European Justice Limits Mortgage Claim Time
- European justice has affirmed temporal limits for consumers seeking to claim abusive mortgage expenses.
- These clauses were declared illegal in 2019 by the Supreme Court, mandating an equal cost distribution between financial entities and clients.
- In January 2024, European Justice established that the prescription period for claiming mortgage expenses begins when the consumer possesses complete facts regarding the nullity of the clause and...
European Court Rules on Time Limits for Mortgage Expense Claims
Table of Contents
- European Court Rules on Time Limits for Mortgage Expense Claims
- Understanding Time Limits for Mortgage Expense Claims in Europe: A Q&A Guide
- Frequently Asked Questions
- What are ”abusive mortgage expenses,” and why were they deemed illegal?
- What is the time limit for claiming abusive mortgage expenses in Spain?
- When does the prescription period (statute of limitations) for claiming mortgage expenses begin?
- Has the start date for the prescription period been clearly defined?
- how did the Spanish Supreme court respond to the CJEU rulings?
- What was the Galician Court’s preliminary ruling, and why is it important?
- What was the specific case that prompted the Galician Court’s concerns?
- How did the CJEU respond to the Galician Court’s preliminary ruling?
- Understanding “Principle of Equivalence”
- Revolving Card Claims: A Related Issue
- Key Takeaways
- Conclusion
- Frequently Asked Questions
European justice has affirmed temporal limits for consumers seeking to claim abusive mortgage expenses. The Court of Justice of the European Union (CJEU) has again addressed clauses where banks required consumers to cover the full costs of notary procedures, property registration, and management when formalizing a mortgage.
These clauses were declared illegal in 2019 by the Supreme Court, mandating an equal cost distribution between financial entities and clients. The CJEU clarified that while actions to declare such obligations void due to their abusive nature are valid, there remains a deadline for claiming reimbursement, set at five years in Spain.
Key Rulings on Mortgage Expense Claims
In January 2024, European Justice established that the prescription period for claiming mortgage expenses begins when the consumer possesses complete facts regarding the nullity of the clause and is fully aware of their rights. This stance was further solidified in April 2024, when the court stated that the prescription period starts once the user has “true knowledge” that the clause within their property acquisition loan contract is abusive.
This “true knowledge” typically arises when a final nullity sentence is issued. However, a specific end date for initiating the claim process was not initially defined. This ruling was welcomed by consumers, effectively extending the claim deadline for many.
In June, the Supreme Court aligned with the CJEU’s criteria, applying it to its jurisprudence, paving the way for a potential surge in mortgage expense claims.
Spanish Court’s Preliminary Ruling
In a ruling announced this Thursday, the highest judicial instance addressed a preliminary ruling from a Spanish court. The Spanish court questioned the possibility of debating the legality of a clause alongside a claim for restitution based on the declaration of nullity. Specifically, the Court of First Instance number 8 of A Coruña questioned whether the action to request the nullity of said obligation does not prescribe, while the action to demand the paid of more does.
The Galician Court expressed concerns that if the action to demand payment does prescribe,”we would reach the absurdity that absolute nullity would operate in a vacuum,had no consequence,as its existence still declared (not subject to expiration or prescription) The benefits could not be returned or this end of the action could be prescribed or expired.” The court further warned that this situation could have a “deterrent effect” on those affected by abusive mortgage clauses.
The preliminary ruling by the Galician Court arose from a case involving mortgage expenses in a contract signed 14 years prior, seeking the return of unduly paid amounts plus legal interest. The bank contested the reimbursement claim, arguing that the statute of limitations had expired, citing the Civil Code’s five-year deadline (previously 15 years before its reform).
Similar Claim Cases
The CJEU clarified that the Directive on abusive clauses in consumer contracts and the principle of equivalence—which ensures similar requirements in national and Union laws regarding damage compensation—do not prevent the caducity of restitution actions, even if the claim of nullity does not prescribe. Though, national laws must ensure similar periods for all restitution cases and avoid making it excessively difficult for consumers to exercise their rights.
Regarding the specific case from the Galician Court,the European court emphasized that to uphold the principle of equivalence,the judge must verify the similarity in object,cause,and essential elements between the analyzed litigation and other claims for abusive clauses. The judge must also determine if the Spanish legal system provides comparable prescription deadlines. A violation of the principle of equivalence would occur if such comparable deadlines are absent.
In other cases involving abusive clauses, the Spanish high court recently established a deadline for claiming reimbursement on revolving cards, which are considered usurious when exceeding six percentage points above the normal price. In a judgment on March 5, the Civil Chamber ruled that the action to claim the return of excess payments on these credits expires in five years, as stipulated by the Civil Code.
The magistrates stressed that “usury is an issue outside the scope of the law of the union” and therefore understood that the TJUE doctrine could not be applied on the restitution of the abusive clauses, which establishes that the prescription period begins once there is knowledge that these agreements are illegal. Even so, the Supreme did not close all the possibilities to claims for the revolving and agreed to the beginning of the prescription in the five years prior to the formulation of the extrajudicial claim or the filing of the claim.
