Law 1/2013, of May 14, on measures to strengthen protection for mortgage debtors, debt restructuring and social housing

OFFICIAL STATE BULLETIN No. 116 Wednesday, May 15, 2013 Sec. I. Page 36373 I. GENERAL PROVISIONS HEAD OF STATE 5073 Law 1/2013, of May 14, on measures to strengthen protection for mortgage debtors, debt restructuring and social housing. JUAN CARLOS I KING OF SPAIN To all who see and understand this. Know: That the General Courts have approved and I come to sanction the following law. PRELIMINARY STATEMENT The attention to the exceptional circumstances our country is going through, motivated by the economic and financial crisis, in which numerous people who contracted a mortgage loan to acquire their main residence are in difficulty meeting their obligations, requires the adoption of measures that, in different ways, contribute to alleviating the situation of mortgage debtors. Although the default rate in our country is low, it must be kept in mind that the social drama it represents for each person or family in difficulty meeting their payments is the possibility that, due to this situation, their debts may increase or they may lose their main residence. The collective effort that citizens of our country are making in order to jointly overcome the difficult situation we are going through, requires that, in the same way and from all sectors, measures continue to be adopted to guarantee that no citizen is led to a situation of social exclusion. For this purpose, it is necessary to deepen the lines that have been developed in recent times, to perfect and strengthen the protection framework for debtors who, because of such exceptional circumstances, have seen their economic or asset situation altered and have found themselves in a situation deserving of protection. For these purposes, this Law is approved, which consists of four chapters. The first of them provides for the immediate suspension for a period of two years of evictions of families who are in a situation of special risk of exclusion. This measure, of an exceptional and temporary nature, will affect any judicial process of mortgage enforcement or extrajudicial sale by which the creditor is awarded the main residence of persons belonging to certain groups. In these cases, the Law, without altering the mortgage enforcement procedure, prevents the eviction that would culminate in the eviction of persons from proceeding. The suspension of evictions will affect persons who are in a situation of special vulnerability. Indeed, for a mortgage debtor to be within this scope of application, it will be necessary to meet two types of requirements. On the one hand, the social groups that can benefit are large families, single-parent families with two dependent children, those with a child under three years of age or a member with a disability or dependent, or where the mortgage debtor is unemployed and has exhausted social benefits, or finally, victims of gender-based violence. Likewise, in families that benefit from this suspension, income cannot exceed the limit of three times the Public Indicator of Multiple Effects Income. This limit is increased with respect to family units in which a member is a person with a disability or dependent or who lives with persons with disabilities or dependents. In addition, it is necessary that, in the four years prior to the time of the application, the family unit has suffered a significant alteration of its economic circumstances, in terms of effort to access housing. cve: BOE-A-2013-5073

