Purchase and sale of products and services: Property sector

Mortgage credit agreements

Mortgage credit agreements are regulated by Law 5/2019 of 15 March governing property credit agreements , which implements Directive 2014/17/EU.

What is the purpose of this Law 5/2019? To safeguard people interested in applying for a loan to buy a home.

The Law:

• Regulates measures to increase the security, transparency and understanding of agreements and their clauses.
• Strikes a fair balance between the parties entering into a mortgage agreement.
• Imposes obligations on creditors and credit intermediaries.
• Provides for a system of penalties for breaches of obligations.
• Extends the powers of property registrars to ensure the legality of these operations.
• The mortgage loan agreement constitutes a right in rem that does not arise until it is registered in the land register.

Registrars are charged, among other things, with the following functions of legality and supervision:

• The Register of General Contract Conditions offers free information on:

Mortgage loan agreements marketed by financial institutions.

Clauses considered to be general contract conditions.

Clauses that have been declared invalid by the courts.

• The property registrars check that mortgage loan agreements meet the legal requirements and guarantees necessary for registration. The registrar can refuse to register the agreement if it has any defects that fail to guarantee the rights of loan applicants.

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Registering mortgage loan agreements in the Land Registry

To safeguard consumers and their right to receive information about the mortgage agreement they are about to sign, the law requires a notary of their choice to draw up a document before the mortgage agreement is signed, which must state:

• That the person who is about to take out the loan has received all the obligatory documentation on time,
• That the notary has advised them on the clauses of the agreement, and
• That the customer understands the conditions of the loan and their effects.

To safeguard the public, property registrars cannot register any mortgage which has not been duly stamped by a notary who must be duly informed before registration.

The mortgage details entered by the registrars show the loan capital amount and, where appropriate, the agreed interest, or the maximum amount of mortgage liability, indicating the guaranteed obligations.

Once the mortgage has been registered, the registrars send the buyer the following in electronic form, free of charge:

• A simple transcription of the entry made, the official letter and a qualification, indicating the unregistered clauses and the reason for their suspension or refusal. In this way, the borrower has full knowledge of the mortgage derived from the registration.

Property registrars cannot register clauses in agreements that are against the law, that have been declared invalid by a Supreme Court ruling or that are entered in the Register of General Contract Conditions.

The costs incurred for registering the mortgage in the land register are payable by the financial entity.

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Registering final judgments declaring certain clauses of the agreement to be invalid

The courts refer final judgments handed down in collective or individual actions declaring the invalidity of illegal general conditions to the Register of Contract Conditions. These judgments are entered in the Register to ensure that they are public knowledge and the property registrars, before registering the mortgage, will check that it does not include any clause that has been declared null and void.

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