mortgage_rent_covid_19

Mortgage, loans and rent during COVID-19

 

During this emergency time regulations are also in emergency. This article tries to explain easily the Spanish government measures with regards to mortgages and rent and other loans with no guarantee during COVID-19 emergency time.

COVID-19 Spanish basic regulations

The emergency estate was declared on the Decree 463/2020 of March the 14th.

Later on, specific regulations on mortgages and other loans with no guarantee and rents was approved on  March the 31st. You can check it here only in Spanish I am afraid.

Rental measures (I will refer only to individual landlords who rent up to 10 properties):

  1. Eviction procedures suspension. All the court proceedings terms and deadlines are on hold due to the emergency estate. They will resume once the emergency is over. But then the eviction procedures will be suspended when the tenant or property owners (if they are not paid the rents due to COVID-19 for instance and that is their only income for instance) show to the court that they are in a vulnerable position due to the COVID-19 situation. The court will contact the corresponding social services in order to make sure that the eviction procedure do not leave the tenants in a miserable situation.
  2. Letting contract extensions. When the letting contract terminates between April the 1st and two months after the end of the emergency estate the tenant will be able to apply for an extension of six months if the landlord agrees or unless the parties reach a different agreement.
  3. Vulnerable people will be able to (i) modify the contract, the tenants might apply from April and until the 1st and May the 1st to reduce the rent or to delay its payment. The landlords have 7 days to deny or accept the offer, or to reach a different agreement. If a solution is not reached then (ii) the tenant might apply for special loans with no expenses and interests to pay the rents with the guarantee of the Estate. (iii) Specific public financial help to cover the rent such as help to pay other loans taken by vulnerable people to pay the rent for instance.

Who is in a vulnerable situation due to COVID-19 for rental measures?

Whoever fulfils jointly the following requirements:

  • The vulnerable person has is unemployed or if self-employed has an important income reduction, and is part of family household (parents and children basically and similar situations detailed in the regulations),
  • Consquently, the family income falls below a certain limits. this limits take into account children, elderly, disabled and dependants,
  • That the rent and basic expenses are over 35% of the family househjold. The basic expenses are the following: water, electricity, heating, telephone and internet, community of owners’ fees. No more.
  • None of the family members owns or has a life interest of an available and full property in Spain.

Loans suspension

You can see a quite technical explanation in Spanish of this subject here try to summarize:

Which loans are affected?

  1. Loans guaranteed with a mortgage on main residence, or commercial premises where people carry out their main economic activity or profession, or properties let but owners are not paid because the tenants are in financial trouble due to COVID-19,
  2. Loans not guaranteed with a mortgage.

Beneficiaries:

Debtors who fulfil jointly the following requirements:

  • The vulnerable person has is unemployed or if self-employed has an invoicing  reduction of 40% and is part of family household (parents and children basically and similar situations detailed in the regulations),
  • Consquently, the family income falls below a certain limits. this limits take into account children, elderly, disabled and dependants,
  • Family income limits as stated for vulnerable people for rental measures.
  • That either the (i) mortgage monthly payment, or (ii) the rent plus personal loan/s or (iii) just the personal loans (but not the mortgage monthly payment plus personal loan/s) severally, plus the basic expenses are over 35% of the household computable income.
  • That the proportion of the mortgage payments (including arrears since the beginning of the emergency) on the family income increases on 30%. This will be due to the income reduction basically as the variable interest rate has of the majority of the mortgages in Spain has barely increased fi so.
  • None of the family members owns or has a life interest of an available and full property in Spain.

When to apply?

For mortgage suspensión up to 15 days after the emergency estate finishes.

For the other loans up to one month after the emergency estate finishes.

How long the suspension lasts?

Three months initially. The Government can extend it if necessary.

When the suspension starts?

If all the requirements are met the suspension starts immediately once the application is made. In the case of mortgages, 15 days afeter the application.

Theres is no need to agree anything with the bank. The suspension takes place by act of law.

What the suspension means?

It is like a gap in the loan. It means an extension of 3 months of the repayment schedule. It means no payment of capital, regular interest or penalty interest. And the suspension time does not count as default payment according to the law to calculate the default time to eventually engage the early cancellation stipulation.

It does affect to the loans’ personal guarantors?

Yes, it does affect to their position as guarantors in two circumstances: (i) the creditors must try to get paid from the debtors first even if the guarantee agreement allow the creditor to claim directly to the guarantor, and (ii) once the bank is enabled to chase the guarantor they will be able to apply for the suspension if they are vulnerable according to the law.

Water, electricity and heating fuel.

During the emergency estate they cannot be cut off at all to individual consumers.

Free legal advice

I would like to offer free legal advice on these issues as I feel many queries might arise to everybody (including to the legal community) due to the emergency of the situation and the fast measures the Government is taking. So, all the queries relating to these issues will be free at any time.  

Thank you

Thank you for your time and attention and I hope this information is of use. You are very welcome to share if you liked it. You might be interested in this other post about COVID-19 and family law.

Warning

Please, note that this is general information. This is not specific legal advice. It is advisable to seek legal advice for any specific legal issue.

And remember, take care and stay at home.