OFFICIAL STATE BULLETIN No. 116 Wednesday, May 15, 2013 Sec. I. Page 36374 The significant alteration of its economic circumstances is measured based on the variation of the mortgage burden on income suffered in the last four years. Finally, inclusion in the scope of application involves meeting other requirements, among which it can be highlighted that the mortgage payment exceeds 50 percent of the net income received by the members of the family unit, or that it is a credit or loan secured by a mortgage on the only property owned by the debtor and granted for its acquisition. The significance of this regulatory provision is undeniable, as it guarantees that during this period, especially vulnerable mortgage debtors cannot be evicted from their homes, with the confidence that, upon completion of this period, they will have overcome the difficult situation they may be in at the present time. For these especially vulnerable debtors, it is also provided that the debt that could not be covered with the main residence will not accrue more default interest than that resulting from adding two percent to the remuneration interest on the outstanding debt. Chapter II introduces improvements in the mortgage market through the modification of the Mortgage Law, Consolidated Text according to Decree of February 8, 1946; Law 2/1981, of March 25, on the Regulation of the Mortgage Market; and Law 41/2007, of December 7, which modifies Law 2/1981, of March 25, on the Regulation of the Mortgage Market and other norms of the mortgage and financial system, regulation of reverse mortgages and the dependency insurance and by which a certain tax norm is established. Especially relevant is the fact that, for mortgages constituted on the main residence, the default interest that credit entities can demand will be limited to three times the legal interest on money. In addition, the capitalization of these interests is expressly prohibited and it is established that, in the event that the result of the enforcement is insufficient to cover the entire secured debt, said result will be applied last to default interest, in such a way that it is allowed to the greatest extent possible that the principal ceases to accrue interest. Additionally, the regime for the extrajudicial sale of mortgaged assets is strengthened in the Mortgage Law. On the other hand, the independence of appraisal companies from credit entities is reinforced. In the extrajudicial sale, the possibility is introduced that the Notary may suspend it when the parties prove that they have requested the competent judicial body, in the manner provided for in Article 129 of the Mortgage Law, to issue a resolution decreeing the impropriety of said sale, due to the existence of abusive clauses in the mortgage loan contract, or its continuation without the application of the abusive clauses. In addition, the Notary is expressly empowered to warn the parties that some clause of the contract may be abusive. These modifications are adopted as a consequence of the Judgment of the Court of Justice of the European Union of March 14, 2013, issued in the matter by which the preliminary question raised by the Commercial Court No. 3 of Barcelona regarding the interpretation of Council Directive 93/13/EEC of April 5, 1993 is resolved. Chapter III collects different modifications to the Civil Procedure Law in order to guarantee that mortgage enforcement is carried out in such a way that the rights and interests of the mortgage debtor are adequately protected and, as a whole, the enforcement procedure is expedited and flexibilized. In particular, as a measure of great relevance, it is established that if after the mortgage enforcement of a main residence there is still debt to pay, during the subsequent monetary enforcement procedure, part of the payment of the remaining debt may be forgiven, provided that certain payment obligations are met. In addition, it is allowed that the debtor participates in the eventual future revaluation of the enforced property. On the other hand, access of bidders to auctions is facilitated and the requirements imposed on bidders are lowered, so that, for example, the necessary guarantee to bid is reduced from 20 to 5 percent of the appraised value of the assets. Likewise, the time limit for the winner of an auction to consign the price of the award is doubled, in the same sense. cve: BOE-A-2013-5073

OFFICIAL STATE BULLETIN No. 116 Wednesday, May 15, 2013 Sec. I. Page 36375 Certain improvements are introduced in the auction procedure, establishing that the appraised value for the purposes thereof cannot be less than 75 percent of the appraised value that served to grant the loan. Previously, there was no limit for the auction type. In addition, in the event that the auction concludes without any bidder, the percentages of award of the property are increased. Specifically, it would rise from 60 percent to a maximum of 70 percent, always for cases of main residence. This Chapter also collects the modification of the executive procedure for the purpose that, ex officio or at the instance of a party, the competent judicial body may appreciate the existence of abusive clauses in the executive title and, as a consequence, decree the impropriety of the enforcement or, if applicable, its continuation without the application of those considered abusive. This modification is adopted as a consequence of the Judgment of the Court of Justice of the European Union of March 14, 2013, issued in the matter, by which the preliminary question raised by the Commercial Court No. 3 of Barcelona regarding the interpretation of Council Directive 93/13/EEC of April 5, 1993 is resolved. Finally, Chapter IV modifies Royal Decree-Law 6/2012, of March 9, on urgent measures for the protection of mortgage debtors without resources, both in terms of the scope of application and regarding the characteristics of the measures that can be adopted. Additionally, this Law includes a mandate to the Government to immediately undertake the necessary measures to promote, with the financial sector, the constitution of a social housing fund intended to provide coverage for those persons who have been evicted from their main residence due to non-payment of a mortgage loan. This fund should mobilize a large stock of housing, owned by credit entities, for the benefit of those families that can only access housing if rents are adjusted to the scarcity of their income. CHAPTER I Suspension of evictions Article 1. Suspension of evictions on main residences of especially vulnerable groups.

1. Until two years have passed since the entry into force of this Law, eviction shall not proceed when in a judicial or extrajudicial process of mortgage enforcement the main residence of persons who are in situations of special vulnerability and in the economic circumstances provided for in this article has been awarded to the creditor, or to a person acting on their behalf.
2. The situations of special vulnerability referred to in the previous paragraph are: a) Large family, in accordance with current legislation. b) Single-parent family unit with two dependent children. c) Family unit in which a child under three years of age is a member. d) Family unit in which any of its members has a declared disability greater than 33 percent, a situation of dependency or illness that credibly and permanently incapacitates them from carrying out a labor activity. e) Family unit in which the mortgage debtor is in a situation of unemployment and has exhausted unemployment benefits. f) Family unit in which one or more persons who are related to the holder of the mortgage or their spouse by a bond of kinship up to the third degree of consanguinity or affinity, and who are in a personal situation of disability, dependency, serious illness that credibly and temporarily or permanently incapacitates them from carrying out a labor activity, live in the same dwelling. cve: BOE-A-2013-5073

