The Spanish mortgage protection system is considered to be sound in terms of affording legal certainty to users. However, it is often criticised for failing to reflect the reality and needs of today's shifting financial landscape.

In the past, the legal foundations of mortgages required that each facility in a development have its own mortgage, and that the loan conditions clearly specify certain provisions (ie, what the mortgaged property was liable for, the relevant amount and the beneficiaries). Consequently, when securing financing comprised of distinct tiers, in which creditors took a different share in each tier, mortgage regulations traditionally required that the financing be broken into sections, and that each facility in the development be treated as though it were a separate claim with its own creditors, and thus with its own mortgage.

Since 2007, the legal foundations have been relaxed and most specification requirements have been deferred from execution to enforcement. On June 8 2011 the General Directorate of Registries and Notaries issued a development in this area with the aim of creating greater flexibility and common sense. On examining such financing arrangements, the directorate stressed that in these types of transaction, different blocks within the development cannot be singled out and secured individually. Where there is a common link or cause, and despite the fact that each lender holds an individual position, the transaction itself cannot be read individually and can only be construed collectively with the remaining lenders.
If Spanish law allow parties to configure their own obligations and a mortgage is ancillary to the credit it purports to secure, it ought to be possible for mortgages to be accepted collectively without having to itemise the shares held by each beneficiary in the secured obligations and, concomitantly, in the mortgage.

For further information on this topic please contact José Antonio Pérez Breva at Garrigues by telephone (+34 93 253 3700), fax (+34 93 253 3750) or email ([email protected]).