How are mortgages created and perfected in Spain? Is it possible to grant an equitable mortgage (that is, a valid and enforceable mortgage even if formalities have not been complied)?
Granting a Mortgage in Spain
A mortgage is the most secure and comprehensive form of security as regards real estate assets in Spain. A lender will usually prefer to take a mortgage over real estate, notwithstanding its value, as it gives the best protection against other below ranked interests.
When granting a mortgage over real estate property located in Spain, the Spanish legislation must apply to the security itself, this is not subject to contrary agreement by the parties.
Pursuant to the Spanish legislation a mortgage would only be valid and enforceable if:
- Executed before a notary public in a public deed; and
- Filed and registered with the land registry where the real estate property is located.
Treatment to unregistered mortgages in Spain
Any mortgage already granted before a notary public but not registered within the Land Registry is rendered as invalid and unenforceable. That is, no equitable mortgage or similar will ever be recognised under the Spanish legislation, neither on insolvency or against any other creditors or the debtor itself. Nonetheless, no registering of the mortgage at the Companies House is required whatsoever.
Equitable Mortgages in the UK
Overall tighten of the Spanish legal system contrasts sharply with granting a mortgage pursuant to the laws of England and Wales, where an unregistered mortgage usually takes effect as an equitable mortgage. An equitable mortgage, if existing, does only transfer a beneficial interest in the asset to the mortgagee with legal title remaining with the mortgagor. However, any mortgage or charge over real estate granted by a UK company or LLP must be registered at Companies House in the 21-day period immediately after the security is created, otherwise it will be void on insolvency and against other creditors.