Royal Decree-Law 5/2017, of March 17, amending Royal Decree-Law 6/2012, of March 9, and Act 1/2013, of May 14, which took effect on March 19, 2017, has brought about significant changes aimed at strengthening the protection in place for particularly vulnerable mortgage borrowers by reforming previous provisions of earlier laws.
The main changes
- Extension of the moratorium on evictions (Act 1/2013)
- Broadening of the categories of particularly vulnerable persons (Act 1/2013)
- Revision of the Code of Good Practice (Royal Decree-Law 6/2012)
- Measures aimed at recovering ownership
Extension of the moratorium (Act 1/2013)
The moratorium on evicting from their primary residence families in particularly vulnerable circumstances laid down in Act 1/2013 (as set out in the following section) has been extended until May 15, 2020.
It should be noted that this exceptional and temporary measure applies to all judicial and extrajudicial mortgage foreclosure proceedings deriving from a loan secured by a mortgage granted for the purchase of the borrower's sole place of residence, where the creditor or its agent has acquired by enforcement the primary residence of a person classified as paarticularly vulnerable who fulfills the financial requirements set out in the law, which have not been amended: a family income lower than three time the Public Income (Multiplier Effect) Index for 14 annual salary payments, a mortgage payment greater than 50% of the family's net income, or at least a 1.5-fold increase in the mortgage payment.
The moratorium began when Royal Decree-Law 27/2012, of November 15, took effect and has since been extended by successive laws.
As a result, where the creditor acquires the dwelling in the enforcement proceeding, eviction will not be possible as long as the moratorium is in effect, and it will only be possible when the moratorium has been lifted in accordance with article 675 and related articles in the Civil Procedure Act.
The new moratorium regulations apply to (i) mortgage foreclosure proceedings in which eviction has not already been enforced that were pending when the moratorium took effect, and (ii) proceedings that will begin in the future.
Broadening of the categories particularly vulnerable persons (Act 1/2013)
Royal Decree-Law 5/2017 has expanded the categories of particularly vulnerable persons provided in Act 1/2013. A family is now regarded as being particularly vulnerable in the following cases:
- Large families, as defined under the current law.
- Single-parent families with dependent children. As the new wording makes no reference to a specific number of children, the new provision could be interpreted as protecting a single-parent family with just one dependent child (regardless of age).
- Families in which one member is a minor, which broadens the previous prevision, which only applied to children under three years of age.
- Families in which one member is legally disabled to a degree greater than 33%, has a condition that causes him/her to be dependent, or has an illness so as to certifiably prevent him/her from working permanently.
- Families in which the mortgage borrower is unemployed, now regardless of whether unemployment benefits have expired, as formerly required under the previous wording.
- Families in which there are, living together in the same dwelling, one or more persons joined to the mortgage holder or his/her spouse by ties of kinship up to the third degree of consanguinity or affinity, who are disabled, dependent, or seriously ill so as to certifiably prevent him/her from working temporarily or permanently.
- Families in which there is a member who is a victim of gender violence.
- The borrower is over 60 years of age.
Revision of the Code of Good Practice (Royal Decree-Law 6/2012)
The new law also changes the so called "Code of Good Pratice" approved under Royal Decree-Law 6/2012.
This Code brings together a set of good practices for the viable restructuring of mortgage debt on the primary residence. Credit institutions can choose whether to adopt the Code and its successive amendments. On the date of this notice, the most relevant credit institutions operating in our country have voluntarily adopted the Code of Good Practice.
With the entry into force of Royal Decree-Law 5/2017, the particularly vulnerable groups quite similar to the ones described in the previous section, who also fulfill the financial requirements described in the first section, can benefit from the Code of Good Practice.
Moreover, the amended Code of Good Practice establishes a right for mortgage borrowers whose eviction has been suspended under the above regulation, namely, the right to request and obtain from the creditor foreclosing on the dwelling a lease to that dwelling for an annual rent not exceeding 3% of its value at the time of auction, based on the certified appraisal by an officially aproved appraiser, to be provided by the borrower.
The duaration of the lease will be one year, renewable at the lessee's request for up to five years, and must be requested within six months of the entry into force of Royal Decree-Law 5/2017 in the case of borrowers who were already beneficiaries of the suspension, and from the date of suspension for hose benefitting subsequently. The minimum length of these lease agreements (five years) is longer that that stipulated in the Current Urban Tenancy Act, which is three years.
Measures aimed at recovering ownership
The new law includes mandate whereby the government, within eight months, must put forward measures designed to facilitate recovery of ownership by mortgage borrowers who fall within the scope of applicability of Act 1/2013.
Specifically, these measures must take into account the acquisition price in the enforcement proceeding of the dwelling, the possibility of discounting from that price a portion of the amounts of the original foreclosed financing that have been repaid, improvements made by the mortgage borrower while eviction has been suspended, and other factors that ensure recovery of the dwelling at a fair price.