EU court deals blow to Spain eviction law By Tobias Buck in Madrid [Financial Times]
The Spanish law that has allowed banks to evict tens of thousands of mortgage holders during the recent housing crisis is not compatible with EU law, the bloc’s highest court has ruled.
The decision, published on Thursday, deals a fresh blow to Spain’s draconian mortgage regime – and will add to rising public pressure on the government in Madrid to change the system.
Anti-eviction campaigners have collected almost 1.5m signatures to force parliament to debate a change in the law that would strengthen the rights of mortgage holders and weaken the position of banks. Spanish lenders have repossessed almost 400,000 houses, flats and offices since the start of the crisis in 2007, sparking a wave of popular anger and regular protests and demonstrations.
Alberto Ruiz-Gallardón, Spain’s justice minister, signalled the government’s readiness to amend the current legislation, but left open how far the changes would go.
“All the aspects that were declared contrary to the law will be corrected,” he said.
The government has already published a plan to ease the plight of over-indebted homeowners, but campaigners say the proposed changes do not go far enough.
The ruling handed down by the European Court of Justice dealt with the case of Mohamed Aziz, who in 2007 took out a mortgage of €138,000 from Catalunyacaixa, a lender that was later nationalised. He stopped paying his instalments the following year, and was eventually evicted from his home in 2011.
Mr Aziz argued that his eviction was illegal because the original mortgage agreement was unfair, and should have been annulled. He pointed out that the contract allowed the bank to take away his home after just one failure to pay an instalment, and included a default interest rate of 18.75 per cent.
Under Spanish law, however, courts have no power to halt evictions on the basis that the mortgage agreement includes unfair terms. The Luxembourg-based court ruled that this gives “incomplete and insufficient” protection for mortgage holders – especially in cases where the mortgaged property is a family home. The decision makes clear that Spanish courts must be given the power to freeze an eviction process while the mortgage contract is under legal scrutiny.
Spain’s banking association called the ruling “reasonable and constructive”.
The Financial Times Limited 2013
The Spanish law that has allowed banks to evict tens of thousands of mortgage holders during the recent housing crisis is not compatible with EU law, the bloc’s highest court has ruled.
The decision, published on Thursday, deals a fresh blow to Spain’s draconian mortgage regime – and will add to rising public pressure on the government in Madrid to change the system.
Anti-eviction campaigners have collected almost 1.5m signatures to force parliament to debate a change in the law that would strengthen the rights of mortgage holders and weaken the position of banks. Spanish lenders have repossessed almost 400,000 houses, flats and offices since the start of the crisis in 2007, sparking a wave of popular anger and regular protests and demonstrations.
Alberto Ruiz-Gallardón, Spain’s justice minister, signalled the government’s readiness to amend the current legislation, but left open how far the changes would go.
“All the aspects that were declared contrary to the law will be corrected,” he said.
The government has already published a plan to ease the plight of over-indebted homeowners, but campaigners say the proposed changes do not go far enough.
The ruling handed down by the European Court of Justice dealt with the case of Mohamed Aziz, who in 2007 took out a mortgage of €138,000 from Catalunyacaixa, a lender that was later nationalised. He stopped paying his instalments the following year, and was eventually evicted from his home in 2011.
Mr Aziz argued that his eviction was illegal because the original mortgage agreement was unfair, and should have been annulled. He pointed out that the contract allowed the bank to take away his home after just one failure to pay an instalment, and included a default interest rate of 18.75 per cent.
Under Spanish law, however, courts have no power to halt evictions on the basis that the mortgage agreement includes unfair terms. The Luxembourg-based court ruled that this gives “incomplete and insufficient” protection for mortgage holders – especially in cases where the mortgaged property is a family home. The decision makes clear that Spanish courts must be given the power to freeze an eviction process while the mortgage contract is under legal scrutiny.
Spain’s banking association called the ruling “reasonable and constructive”.
The Financial Times Limited 2013