Transparency Act | Jesús Benavides Notary Office
Real estate and mortgage

Transparency Act

Step 1

What is a transparency act?

It is the notarial document through which it is verified that all the requirements of material transparency demanded by the applicable Law have been fulfilled, so that the future debtors have received in advance all the documentation, information and advice necessary to adequately shape their will before contracting a mortgage loan.

Step 2

What documentation do I need to go to the notary to grant a certificate of material transparency?

Step 3

How much does the material transparency act cost?

The material transparency act is free of charge for the client.

Step 4

More frequently asked questions

What is a material transparency act?

The certificate of material transparency is a document that includes the notary's intervention consisting of verifying that, in a real estate credit operation that will be formalized shortly(for example, a mortgage loan for the purchase of a home), all the requirements of material transparency demanded by the applicable Law have been fulfilled, so that the future debtors have received all the documentation, information and advice necessary to adequately conform their will to contract this credit operation.

<ejemplo>Así pues, Juan y Laura, pareja, han decidido dar un paso más en su relación y, tras vivir varios años de forma conjunta en un piso de alquiler, próximamente adquirirán una vivienda de propiedad (cuyo precio de compra es de 200.000 euros) para establecer en ella su domicilio habitual. Para esta compra, Juan y Laura, disponen de unos ahorros (60.000 euros), mientras que, para pagar el resto del precio, han pensado en solicitar un préstamo hipotecario a su entidad financiera.<ejemplo>

<ejemplo>A la vista de ello, en este caso, Juan y Laura, antes de poder firmar sus escrituras de compra y préstamo hipotecario, deberán acudir previamente al Notario para firmar su acta de transparencia material, para así verificar que su operación cumple con todos los requisitos que exige la Ley, y asimismo, para asegurar que están adecuadamente informados sobre todas las características y particularidades del préstamo hipotecario que formalizarán en breves.<ejemplo>

Thus, in short, as will be seen, when a natural person wishes to acquire a property for residential use, and to finance such purchase with a mortgage loan, it will be necessary to previously grant this certificate of material transparency, to confirm that the transaction complies with all legal requirements, and that the debtor also adequately understands the type of legal transaction that he is about to formalize, thus ensuring his adequate protection as a consumer.

What is the transparency act for?

As has just been indicated in the preceding question, the material transparency act serves to verify that the credit operation that is intended to be formalized shortly, complies with all the requirements that the law demands, thus guaranteeing the adequate protection of the debtor natural person, that is, that the future debtor adequately knows all the characteristics of his future mortgage loan contract, so that, when signing his loan deed, he does so knowing in detail what he is contracting, as well as the consequences that will derive from it.

Thus, through the granting of the material transparency act, a Notary, that is, a public official, impartial and independent, specialist in private and mortgage law, will verify:

  • That the bank that intends to finance the purchase of our home has complied with all the legal requirements, providing the debtor with all the necessary documents, in which all the characteristics of our credit operation are stated in detail, since only by knowing all its details and characteristics, we will be able to properly decide whether or not we wish to contract this loan with these specific characteristics. In this regard, it should be taken into account that the bank must even provide the future debtor with a draft of the loan contract, so that the debtor will be able to examine the loan contract that he/she will soon sign well in advance.
  • Likewise, the Notary will verify that all this documentation has been provided to us with the necessary advance notice required by law, so that the debtor can examine it calmly, know it in detail and, if necessary, have room to negotiate the appropriate changes. This is undoubtedly a very important and fundamental change, because in the past, in the absence of this procedure, if there was any discrepancy between the debtor and the creditor bank, it was revealed the same day of the sale, when going to the Notary's office, so the margin for negotiation was very reduced, if not null.
  • In addition, to ensure that the debtor has adequately understood all the fundamental characteristics of his loan, he will be given a test at the Notary's office, which he will have to answer, in order to verify that his understanding of the transaction is in line with the reality and characteristics of the transaction.
  • And, finally, the Notary will carry out a function of advice and counsel to the future debtor, resolving all the doubts that the debtor may have about his credit operation, resolving them based on his expert knowledge of the law and the mortgage market.

Where and why is the principle of material transparency regulated?

In relation to the function or usefulness of the material transparency act, in my opinion, it is necessary, without a doubt, to look back and analyze the historical functioning of the mortgage market, as well as the nature of the contracting parties that concur in it, since only in this way will we be able to adequately understand the issue. Thus, in this regard, it is necessary to point out the following issues:

  • First of all, as can be seen, the mortgage market is characterized by a great disproportion between the contracting parties, since on the one hand, as creditor, there will be a bank, that is, a large company, with legal services and expert professionals who know in detail the regulations applicable to mortgage loans and their financial and economic implications, while the other party, i.e., the debtor of the mortgage loan, will in most cases be a natural person with no legal or financial knowledge that would allow him to properly understand all the content and scope of the clauses of his loan contract. Thus, this traditional disproportion of means and knowledge has meant that, in many cases, real estate loan contracts and contracting practices were formalized in a way that greatly benefited the position of the lending institution, to the detriment of the rights and interests of the debtors.
  • Likewise, it is necessary to indicate that the contracting of mortgage loans for the purchase of housing is a very relevant contracting sector for an economy, since taking into account the current high price of housing, practically all the people who wish to acquire the ownership of their home will have to resort to bank financing for this purpose, so that the way in which this contracting sector is regulated will have a great impact on the national economy and on the lives of many millions of people.
  • And finally, to point out that, as it is well known, in the past, as a result of the massive commercialization of mortgage loans, and of this lack of legal and financial knowledge of many debtors, there have been bad practices in the commercialization of these credit operations, so that many debtors, in the past (for example, During the real estate bubble of the 2000s, for example, many debtors signed their loan transactions without knowing all the details and consequences of these transactions, which has led to situations that are very complex to manage and with a high economic and social cost (such as all the litigation related to the clauses of mortgage loan contracts, or the foreclosure of homes).

Thus, in view of all the problems generated in the past, and of the special importance of this contracting sector in the country's economy and in the life of the majority of citizens, the legislator, being aware of this, has recently approved a new regulation (specifically Law 5/2019, of March 15, regulating real estate credit agreements), which aims to regulate the real estate market in a more adequate way, clearly defining the way in which real estate credit operations must be formalized, and also assessing all the detailed information that mortgagors must receive, in order to guarantee their adequate protection, ensuring that they adequately understand the product they are contracting as well as the consequences that may derive from it, so that, if they finally decide to contract it (and sign their mortgage loan), their consent is fully informed and properly perfected.

In which operations is it necessary to sign the material transparency act?

In accordance with the provisions of Article 1 of the Real Estate Credit Law, its scope of protection shall extend to those operations in which:

  • The debtor party is a natural person and the creditor party is a person (natural or legal) that carries out, in a professional manner, the activity of money lending.
  • The loan to be formalized is secured by a real right of mortgage.
  • The purpose of the loan is to acquire or retain ownership rights to residential real estate (or land or real estate constructed or to be constructed).

Thus, in the majority of real estate purchase and sale transactions, in which the buyer of the property is a private individual who finances the acquisition with a mortgage loan granted by his bank, all the provisions of this Real Estate Credit Law will be applicable, so that it will be necessary to formalize, in advance, this act of material transparency.

What is the act of granting the material transparency act before a Notary Public?

Pursuant to the provisions of Article 15 of Law 5/2019, regulating real estate credit agreements, in the material transparency act, the Notary:

First, it will verify that the creditor entity has made available all documentation required by law. Specifically:

  • The European Standardized Information Sheet (ESIS), which will be considered as a binding offer, and which will include details of the main characteristics of the loan, such as its amount, duration, interest rate, amount of repayment installments, etc. (for more information, see later question dedicated exclusively to the analysis and understanding of the ESIS).
  • The Ficha de Advertencias Estandarizadas (FIAE), which is a document in which the borrower will be informed of the most relevant clauses or elements of his contract (for more information, see later question dedicated exclusively to the analysis and understanding of the FIAE).
  • In the case of a floating rate loan, a separate document with a special reference to the periodic installments to be paid by the borrower in different scenarios of interest rate evolution.
  • A copy of the draft contract (of the mortgage loan deed) to be signed, so that the debtor knows it in advance and can analyze and study it in detail.
  • A document with a breakdown of all the expenses of the operation and the contracting party that will have to assume them.
  • In the event that the lender requires the debtor to take out performance bond insurance (default insurance) or insurance against damage to the mortgaged property, a document stating the terms and conditions of such insurance contracts.

It is also necessary to state for the record that the Notary:

  • It will check that all this documentation has been made available to the debtor within the period established by law, i.e. at least ten days prior to the signing of the mortgage loan contract (which will be discussed in a later question).
  • And it will verify that the debtor has adequately understood all the documentation provided, proceeding to provide a test to the future debtor, who will have to respond appropriately.

Finally, once these actions have been completed, the Notary will give the future debtors the opportunity to ask any doubts and queries they may have about any aspect of their transaction, and the Notary will proceed to resolve them, based on his exhaustive knowledge of mortgage law, private law and the reality of contracting in the real estate market.

See more frequently asked questions

Who must sign the material 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>

What is the process for signing the material transparency act?

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.

At what point should the material transparency act be signed?

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>

At which notary will the material transparency act be signed?

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.

What is FEIN?

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.

What is FIAE?

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.

What is the test I will have to complete at the Notary's office?

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.

Can I ask the Notary any questions I may have about my transaction?

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.

What will happen if the Notary determines that the material transparency requirements of the Law have not been met?

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.

What is the cost of the material transparency act?

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.

How will it be verified in my loan deed that the material transparency act has been granted?

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.

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