treasury or the autonomous communities must reimburse clients who have paid the costs.
According to Catalonia’s association of notaries, clients have continued paying the tax since the court’s initial ruling in February, with the costs making up about 1.5% of the total amount lent by the bank.
830 million euros at stake
Estimates suggest that there are more than 235,000 people in Catalonia who will have the right to reclaim the costs should the court confirm its October decision that it is the lender who should pay. That could lead to claims worth 830 million euros in Catalonia alone.
The court reversed its decision on who should pay the tax based on the argument that it is the lender who gains from the signing of a new mortgage. Yet, the reversal caused a severe fall in the stock market, with Spanish banks making losses of some 5.3 billion euros.
A number of financial institutions have warned that if the court confirms that it is the lenders who must pay the tax and it is made retrospective, it will have negative repercussions on clients by leading to more expensive mortgages.