Property Finance

Chapter 15Spain¹

Preliminary remark

Although the current country report has been drafted by referring to the Spanish Civil Code (hereinafter referred to as “SCC”), within Spain regional law applies to single provinces or territories. In the latter case, the provisions of the Spanish Civil Code shall apply on a subsidiary basis.

1. What are the principal securities lenders will require borrowers to provide?

• the establishment of first-rank mortgages;
• the establishment of share pledges;
• the assignment of rental income;
• the pledge on rental income and the order of collection of rental income;
• the providing of sureties;
• the issuance of comfort letters;
• the assignment of insurance policies;
• the granting of an irrevocable mandate to sell the financed property.

2. What statutory provisions apply to such securities?

Article 1857 SCC sets forth that for a pledge or a mortgage to be effective:

• it must secure the performance of a principal obligation;
• the thing pledged or mortgaged must be owned by the pledgor or mortgagor;
• the person constituting the pledge or the mortgage has to either be in a position to freely dispose of the thing to be pledged or mortgaged or, should that not be the case, the corresponding authority has to be conferred upon them.

Should the principal obligation upon its maturity not have been discharged, the pledged thing or the mortgaged immovable property may be disposed of to pay the secured creditor. The creditor is not entitled to appropriate the things ...