The Advocate General of the Court of Justice of the European Union (CJEU) has recently issued his expert conclusion on five questions referred by different Spanish Courts, the Supreme Court among others, in regards to early maturity clause contained in mortgage contracts.
What is an early maturity clause?
It is a clause by which Bank can claim the whole debt just after a minor default (one installment) by the mortgage debtor
What did Spanish Courts ask the European Court?
In an scenario where a foreclosure procedure was started after many unpaid mortgage installments BUT based on the existence of a clause on the mortgage deeds by which just one installment would allow the start of the enforcement: if the law of the Union is opposed to a jurisprudential criterion that allows the national judge to correct an abusive clause of early expiration, modifying it and replacing it with a Spanish rule, to allow to go ahead with the execution procedure.
The Advocate General conclusion is that when a judicial body has appreciated the abusive nature of the clause relating to the early maturity clause, then the foreclosure procedure cannot continue through the supplementary application of a rule of Spanish law, unless the consumer, after having been duly informed by the judge, freely gives his consent, because he will benefit from the advantages of the foreclosure procedure, and expressly express its intention not to assert the abusive and non-binding nature of such a clause.
What would happen if the European Court accepted the conclusions of the General Counsel, in the Judgment that will soon be issued?
Consequence would be that in those mortgage loan contracts that the faculty of the bank to exercise the early maturity for the case of non-payment of a single installment, or a disproportionate amount in reference to the borrowed capital ( as per judge criteria) is arranged , the entity may not initiate the privileged procedure of execution of the mortgage in case the borrower fails to meet his payment commitment; and those ongoing foreclosure proceedings based on such a clause, will have to be filed, leaving open the possibility for the bank to claim through other ways.
Contact us if you are about to default in your mortgage payments, have already defaulted or the bank has started a foreclosure proceeding against you
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