The early maturity due to default on mortgage loans

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Uncertainty pending the decision of the CJEU

Until recently, it was peaceful to understand admissible the declaration of total anticipated maturity of loans with mortgage guarantee due to non-payment of one or three or more installments, depending on whether they were loans formalized before or after the entry into force of Law 1/2013, of May 14, of Measures to reinforce the protection of mortgage debtors, Debt restructuring and Social rent. It was this Law that modified article 693.2. LEC, which traditionally allowed the agreement of full early maturity of the amount owed for capital and interest “if the total maturity had been agreed in case of non-payment of any of the different installments”, going on to demand the non-payment of “at least,

This panorama changes at the moment in which some courts of first instance begin to consider the possible abusive nature of the early maturity clause due to non-payment of a single installment, being, of course, mortgage loans formalized before the entry into force of the aforementioned Law 1/2013.
Along these lines, the Santander court number 2 raised the preliminary ruling that gave rise to the order of June 11, 2015 of the CJEU. In this case, the financial institution had declared the early maturity due to the non-payment of four installments of the mortgage loan under a clause in the loan deed that allowed said declaration of early maturity “in the event of non-payment on the due dates of one any part of the principal of the loan or of its interests ”. The question that the court raised to the CJEU is whether, considering the existence of an abusive clause relative to the anticipated expiration by the national judge, it should be considered not put, extracting the consequences inherent to it even if the professional had waited the minimum time provided in the national standard. And what was the response of the CJEU? That the mere fact that the early expiration clause is contrary to article 693.2 LEC is not a sufficient argument to conclude that it is abusive, since it “must cause a significant imbalance between the rights and obligations of the parties to the detriment of the consumer. derive from said contract ”, and that the fact that the clause reputedly abusive has not been applied does not by itself exclude the existence of a significant imbalance between the parties.
What, therefore, must the national court take into account when classifying the clauses of early expiration due to non-payment? In this regard, the CJEU, in its judgment of March 14, 2013 -case C-415 / 11- without expressly ruling on this type of clause, pointed out as criteria to be taken into account by the national judge to assess its possible abusiveness the following : 1) the breach by the debtor of an essential obligation within the framework of the contractual relationship in question; 2) the sufficiently serious nature of said default with respect to the duration and amount of the loan; 3) that the power to declare early expiration does not constitute an exception with respect to the applicable regulations on the matter;

“The Supreme Court, which had been defending the validity of the early maturity clauses due to non-payment in general, provided that the alleged determinants of early maturity had been clearly determined in the contract, has reversed its position in the plenary judgment of December 23, 2015 “

In view of this ruling, the Supreme Court, which had been defending the validity of the early maturity clauses for non-payment in general, provided that the alleged determinants of early maturity had been clearly determined in the contract and not at the discretion of the entity. lender, makes a change in its position in the plenary judgment of December 23, 2015 -confirmed by the subsequent one of February 18, 2016-. In the aforementioned judgments, the High Court, despite acknowledging that this type of clauses are protected by various norms of our legal system (arts. 1129 and 1124 CC and art. 693.2 LEC already cited in its wording prior to Law 1/2013 ), understands that “an early expiration clause that allows the resolution for the breach of a single term,
Subsequently, in the plenary sentence of May 30, 2016, the Supreme Court considers valid a clause of early expiration due to non-payment of a fee and its exercise in the event of non-payment of two installments, since the previous wording of article 693.2 had been agreed in force. LEC. However, it was a loan entered into between a financial institution and a company dedicated to real estate development, hence the consumer protection regulations were not applicable.
The direct consequence of these judicial ups and downs has been a generalized declaration of nullity by the courts of first instance of those clauses in which the mortgagee is empowered to give up early the loan or credit with mortgage guarantee for non-payment of a single installment, for not meeting the standards set by the CJEU and consequently by our Supreme Court. And in this regard, it is important to note that these types of clauses are included in practically all the loans or credits with mortgage guarantee arranged before the reform of article 693.2 of the LEC mentioned above.
The decisive question, therefore, is to elucidate the consequences derived from the declaration of invalidity of this type of clause: should the procedure be dismissed if it has been initiated or, if the question is raised before its initiation, would such invalidity be prevented from going to the procedure of direct execution of the mortgaged property? And if so, what recourse does the mortgagee have in the face of repeated default by the debtor?

