[JURIST] The European Court of Justice (ECJ) [official website] ruled [judgment, in Spanish] Thursday that evictions carried out in Spain under harsh property repossession laws violate EU consumer protection laws. According to the ECJ, Spain’s laws contravene EU laws [press release, PDF] because they do not allow national courts to stop evictions taking place due to possible unfair terms in mortgage agreements. The ECJ’s decision came in the case Mohamed Aziz v Catalunyacaixa, in which Aziz, a Moroccan national residing in Spain, concluded with Catalunyacaixa Bank a loan agreement for €138,000 secured by a mortgage over his family home. After he stopped making payments in June 2008, enforcement proceedings were initiated and, in January 2011, Aziz was evicted, while the property was vested in the bank at 50 percent of its value. According to the ECJ’s ruling:
The Unfair Terms in Consumer Contracts Directive preclude national legislation, such as the Spanish legislation at issue, which does not allow the court hearing the declaratory proceedings—that is, the proceedings seeking a declaration that a term is unfair—to adopt interim measures, in particular, the staying of the enforcement proceedings, where they are necessary to guarantee the full effectiveness of its final decision.
In addition, the court noted that Spain’s national courts must be able to assess issues stemming from default interest clauses, acceleration clauses and clauses on unilateral quantification of the unpaid debt. Spain’s legislation currently allows a bank to pursue a mortgage holder to pay off the remaining balance of a loan if the value of the seized property is not sufficient.
Spain has seen a rash of protests in recent months [Reuters report], which some say are directly related to the country’s eviction policies, as well as corruption and unpopular austerity measures. In November the country announced new eviction rules [NYT report] that many interpreted as a de facto moratorium on evictions. Issues related to unfair practices in the housing market have not been isolated to Spain. For example, in June 2011 JPMorgan reached a $153.6 millionsettlement agreement [JURIST report] for fraud charges brought by the US Securities and Exchange Commission (SEC) [official website] for misleading investors during the housing crises. In December 2008 the SEC approved rule amendments [JURIST report] that provided greater oversight and regulation of credit rating agencies.