Transparency Act

In accordance with Law 5/2019, of March 15, 2009, regulating real estate credit agreements, the material transparency act must be signed by both the future debtor and any possible guarantors or guarantors of the transaction, if any.

<ejemplo>Así pues, retomando el ejemplo inicial en el que Juan y Laura, una joven pareja, compran su primera vivienda, el banco, para mayor garantía de la operación, ha exigido un aval de la misma, el cual será prestado por los padres de Juan, de modo que dichos padres, como avalistas, también deberán acudir al Notario a firmar el acta de transparencia material, al igual que Juan y Laura como deudores.<ejemplo>

In practice, the debtor must go to his bank office and sign all the pre-contractual documentation of the loan (FEIN, FIAE, etc.), after which the bank will send it to the Notary that has been determined, all through a telematic platform existing between the banks and the Notaries.

Once the Notary has received this documentation, he will contact the future debtor in order to arrange an appointment for the signing of the material transparency act.

At the agreed date and time, the future debtors (and if applicable also the guarantors or guarantors of the transaction) will go to the Notary's office, and will proceed to sign the transparency deed, with all the requirements and formalities indicated in the preceding questions, and if all the requirements have been met, the deed will be granted with a positive result.

After this, the deed of sale and mortgage loan may be signed, once the legally established deadlines have elapsed, which will be detailed in the preceding question.

The material transparency act must be signed prior to the signing of the mortgage loan deed. On this basis, the following particularities must be taken into account:

First of all, it is necessary to take into account that Law 5/2019 establishes that at least ten days must elapse between the time the pre-contractual documentation of the transaction has been made available to the debtor and the signing of the transaction, so that the really relevant term for the computation, and that all interested parties must take into account, is the day on which this pre-contractual documentation has been signed and has been sent to and received at the designated Notary's office, since it will be from that moment onwards that this 10-day period can begin to be counted, after which the mortgage loan deed can be signed.

It should also be borne in mind that in certain territories, this period is longer, for example, in the case of Catalonia, its consumer regulations raise this period to 14 days.

<ejemplo>Así pues, por ejemplo, si Juan y Laura acuden a su banco a firmar la documentación precontractual de su préstamo el día 1 de septiembre, y su banco la remite ese mismo día a la Notaría designada, una vez se firme el acta de transparencia, su préstamo hipotecario se podrá firmar a partir del día 12 de septiembre (esto es, 10 días naturales después), de conformidad con la normativa estatal.<ejemplo>

Also, it should be noted that Law 5/2019 determines that at least one day must elapse between the signing of the material transparency act and the mortgage loan deed, so that, at a minimum, the transparency act must be signed the day before the signing of the loan deed.

<ejemplo>Siguiendo nuestro ejemplo anterior, si la documentación precontractual se ha firmado el día 1 y a partir del día 12 de septiembre se puede firmar la escritura de préstamo hipotecario, el acta de transparencia material se podrá firmar entre los días 2 a 11 de septiembre, quedando pendiente de concretar entre el deudor y la Notaría designada, a la vista de la disponibilidad horaria de ambas partes.<ejemplo>

In the real estate sale and purchase it must be taken into account that, unless otherwise agreed, it will be the buyer who will have the right to choose the Notary where the transaction will be signed, so that it will be in that Notary's office (where the sale and purchase is signed) where the buyer and future debtor must sign their material transparency act.

In practice, as it is the buyer who has the right to choose the Notary's office, when he goes to his bank to sign the pre-contractual documentation, he must inform of the name of the Notary he has chosen, so that his bank can send to this Notary the documentation of the transaction through the telematic platform indicated above.

The ESIS, or European Standardized Information Sheet, is a document that must be delivered by the bank to the future borrower and signed by both parties, operating as a binding offer, i.e., a document that contains all the conditions of the future loan contract.