“The decisive question is to determine the consequences derived from the declaration of nullity: does the nullity prevent going to the procedure of direct execution of the mortgaged property? What remedies are left to the mortgagee in the face of repeated default by the debtor?”

Regarding the first question, that is, if the declaration of nullity of a clause for early expiration due to non-payment entails the impossibility of resorting to the direct execution procedure, the Supreme Court itself, in the aforementioned judgment of December 23, 2015, indicates what Next: first, it must be taken into account that the decision to continue the execution may be more detrimental to the debtor than the dismissal, taking into account that it is in the direct execution procedure where a whole series of measures have been introduced to adequate protection of the debtor; second, that the protection of consumers itself “advises avoiding maximalist interpretations, which under an appearance of maximum protection, have as a paradoxical consequence the restriction of access to mortgage credit and, consequently, to the acquisition of home ownership ”; third, that in the same way that the balance in the benefits must govern the interpretation to be made by the judges of the early maturity clauses, it is not appropriate to oblige financial entities, “in the face of flagrant delinquency behavior”, to go to the declarative route hindering the effectiveness of the real guarantee; and finally, the possibility that the national court has, in accordance with the case law of the CJEU, of substituting an abusive clause for a supplementary provision of national law – Article 693.2 LEC in force – provided that the substitution allows to reestablish a real balance between the rights and obligations of both parties to the contract, since only in this way would a detrimental effect equivalent to that which would occur in the event of contractual nullity caused by the nullity of the early expiration clause be avoided. As a consequence of all the foregoing, the High Court tries to mitigate the foreseeable negative consequences of its change of doctrine, defending the possibility of resorting to the direct execution procedure despite the nullity of the early expiration clause.
Now, the problem has not been resolved, much less because this doctrine of the Supreme Court has been questioned by various national courts of first instance that have submitted preliminary questions to the CJEU because they understand that it could be contrary to the jurisprudence of the Court itself of Justice. In fact,

“The Supreme Court itself has raised a preliminary question asking whether a national court that has declared an early expiration clause of this type abusive can assess the supplementary application of a rule of national law continuing with the enforcement process against the consumer”

2 LEC in force- it is essential that the loan cannot survive after the removal of the early maturity clause, which is not the case. Furthermore, the Advocate General recalls that the fact that the contested clause had or had not been effectively applied is irrelevant in order to assess its abusive nature – Banco Primus judgment. And finally, after analyzing whether the advantages of the direct foreclosure procedure justify the continuation of the foreclosure once the early maturity clause has been declared invalid as abusive, it concludes that they do not necessarily benefit all consumers, hence the whether or not to proceed with the direct execution procedures in progress depends on the will of the debtor in default.
In our view, these conclusions are debatable. In the first place, because this type of clause was protected not only by rules of legal rank at the time the contract was signed, but also by various judgments of the Supreme Court itself -STS of June 4, 2008 and STS of March 9, 2001 , among others-, hence the Bank cannot be held responsible for having introduced the early maturity clauses in these terms. Second, because we are not in a scenario of normal compliance by the debtor as occurs in other cases in which the clauses have been declared void as abusive, as in the case of the floor clauses, but rather the fact that triggers the early maturity It is the default of the debtor. In third place, because the fact that the clause may be objectively abusive should not affect the debtor if the creditor, when using the power of early maturity, does so on reasonable terms and proportionate to the seriousness of the breach. And fourthly, because if any early expiration clause is null and the consequence is the impossibility of resorting to the direct execution procedure, what will happen if the future Law regulating real estate credit contracts, as is foreseeable, sets a term greater than three months for the possible declaration of the anticipated expiration? Will the courts then consider void the clauses in which the early expiration due to non-payment of three installments has been agreed under the current article 693. 3 LEC? And where will this spiral end? Faced with so many jurisprudential ups and downs, the only thing that is undoubted is that we are living in a moment of enormous legal uncertainty, since clauses that are valid today may not be valid tomorrow. That is why, in my opinion, the integration by the national judge of the void early expiration clause is justified, since the power to resort to direct enforcement in the event of a serious breach without the need to wait for the expiration of the term initially agreed is essential for the creditor and, as the Supreme Court itself has indicated in support of its position, if the mortgage creditor were forced to resort to the declaratory route, although some debtors could have a better fortune thanks to the delays produced releasing the mortgaged asset,
For all of the above, we consider that the jurisprudence established by the Supreme Court ruling of December 23, 2015 is correct, since in addition to ensuring legal security, it combines an adequate defense of the interests of the affected consumers and the preservation of the direct execution route that fulfills a double condition: to be the most effective remedy against default for creditors and to be the most guaranteeing procedure today for executed debtors. Otherwise, the mortgagee has no choice but to resort to the declaratory route and urge the termination of the contract due to non-compliance, a possibility not without controversy, but whose path the High Court has recently paved in a judgment of July 11, 2018.

