Returning the keys to the bank after the death of a relative

One of the first phrases that I learnt when I moved to the UK to work as a Spanish lawyer was “catch 22”. At the beginning I did not have a clue as to what it meant (‘a paradoxical situation from which an individual cannot escape because of contradictory rules or limitations’ says Wikipedia) but once I learnt its meaning, I then started to use it in situations like the one I am about to describe.

What happens when a relative dies with a property in Spain with no equity? Imagine that uncle Vernie died while he was a resident in Spain. He had a property in Spain with a mortgage and a few thousand euro in the bank. Due to the property crisis, the asset is worth less than the mortgage and we are uncle Vernie’s next of kin. As we are not interested in the property, we would like to transfer this back to the bank and clear the debt, so we can inherit the money that is in the bank. So far, so good but in Spain, the beneficiaries cannot transfer the deceased´s property back to the bank without having accepted the estate first and registered the property in their names. Furthermore, the costs of the administration of the Spanish estate are quite high and very often could involve thousands of Euro. On the other hand, if we do nothing the bank will probably take legal action against us because the mortgage is unpaid and will try to force us to either accept or reject the estate.

What options do you have:

  • You can renounce to the Spanish estate, although this has to be done properly through a Notarial deed. Also, in certain occasions it could lead to the estate passing to your children, which is something that we will not want. Legal advice should be sought before taking this route.
  • Speak with the bank and negotiate a solution. In certain cases, the Spanish bank will be prepared to cover part of the costs if there is an intention to transfer the property back to the bank
  • Accept the estate, register the property in your name, paying the mortgage every month and then eventually sell the property when the property market recovers and there is equity again
  • Do nothing, which is not advisable as this matter can then become a “Damocles sword” pending on your heads for years to come.

These are more or less the options available in cases like the one above. Very often, having a lawyer will help as he or she will be able to speak with the bank and advise you on your options, costs and tax implications.

As you can see, the supposed “catch 22” situation can become a happy fairy tale if you take the right actions to overcome the problem.

Happy new year!



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