Restructuring & Insolvency
A judgment of the Court of Justice of the European Union (ECJ) confirms the possibility of replacing an unfair early termination clause in a loan agreement by the application of article 693.2 of the Spanish Civil Procedure Rules (LEC), declaring valid and not unfair to start mortgage foreclosure in the event of default of at least three monthly instalments.
In an order rendered on December 18, 2018, Madrid Commercial Court no 1 allowed a debtor under an insolvency order to sign and homologate a refinancing agreement after the opening of the insolvency proceedings.
The New Real Estate Credit Act, passed by the Spanish Parliament on February 21st 2019 includes a set of brand new rules that will have a direct impact on the underwriting and modelling processes of secured lenders, namely the buyers of non-performing loans portfolios (NPLs).
The Constitutional Court has held unconstitutional a provision in a law passed by the Catalan parliament which, if a loan secured with a home is sold to a third party (a fund usually), allowed the debtor to be released from their debt by paying the buyer out of the debt only the price the buyer had paid (plus the statutory interest and costs caused by the claim).
The DGRN is seeking to strike a balance between the necessary rigor that must prevail in the Spanish registration system and the legal certainty needed for the recipients of assets during insolvency proceedings.