OFFICIAL STATE BULLETIN No. 116 Wednesday, May 15, 2013 Sec. I. Page 36376 g) Family unit in which there is a victim of gender-based violence, as established in current legislation, in the case where the dwelling subject to eviction constitutes their habitual residence. 3. For the provisions of paragraph 1 to apply, in addition to the situations of special vulnerability provided for in the previous paragraph, the following economic circumstances must concur: a) That the total income of the members of the family unit does not exceed the limit of three times the Public Indicator of Multiple Effects Income. This limit will be four times the Public Indicator of Multiple Effects Income in the cases provided for in letters d) and f) of the previous paragraph, and five times said indicator in the case where the executed person is a person with cerebral palsy, mental illness or intellectual disability, with a recognized disability degree equal to or greater than 33 percent, or a person with physical or sensory disability, with a recognized disability degree equal to or greater than 65 percent, as well as in cases of serious illness that credibly incapacitates the person or their caregiver from carrying out a labor activity. b) That, in the four years prior to the time of the application, the family unit has suffered a significant alteration of its economic circumstances, in terms of effort to access housing. c) That the mortgage payment exceeds 50 percent of the net income received by the members of the family unit. d) That it is a credit or loan secured by a mortgage on the only property owned by the debtor and granted for its acquisition. 4. For the purposes of what is provided for in this article, it will be understood: a) That a significant alteration of economic circumstances has occurred when the effort represented by the mortgage burden on family income has multiplied by at least 1.5. b) By family unit, the one composed of the debtor, their legally non-separated spouse or registered partner and the children, regardless of their age, who reside in the dwelling, including those linked by a relationship of guardianship, custody or family foster care. Article 2. Accreditation. The concurrence of the circumstances referred to in this Law shall be accredited by the debtor at any time during the mortgage enforcement procedure and before the execution of the eviction, before the Judge or the Notary in charge of the procedure, by presenting the following documents: a) Receipt of income by members of the family unit:

1. Certificate of incomes and, if applicable, certificate regarding the presentation of the Wealth Tax, issued by the State Tax Administration Agency regarding the last four tax years.
2. Last three received pay slips.
3. Certificate issued by the entity managing benefits, in which the monthly amount received in the concept of unemployment benefits or subsidies appears.
4. Certificate accrediting social salaries, minimum insertion incomes or analogous social assistance aids granted by the Autonomous Communities and local entities.
5. In the case of self-employed workers, the certificate issued by the State Tax Administration Agency or, if they were receiving the benefit for cessation of activity, the certificate issued by the managing body in which the monthly amount received appears. cve: BOE-A-2013-5073

OFFICIAL STATE BULLETIN No. 116 Wednesday, May 15, 2013 Sec. I. Page 36377 b) Number of people living in the dwelling:

1. Family book or document accrediting registration as a registered partner.
2. Certificate of registration relating to the people registered in the dwelling, with reference to the time of presentation of the accrediting documents and the previous six months. c) Ownership of assets:
3. Ownership certificates issued by the Property Registry relating to each of the members of the family unit.
4. Deeds of sale of the dwelling and of constitution of the mortgage guarantee and other justificatory documents, if applicable, of the rest of the real or personal guarantees constituted, if any. d) Responsible declaration of the debtor or debtors regarding compliance with the requirements required to be considered within the scope of application of this Law. CHAPTER II Measures to improve the mortgage market Article 3. Modification of the Mortgage Law, Consolidated Text according to Decree of February 8, 1946. The Mortgage Law, Consolidated Text according to Decree of February 8, 1946, is modified as follows: One. A paragraph 3 is added to Article 21, which is drafted as follows: "1. Documents relating to contracts or acts that must be registered shall express, at least, all the circumstances that necessarily must be contained in the registration and that are related to the persons of the grantors, to the properties and to the registered rights.
5. Public deeds relating to acts or contracts by which ownership and other real rights over immovable property are declared, constituted, transmitted, encumbered, modified or extinguished for consideration, when the consideration consisted, in whole or in part, in money or a sign representing it, shall express, in addition to the circumstances provided for in the previous paragraph, the identification of the payment methods used by the parties, in the terms provided for in Article 24 of the Notary Law of May 28, 1862.
6. In mortgage loan deeds on housing, the character, habitual or not, that is intended to be attributed to the housing to be mortgaged must be stated. It will be presumed, unless proof to the contrary, that at the time of the judicial enforcement of the property it is the main residence if this is stated in the deed of constitution." Two. A third paragraph is added to Article 114, which is drafted as follows: "Default interest on loans or credits for the acquisition of the main residence, secured by mortgages constituted on the same residence, cannot exceed three times the legal interest on money and can only accrue on the outstanding principal. These default interest cannot be capitalized in any case, except in the case provided for in Article 579.2.a) of the Civil Procedure Law." cve: BOE-A-2013-5073

