An Analysis of the Draft Law Regulating Real Estate Credit Agreements

The maximum period granted by the European Commission to implement the European legislation on mortgages in national law expired almost three months ago. Previous versions of the Mortgage Credit Law have been the subject of intense parliamentary debate for more than a year due to its importance and the profound effect that this law will have on current mortgage-backed facilities. Finally, on 15 March 2019, the last version of the Mortgage Credit Law was published.

The Mortgage Credit Law implements Directive 2014/17/EU of the European Parliament and of the Council of 4 February 2014 in Spain. The purpose of this Directive is to enhance legal certainty, transparency and understanding in relation to certain financing agreements granted to consumers who are not acting in the course of their professional or business activity.

However, the Mortgage Credit Law has gone further, extending its scope of application to all natural persons regardless of whether they are considered consumers or not. Therefore, the Mortgage Credit Law also applies to other groups, such as self-employed workers.

The main changes introduced by the Mortgage Credit Law affect the following elements of the mortgaged-backed facilities this Law applies to:

• early repayment and the corresponding fees;
• prohibition of minimum interest rate clauses (cláusula suelo);
• multicurrency mortgages;
• related sales;
• default interest;
• appraisal value;
• distribution of mortgage expenses; and
• legal framework of the lenders, among other elements.