On January 16, 2014, the European Court of Justice (ECJ) ruled on the potential unfairness for consumers of contract clauses establishing that the buyer of a property is liable for payment of the Municipal Tax on the Increase of Value of Urban Land, usually called municipal capital gains tax.

This judgment was passed as a result of a pre-court question submitted by the Provincial Court of Oviedo on litigation brought by a private individual against a developer. In short, the judgment confirms the jurisprudence stance of the Supreme Court, which already ruled back in November 2011 that such clauses are unfair when not negotiated on an individual basis and agreed with the buyer. However, this national jurisprudence failed to unify the differing interpretations of Provincial Courts as the controversy surrounded whether these clauses did or did not involve the significant imbalance required to be classed as unfair by the Law on General Contract Conditions and European Law.

Although the ECJ has declined to rule on the facts of the case, leaving this task to Spanish courts, it does provide a guideline to follow when weighing these clauses. The conclusion of the ECJ is that they may involve a significant imbalance, despite the fact that the amount of the tax is of little significance in relation to the overall cost of buying the property.

In this vein, the judgement rules that: “The existence of a “significant imbalance” does not necessarily require that the costs to be paid by consumers as a result of a contract clause have to be economically significant for such consumers in relation to the amount of the transaction involved, but the imbalance can however emerge from the mere fact of a sufficiently serious injury to the legal position where consumers stand […].”

The interpretation of these clauses by Spanish courts in each specific case is still to be seen, but this judgment could lead to stricter protection criteria in favour of consumers.