The High Court in Álava province (Basque Country) has declared a so-called ‘clausula suelo‘ – or mortgage floor clause – null and void and ordered the bank in question, Liderbank (formerly Caja Extremadura), to return €17,000 that it received from the customer as a result of the clause that was contained in the mortgage agreement.
The subject of ‘clausulas suelo‘ was recently reviewed by the Supreme Court and is essentially a term of the mortgage agreement that establishes a minimum interest rate. So even though the rate payable may be declared to be a fixed percentage below the European ‘Euribor’ rate, should the Euribor rate fall low enough, the ‘clausula suelo‘ will prevent the bank customer from benefiting from lower repayments.
Unfair and Disproportionate
The High Court in Álava agreed with the Court of first Instance that the clause had to be struck-out of the agreement on the basis that is was ‘unfair’ for being “disproportionate, displaying a lack of reciprocity and was a violation of the doctrine of fair balance in loans”.
The customer had agreed to pay an interest rate of the Euribor rate + 0.65%. However the mortgage agreement included a minimum rate of 4.25% regardless of the Euribor rate and the customer alleged that, since the Euribor rate had fallen below this level that he had paid €17,000 more than he would of if there had been no minimum rate.
The agreement also contained a maximum interest rate of 12% but while the minimum rate had been exceeded may times, the maximum rate threshold had not once been exceeded. This gave rise to a conclusion by the Court that the agreement was unfair since the minimum and maximum rates were not applied in a similar fashion.
Second similar judgment in one week
Regarding the order to repay the €17,000 which had been paid to the bank purely as a result of the clause, the Court ruled that the obligation to repay the money arose once the clause was deemed to be unfair. Considering those circumstances in which it would not be correct for the money to be repaid, the Court alluded to prior decisions of the Supreme Court and decided that to order the return of €17,000 did not constitute a grave risk for the national economy or even of the affected bank.
This is the second judgment to emanate from the Basque Country in less than a week ordering a bank to repay mortgage payments due to the existence of an unfair ‘clausula suelo‘ in a mortgage agreement and it will be interesting to see how many similar judgments will follow.