Understanding Time Limits for Mortgage Expense Claims in Europe: A Q&A Guide
Are you a homeowner in Europe who paid excessive mortgage expenses? Recent rulings by the European Court of Justice (CJEU) have clarified the time limits for claiming reimbursement on abusive mortgage clauses. This Q&A guide breaks down these rulings and what they meen for you, focusing notably on the Spanish context.
Frequently Asked Questions
What are ”abusive mortgage expenses,” and why were they deemed illegal?
Abusive mortgage expenses refer to clauses in mortgage contracts where banks required consumers to cover all costs associated with formalizing the mortgage.This includes notary fees, property registration fees, and management expenses. In 2019,the Supreme Court in Europe declared these clauses illegal,mandating an equal distribution of these costs between the financial institution and the client.
What is the time limit for claiming abusive mortgage expenses in Spain?
While actions to declare abusive mortgage clauses void are valid, there is a deadline for claiming reimbursement. In Spain, this deadline is set at five years.
When does the prescription period (statute of limitations) for claiming mortgage expenses begin?
The CJEU has clarified that the prescription period begins when the consumer:
Possesses complete facts regarding the nullity of the clause.
Is fully aware of their rights to claim.
Has “true knowledge” that the clause in their loan contract is abusive.
This “true knowledge” typically arises when a final nullity sentance is issued.
Has the start date for the prescription period been clearly defined?
Initially, a specific end date for initiating the claim process was not defined. Though, the CJEU rulings have been interpreted as effectively extending the claim deadline for many consumers.
how did the Spanish Supreme court respond to the CJEU rulings?
In June, the Spanish Supreme Court aligned its jurisprudence with the CJEU’s criteria. This alignment has opened the door for a potential surge in mortgage expense claims in Spain.
What was the Galician Court’s preliminary ruling, and why is it important?
The Court of First Instance number 8 of A Coruña (Galician Court) raised concerns about whether the action to request the nullity of an obligation prescribes while the action to demand payment based on that nullity also prescribes. The court worried that if the demand for payment prescribes, the declaration of nullity woudl have no practical consequence, possibly deterring affected individuals from pursuing rightful claims.
What was the specific case that prompted the Galician Court’s concerns?
The case involved mortgage expenses in a contract signed 14 years prior. The plaintiff sought the return of unduly paid amounts plus legal interest. The bank contested the claim, arguing that the statute of limitations had expired under the Civil Code’s five-year deadline.
How did the CJEU respond to the Galician Court’s preliminary ruling?
The CJEU clarified that the Directive on abusive clauses in consumer contracts and the principle of equivalence do not prevent the ”caducity” (expiration) of restitution actions, even if the claim of nullity does not prescribe. However, national laws must ensure similar periods for all restitution cases and avoid making it excessively arduous for consumers to exercise their rights.
Understanding “Principle of Equivalence”
What is the principle of equivalence, and why is it important in these cases?
The principle of equivalence ensures similar requirements in national and Union laws regarding damage compensation. The CJEU emphasized that the Spanish judge must verify the similarity in object, cause, and essential elements between mortgage expense litigation and other claims for abusive clauses. They must also determine if the spanish legal system provides comparable prescription deadlines. A violation of the principle of equivalence would occur if such comparable deadlines are absent.
What about claims for reimbursement on revolving cards with usurious interest rates?
The Spanish high court recently established a deadline for claiming reimbursement on revolving cards deemed usurious (exceeding six percentage points above the normal price). The Civil Chamber ruled that the action to claim the return of excess payments on these credits expires in five years, as stipulated by the Civil Code.
Why are revolving card claims treated differently from mortgage expense claims?
The magistrates stressed that “usury is an issue outside the scope of the law of the union” and thus understood that the TJUE doctrine could not be applied on the restitution of the abusive clauses. Even so, the Supreme did not close all the possibilities to claims for the revolving* and agreed to the begining of the prescription in the five years prior to the formulation of the extrajudicial claim or the filing of the claim.
Key Takeaways
| Topic | Details |
| ————————– | ————————————————————————————————————————————————————————————————————————————————————————————————————————————- |
| Abusive Mortgage Expenses | Clauses requiring consumers to pay all mortgage formalization costs (notary, registration, etc.). Deemed illegal in 2019. |
| Claim Deadline (Spain) | 5 years for claiming reimbursement. |
| Prescription Period Start | When the consumer has “true knowledge” of the clause’s nullity and their rights (typically after a final nullity sentence). |
| Principle of Equivalence | national laws must provide similar time limits for all restitution cases and not make it excessively difficult for consumers to claim. |
| Revolving Card Claims | Claims for usurious interest rates on revolving cards also have a 5-year claim deadline, but the CJEU doctrine might not be applicable. The prescription period begins in the five years prior to the formulation of the extrajudicial claim or the filing of the claim. |
Conclusion
Navigating the complexities of mortgage expense claims requires careful attention to detail and an understanding of evolving legal precedent. By staying informed about the CJEU and Spanish Supreme Court rulings, consumers can better protect their rights and pursue rightful reimbursement for abusive mortgage expenses.