OFFICIAL STATE BULLETIN No. 116 Wednesday, May 15, 2013 Sec. I. Page 36378 Three. Article 129 is modified, which is drafted as follows: "1. The mortgage action may be exercised: a) Directly against the mortgaged assets subjecting its exercise to what is provided in Title IV of Book III of Law 1/2000, of January 7, on Civil Procedure, with the specialities established in its Chapter V. b) Or through the extrajudicial sale of the mortgaged asset, in accordance with Article 1,858 of the Civil Code, provided that it had been agreed in the deed of constitution of the mortgage only for the case of non-payment of the capital or of the interest of the guaranteed amount. 2. The extrajudicial sale will be carried out before a Notary and will be adjusted to the following requirements and formalities: a) The value in which the interested parties appraise the property to serve as the type in the auction cannot be different from that, if any, that has been fixed for the direct judicial enforcement procedure, nor can it in any case be less than 75 percent of the value indicated in the appraisal carried out in accordance with what is provided in Law 2/1981, of March 25, on the Regulation of the Mortgage Market. b) The stipulation by which the grantors agree to the submission to the extrajudicial sale procedure of the mortgage must appear separately from the rest of the stipulations of the deed and must expressly indicate the character, habitual or not, that is intended to be attributed to the housing to be mortgaged. It will be presumed, unless proof to the contrary, that at the time of the extrajudicial sale the property is the main residence if this had been stated in the deed of constitution. c) The extrajudicial sale can only be applied to mortgages constituted as guarantee for obligations whose amount initially appears determined, their ordinary and default interest liquidated in accordance with what is provided in the title and with the limitations indicated in Article 114. In the case where the lent amount is initially determined but the guaranteed loan contract provides for the progressive repayment of the capital, the request for extrajudicial sale must be accompanied by a document in which the amortizations made and their dates appear, and the reliable document that accredits that the liquidation has been carried out in the manner agreed by the parties in the deed of constitution of the mortgage. In any case where variable interests had been agreed, at the request for extrajudicial sale, the reliable document that accredits that the liquidation has been carried out in the manner agreed by the parties in the deed of constitution of the mortgage must be accompanied. d) The sale will be carried out through a single auction, of an electronic nature, which will take place on the auction portal that the State Official State Bulletin Agency will make available for this purpose. The types in the auction and their conditions will be, in all cases, those determined by the Civil Procedure Law. e) The Mortgage Regulation will determine the form and persons to whom notifications must be made, the auction procedure, the amounts to be consigned to take part in it, causes of suspension, the award and its effects on the holders of subsequent rights or charges as well as the persons who must grant the deed of sale and their forms of representation. f) When the Notary considers that any of the clauses of the mortgage loan that constitutes the foundation of the extrajudicial sale or that has determined the amount demanded could have an abusive character, they will put it in the knowledge of the debtor, creditor and, if applicable, guarantor and non-debtor mortgagor, for the appropriate purposes. In any case, the Notary will suspend the extrajudicial sale when any of the parties proves that they have raised before the Judge who is competent, in accordance with

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OFFICIAL STATE BULLETIN No. 116 Wednesday, May 15, 2013 Sec. I. Page 36379 what is established in Article 684 of the Civil Procedure Law, the abusive character of said contractual clauses. The issue regarding said abusive character will be processed by the procedures and with the effects provided for the cause of opposition regulated in the paragraph