The Spanish Supreme Court ruling of September the 11th 2019 settles definitely the early cancellation stipulation issue included usually in all the consumers’ mortgage contracts.
The end of the story?
I think so. The Supreme Court ruling is very clear and fair and gives specific instructions on how to deal with all the eviction procedures which were put on hold until its ruling. And the EUCJ ruled on March the 26th 2019 and later on published 3 more decisions on the matter on July the 3rd 2019. The Spanish Supreme Court ruling of September the 11th 2019 settles definitely the early cancellation stipulation issue included usually in all the consumers’ mortgage contracts.
Following the Supreme Court rulings these are:
- The stipulation declared void and null cannot be fragmented making void and null some parts and keeping others when this makes the stipulation lose its meaning.
- It is possible to substitute a null stipulation by the applicable law on the subject only if the contract cannot survive otherwise. And only when the contract cancellation leaves the consumer in a worst position than the contract maintenance.
- The above assessment has to be made by the national courts.
- In order to assess on the above the national courts have to look at the contract from an objective perspective and not only from the consumers’ point of view.
- Only if the contract can survive without the null stipulation then the consumers’ option would be relevant.
And the Supreme Court understands that a loan guaranteed with a mortgage it is a complex contract. The loans are cheaper than the ones without a mortgage because the mortgage facilitates the fast execution in the case of payment default from the consumers. So the banks do not lend cheap money without a mortgage. So, the loan and the guarantee are intertwined in a complex contract. If the early stipulation cancellation is declared void and null the contract cannot survive. Then the court can substitute the stipulation for the law in force for the survival of the contract. Otherwise, the cancellation of the contract would be worst for the consumer. The situation then would mean that the consumer should return all the debt due, plus interests and costs and would not benefit from the new regulations. This benefits are to stop the eviction procedure paying only the amount due at that moment and reduced legal costs for instance.
But the substitution of the null stipulation has to be made according to criteria. This is, the contract breach has to be of an essential duty such as interest payment for instance, has to be relevant taking into account the length and the amount of the loan. Also, it has to be assesse if there are other remedies to avoid the contract cancellation.
We have to take into account also that an eviction procedure archived because of the nullity of the early cancellation stipulation can start all over again. This is because the new execution is not based in the breach of contract (payment default) but in the breach of law as the new regulations are imperative and foresee and allow the execution at specific payment default percentages. So the new execution is based on the new imperative law and not in the loan contract. And because of these different grounds the new procedure can start over again otherwise it would be impossible as it would be an identical procedure on the same grounds. And this is not permitted.
The Supreme Court also sets the guidelines to deal with all the eviction procedures on hold. So provided that the property has not been already auctioned and delivered to someone else these guidelines are as follows:
- Procedures based on the grounds of a null stipulation before the first change of the regulations on this subject (Act 1/2013 in force on May the 15th 2013) should be archived immediately.
- Procedures on the grounds of a null stipulation when in force the first change of the regulations on this subject (Act 1/2013 in force on May the 15th 2013) should be archived if the breach is not essential, relevant and proportionate. If the breach fulfils the requirements of the new mortgage regulations Act, the procedures can go on.
- The eviction procedures archive allows a new eviction procedure from the creditor as long as the breach fulfils the requirements of the new mortgage regulations 2019 Act.
It is not easy to explain these kind of questions as they are technical and complex. We recommend to seek professional advice from legal experts in order to make sure you make the best decision for you. And each situation is different. So any queries that may arise please do not hesitate to contact us by any mean.
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 related posts on eviction procedures, EUCJ ruling on the clause and the new Spanish mortgage regulations.
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.