The EUCJ ruling on the validity of the early cancellation stipulation on Spanish mortgages states that if when they are abusive they are void and null.
Early cancellation stipulation
I explained here the situation of this stipulation.
I would like to remind that a mortgage deed is like a judge ruling. And a judge ruling is directly enforceable by a special repossession procedure. In this procedure there is no discussion at all about any fact or legal points. If the events foreseen in the early cancellation stipulation are met the bank can engage the repossession procedure.
Thus the relevance of the validity of the early cancellation stipulation.
What does the EUCJ ruling say?
The EUCJ has said basically the following:
First. When the stipulation is abusive it is abusive in full. The stipulation cannot be saved partially. So the consequence is that the stipulation does not exist in the contract unless the contract cannot remain without that stipulation. It is not possible to change the agreement by the stipulations in place if they are different.
Second. The EUCJ instead of applying the afore mentioned general rule makes a sort of an exception. The EUCJ says that the banks can apply the new mortgages regulations more protective to consumers when the final situation of the contract would be not good for the consumer. So the EUCJ is making more flexible the exception of changing abusive stipulations by the current regulations. This will be possible not only in the case that the contract cannot survive but in cases when the consumer is left in a worst situation than the current contract without the abusive stipulation.
Which are the consequences of the EUCJ ruling?
As the EU law wants that the abusive stipulations are not used at all. So if the judges change the abusive stipulations by the regulations in place which are more proportionate then the professionals who use the abusive stipulations would not care about using no abusive stipulations. The reason is that the courts could change the abusive stipulations so the contracts can survive but there would be no fine for those professionals. And they would have no incentives to not to use abusive stipulations.
Usually, the mortgage contract can survive without this stipulation. The bank will not be able to cancel the contract earlier than the final term. And this would be the only consequence. The banks will have to wait longer until the payment default is really relevant for the contract.
So if the early cancellation stipulation is abusive it does not exist. Thus the repossession procedure based on that stipulation would be void and null. The bank needs to start a new whole procedure and this could be worst for the consumer. The assessment of which situation is best for the consumer is on the Spanish court dealing with the repossession procedure.
I think that a new procedure where you can discuss all fact and legal points of the case will not be worst than a repossession procedure where you can discuss nothing. We will see how the Spanish courts will apply the EUCJ ruling. It should be a case to case solution.
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.
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.