- On 18 October the Supreme Court held that the stamp duty on mortgage deeds must be paid by the bank and not the customer.
- Bank shares fell on the possible cost to the sector.
- It is worth reviewing the contract and the deed, keeping the documentation and waiting for the legal position to become clear before deciding.
On 18 October 2018, a ruling of the Supreme Court held that the stamp duty on mortgage deeds must be paid by the bank and not the customer. Bank shares fell. The news affected many people with a mortgage, past or future, and raised questions about who pays what in one of the most important financial transactions of a lifetime. Any change in its costs is felt in the family budget.
A ruling of this kind has economic and legal consequences that go beyond the specific case. When the Supreme Court changes or clarifies a criterion, banks, customers, notaries and advisers must review their practices and expectations. For those with a mortgage already signed or about to be signed, it is an occasion to check what they have paid, what they might claim and what is worth asking before taking on new commitments. That review costs nothing and can avoid later surprises.
What the tax is
The stamp duty on documented legal acts taxes, among other things, the formalisation of a mortgage in a notarial deed. Until then it was usual for the customer signing the loan to pay it. The ruling said that it was for the lender.
The costs of a mortgage include several items: notary, registry, administrative agent, valuation and taxes. Each has a different nature, and the discussion over who should bear them has been recurrent. In this case the ruling focused on the tax linked to the deed, and its effect could be significant because it is applied on a large base. Understanding each item helps one know what is being discussed and avoid confusing concepts. Asking the notary or the lender for a breakdown of each cost is a sensible practice.
The immediate reaction
Bank shares fell, because the measure could mean a significant cost for the sector. For customers, by contrast, the news raised the expectation of not having to bear that payment on future mortgages and, perhaps, of being able to reclaim it on those already signed.
The market reaction reflects how the economic consequences of a court decision are assessed. Investors calculate the possible cost to the institutions and adjust prices immediately, sometimes before knowing every detail. For the customer, however, the situation is different: an expectation is not a confirmed right, and the procedures for claiming, if they applied, would have their own conditions and deadlines that would need to be known. That is why it matters not to let time pass without finding out.
Prudent steps
Anyone with a mortgage, or about to sign one, can review the contract and the deed to see which costs they bore, and consult a lawyer about the options. In any case, it is prudent to keep all the documentation and wait for the legal position to become clear before taking decisions. Acting hastily, in either direction, may do more harm than good.
Among the documents worth locating are the mortgage deed, the invoices from the administrative agent and the notary, and any proof of tax payment. With those to hand, a lawyer can assess whether there is a basis for claiming and what the steps would be. Each case has its own particulars, and what works for one may not work for another. It is also wise to distrust anyone promising certain results or seeking to charge in advance: in legal matters, absolute guarantees almost never exist. An initial consultation with a trusted professional usually clarifies more than many headlines.
With a legal question still open, the prudent course is to gather documents and take nothing for granted.
This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.