“It is urgent that the legislator take action on the matter with a clear purpose: to reestablish the balance of rights and obligations that must exist in any contractual relationship”

Be that as it may, in view of the generalized suspension of foreclosures in our country and the more than probable position to be adopted by the CJEU on the matter, it is urgent that the legislator take action on the matter with a clear purpose: to reestablish the balance of rights and obligations that must exist in any contractual relationship so that financial institutions do not have to resort to excessively costly and lengthy means to collect unpaid loans that in the long run imply a contraction of credit and increase in the cost of access to housing ; nor are consumers left unprotected in the face of an execution based on a merely punctual non-compliance or that is excessively delayed in time with the consequent increase in onerosity.
That is why the solution provided for in the Draft Law regulating Real Estate Credit Contracts seems positive to us, since at the same time the period of default necessary to be able to declare the entire loan or loan as due in advance is considerably extended. credit and the creditor is required to request a prior payment from the debtor, the anticipated expiration is declared ex lege in the event that the aforementioned requirements are met imperatively and regardless of the date of execution of the contract. In this way, the nullity or not of the clause for early maturity due to non-payment would be irrelevant for the possible initiation by the mortgagee of the direct execution procedure, provided that it complies with the new standards of conduct. Now the draft standard, As drafted after the last presentation, it leaves two cases unresolved: that of contracts whose anticipated expiration would have occurred prior to the entry into force of this Law, whether or not a foreclosure procedure had been instituted to do so. cash, and whether it is suspended or not, and that of those loan contracts with mortgage guarantee with consumers that do not fall within the scope of the Law, that is, all those that do not have real estate for residential use as their object. Therefore, in these cases, everything depends on what the CJEU decides in the near future, although everything points to the execution procedures currently underway being doomed to dismissal. that of those contracts whose anticipated expiration would have occurred prior to the entry into force of this Law, whether or not a foreclosure procedure had been instituted to make it effective, and whether or not it was suspended, and that of those loan contracts with Mortgage guarantee with consumers who do not fall within the scope of the Law, that is, all those whose purpose is not real estate for residential use. Therefore, in these cases, everything depends on what the CJEU decides in the near future, although everything points to the execution procedures currently underway being doomed to dismissal. that of those contracts whose anticipated expiration would have occurred prior to the entry into force of this Law, whether or not a foreclosure procedure had been instituted to make it effective, and whether or not it was suspended, and that of those loan contracts with Mortgage guarantee with consumers who do not fall within the scope of the Law, that is, all those whose purpose is not real estate for residential use. Therefore, in these cases, everything depends on what the CJEU decides in the near future, although everything points to the execution procedures currently underway being doomed to dismissal. and whether or not this is suspended, and that of those mortgage loan contracts with consumers that do not fall within the scope of the Law, that is, all those that do not have real estate for residential use as their object. Therefore, in these cases, everything depends on what the CJEU decides in the near future, although everything points to the execution procedures currently underway being doomed to dismissal. and whether or not this is suspended, and that of those mortgage loan contracts with consumers that do not fall within the scope of the Law, that is, all those that do not have real estate for residential use as their object. Therefore, in these cases, everything depends on what the CJEU decides in the near future, although everything points to the execution procedures currently underway being doomed to dismissal.

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