The Royal Decree-Law 8/2020 of March 17th introduced the possibility of applying for a moratorium on mortgage debt for the purchase of the main dwelling for those who are suffering extraordinary difficulties in making their payments as a result of COVID-19 crisis. This regulation has been complemented by the new Royal Decree-Law 11/2020 where adjustments and clarifications are made to facilitate the application of this moratorium.
Scope of application of the moratorium on mortgage debt for the purchase of the main dwelling.
In accordance with Royal Decree-Law 8/2020 of March 17th, the moratorium on mortgage debt for the purchase of the main dwelling is applicable to loan or credit agreements secured by a real estate mortgage where the debtor is an individual who has a financially vulnerable situation according to Article 9 of the above-mentioned law and which are effective on the date of its entry into force.
It also applies to guarantors, sureties and mortgagors in the same situation of vulnerability, who may require the lending entity to execute all the principal debtor’s assets before claiming the guaranteed debt, even if they have expressly waived the benefit of exemption.
The new RDL 11/2020 extends the benefits of the moratorium to two new groups:
- self-employed workers, entrepreneurs and professionals in respect of the property used for their economic activity, and
- individuals who are landlords with rented properties for which they have ceased to receive rental income since the entry into force of the state of alarm or who cease to receive it up to one month after the end of the state of alarm.
Assumptions of economic vulnerability.
There is economic vulnerability to these effects when all of the following requirements are met:
- The debtor becomes unemployed, or if he is an entrepreneur or professional, suffers a substantial loss of income or a substantial drop in the turnover of at least 40%.
- That the total income of the members of the family unit does not exceed in the month prior to the application of the moratorium the limit of three times the monthly IPREM (Public Income Indicator of Multiple Effects) (adjustable upwards according to the concurrent circumstances in the family unit).
- That the aggregate of the mortgage payments, plus expenses and basic supplies is equal to or greater than 35% of the net income of the family unit. For these purposes, “basic expenses and supplies” shall be understood to mean:
- electricity, gas, heating oil, running water,- fixed and mobile telecommunication services
- contributions to the homeowners’ association.
- That, as a result of the health emergency, the effort represented for the family unit by the sum of the mortgage payments with respect to the family income has been multiplied at least by 1.3.
The debtor must prove that the requirements for applying for the moratorium are met by:
- The submission of the specific documentation requested in the Royal Decree, or
- Issuing a responsible statement including explicit justification of the reasons, related to the consequences of the COVID-19 crisis, that prevent him from providing the documents. In this case, the documents may be submitted within one month after the end of the state of alarm.
- The debtor who benefits from the moratorium without meeting the necessary requirements shall be liable for the damages and expenses incurred and without prejudice to any other liability.
Application term. The debtor can request the moratorium from the creditor up to fifteen days after the end of the validity of RDL 8/2020 and the creditor entity “will proceed to its implementation within a maximum period of 15 days”. The bank entity will notify Banco de España for accounting purposes and for not allocating the moratorium in the risk provisions.
- Suspension of the mortgage debt for a period of three months. It is stated that this period can be extended by agreement of the Council of Ministers.
- Non-enforceability of mortgage payments, neither capital nor interest, in full or in percentage.
- Non-application of the early termination clause.
- Non-application of moratorium interests.
To be effective, the suspension does not require contractual novation or agreement between the parties, but it must be formalized in a public deed and be recorded before the Property Registry and the extension of the initial period has a full effect against registered intermediate creditors, even without its consent. However, during the period of the state of alarm, the deed cannot be granted, without the non-granting affecting or suspending the
maximum period of 15 days for its application. Allowances in notary and registry costs of these kinds of deeds are provided for, as well as in Stamp Duty tax.