Mortgage moratorium “by agreement” | Ashurst

On 27 May 2020, the Official Bulleting included a new Royal Decree-Law with measures to alleviate the effects of the COVID-19 (Royal Decree-Law 19/2020 of 26 May, “RDL 19/2020“) which supplemented the regime of mortgage and non-mortgage moratoriums regulated in March 2020 (see here).

What are the changes?

There are no changes in the prior mortgage and non-mortgage “legal” moratorium. However, RDL 19/2020 clarifies that non-mortgage moratorium covers financial leasing contracts, an issue that had generated quite a lot of debate.

The most important thing that this new RDL 19/2020 does is to provide for the possibility of financial entities adhering to sectoral framework agreements promoted by their representative associations to extend the scope of the moratorium from the subjective and objective point of view.

We speak of a subjective extension because this new moratorium, which we will refer to as “by agreement” (as opposed to the “legal” moratorium of Royal Decree-Laws 8/2020 and 11/2020), may benefit, if so provided for in the sectoral framework agreements, debtors who do not meet all the requirements to apply for the “legal” moratorium.

And we refer to objective extension because the moratorium “by agreement” can last longer than the “legal” one and provide that the amount of the deferred debt, instead of extending the deadline, is paid by means of the redistribution (and extension) of the quotas.

Which financial institutions can I apply to for this new moratorium “by agreement”?

Those that adhere to the sectoral framework agreements that have yet to be defined. If a financial entity does not adhere to any framework agreement, it will not be obliged to grant any moratorium “by agreement” (although it will still be obliged to grant the “legal” moratorium to any applying vulnerable debtor who meets the requirements for this).

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What we already know is that, for these purposes, financial institutions are understood to be credit institutions, financial credit establishments, real estate credit lenders, payment institutions and electronic money institutions. All these institutions are eligible to join a sectoral framework agreement promoted by the representative associations of financial institutions.

Institutions that adhere to a sectoral framework agreement shall forward to the Bank of Spain, each working day, information on the requests for moratoriums “by agreement” that they receive and process.

Regarding which kind of contracts can I ask for the moratorium “by agreement”?

This will depend on the sectoral framework agreement to which the financial institution in question has acceded, but in principle such agreements may extend their scope to all types of loans, credits and financial leases.

Can my financial institution take advantage of my request for a moratorium “by agreement” to modify the terms of my contract?

No, the financial entity cannot take advantage of the moratorium “by agreement” to modify the agreed interest rate nor charge expenses or commissions. Nor can it take advantage of it to market other linked or combined products or ask for additional guarantees.

There are two exceptions. First, commissions may be charged for interest-free loans when the effect does not increase the Annual Percentage Rate (Tasa Anual Equivalente) of the initial contract. And the second, the possibility of imposing the extension of any payment protection insurance (for unemployment or temporary disability) or loan repayment (for death or disability) already contracted with the loan or credit being novated.

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What if I asked for a “legal” moratorium and afterwards I ask for a moratorium “by agreement”?

If you are granted both, the “legal” moratorium will prevail. The effects of the moratorium “by agreement” will be suspended until the effects of the “legal” moratorium are over. It will be the framework agreements that will have to define how this works in practice because RDL 19/2020 does not make it any clearer.

Excuse me, but there is something I do not fully understand, if financial institutions are not obliged to adhere to a framework agreement and, therefore, offering moratoriums “by agreement” is voluntary for them, what is the point of this new RDL 19/2020?

From the point of view of financial institutions, the incentive of the moratorium “by agreement” regulated by RDL 19/2020 is that the corresponding amendments in the agreements benefit from the same costs savings as the “legal” moratorium and the procedures are much simpler than for an ordinary modification.

For example, the formalization of a moratorium “by agreement” is exempt from the application of many sections of the Act on Real Estate Credit Agreements (Ley de Contratos de Crédito Inmobiliario) and of the Act on Consumer Credit Contracts (Ley de Créditos al Consumo), although it is necessary to provide the debtor with the proposed agreement, information on the legal and economic consequences of the moratorium and, where appropriate, the conditions of the extension of the payment protection or loan repayment insurance.

General rules apply to the formalisation. Any means of obtaining consent is valid as long as the content and date are recorded.

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However, if the agreement requires public form for access to any registry it will be necessary to comply with this requirement. For these purposes, the financial entity may go alone to the notary unless the debtor prefers to go as well. And whether or not the debtor goes, he will receive a notarial copy of the deed free of charge. The notary and registry fees of the notary and registry instruments will have the same discounts as the “legal” moratorium. The registration of the moratorium “by agreement” will have full effect against intermediate creditors even without their consent.

The granting of public deeds (escrituras) formalising these moratoriums “by agreement” will be exempt from Stamp Duty (Actos Jurídicos Documentados).

When can I ask for my new moratorium?

This RDL 19/2020 came into force on 28 May 2020 but that does not mean that you can start asking for a moratorium “by agreement” straightaway. This will require the financial institution in question to have adhered to a framework agreement, which, as we have already mentioned, is voluntary.

However, if you had already agreed on a moratorium “by agreement” with your financial institution before the RDL 19/2020 (because your institution already had a framework agreement of this type in place) the moratorium remains valid, although RDL 19/2020 establishes minimum information obligations that financial institutions must comply with within one month from tomorrow (if they have not already done so). It is not clear whether moratoriums “by agreement” entered into prior to RDL 19/2020 benefit from the same incentives mentioned in the previous section.