As regards its specific content, Law 5/2019 develops it in an Annex to said regulation, with respect to which it is necessary to highlight the following issues:

• The FEIN will have a specific and limited term of validity, so that the parties must take into account the term stated in the document in order to formalize their loan transaction.
• ~In the event that the term elapses and for any supervening circumstance the sale and loan cannot be signed, the parties must agree on an extension of the FEIN to make this possible.
• The document shall clearly detail the identification data of the contracting parties (i.e. the financial entity on the one hand, and the debtors and, if applicable, guarantors or guarantors), i.e. names, ID cards, addresses, telephone numbers, e-mail addresses, etc.
• As a fundamental aspect, the ESIS will detail the core elements of the loan, i.e., the amount borrowed, the repayment term, the applicable interest rate, the number of repayment installments, their periodicity, the amount of the same, etc.
• Also, as a very relevant aspect, clear and truthful information must be detailed so that the future debtor has real knowledge of the cost of the operation, detailing both the total amount to be repaid and the APR (or Annual Percentage Rate), that is, the cost of the loan expressed as an annual percentage.
• In order for the client to better understand the loan, an example of an illustrative repayment table should also be included, showing the amounts to be repaid on a periodic basis, and the amount of principal and interest for each repayment, as well as the outstanding balance.
• Likewise, the causes for early repayment must be detailed, as well as, if applicable, the costs and commissions agreed upon in this respect.

The FIAE, or Ficha de Advertencias Estandarizadas, is another document that the lending institution must deliver to the client, which must be signed by both parties, in which the Law regulating real estate credit contracts obliges the lending institution to inform the borrower or potential borrower of the existence of the most relevant clauses or elements of the contract, with special reference to:

• If the loan is a variable interest loan, the official reference indexes used to fix the interest rate.
• If a "floor clause" has been agreed (which determines that the interest rate, as a maximum, may be reduced up to an agreed percentage "x"), express mention of the existence of such clause, i.e., of minimum limits on the interest rate applicable as a consequence of the downward variation of the indexes or interest rates to which it is referenced.
• Express reference to the possibility of early maturity of the loan as a result of non-payment and the expenses arising therefrom(so that, for example, if the debtor does not repay his loan, this may lead to foreclosure proceedings which will ultimately result in the loss of the financed property).
• Detail and distribution of the expenses associated with the granting of the loan.
• In the case of a loan referenced to a foreign currency, details and express mention thereof.

As indicated in a previous question, Law 5/2019 obliges the Notary who authorizes the material transparency act to verify that the future debtor has adequately understood the mortgage loan that he/she will soon formalize.

For this purpose, the Notary must provide the future debtor with a test in which he/she will be asked questions related to his/her loan(such as whether it is a fixed or variable rate loan, if he/sheknows the commissions agreed in the contract, if he/she knows the consequences of not repaying the loan, etc.), to which the debtor must answer by checking the corresponding boxes in each case. ), to which the debtor must respond by checking the appropriate boxes in each case.

Said test shall be incorporated as a document attached to the material transparency report, for purposes of recording the same.

In fact, the future debtors and/or guarantors or guarantors, in addition to all the documentary information that they will receive, are entitled to receive expert advice from the Notary, so that they can ask the Notary all the doubts, queries and aspects that they are not clear about their transaction, to which the Notary will give due answers and explanations, in view of his detailed knowledge of the law and the mortgage market.

In the event that the Notary Public considers that the requirements of the Law have not been met in the transaction, in the terms detailed in the previous questions, or in the event that the future debtor does not appear before the Notary Public within the legally established term to execute the material transparency deed, this will be recorded in the deed, and the transaction will be deemed to have been concluded, in which case the mortgage loan public deed that had been proposed may not be authorized.

Law 5/2019 determines that the material transparency act has no cost for the client, as it is a previous step to a mortgage loan deed, which will already accrue its corresponding notary fee.

In order to verify that the principle of material transparency has been complied with and that the transparency act has been previously granted, the law requires that the Notary Public, when authorizing the mortgage loan deed, make express reference to the previously authorized material transparency act (identifying it with its protocol number and date), otherwise the deed cannot be granted or registered in the Land Registry.