Article written by Susana Garzón, notary in Arnedo (La Rioja)
Since June 2019, when the Real Estate Credit Act came into force in Spain, notaries have been authorising the so-called transparency report, which is the notarial document that aims to accredit that the requirements established by law have been met and that individuals know and understand the scope and conditions of the mortgage loan they are signing.
Notaries are therefore involved in the pre-contractual phase of mortgage loans in Spain. In the transparency reports, we check that the financial institution has provided individuals with all the necessary documentation; that this documentation complies with the law, that it has been provided within the legally stipulated period, and that its content will be in line with the deed subsequently signed by the client and the financial institution. In addition, we give impartial advice to individuals on its content and resolve any doubts they may have, without anyone representing the lending institution being present. Finally, we carry out a small test to find out if they have understood the scope and meaning of the obligations they are going to accept upon signing the mortgage.
The transparency report thus contributes to enhancing legal security in mortgage loan contracts, by controlling the legality of the documentation that must be made available to consumers; by ensuring that the content of the prior information provided corresponds to the correlative content of the mortgage deed signed; and finally, by ensuring, with impartial and free notarial advice, the that citizens understand the contract and its clauses, so that they can freely and adequately express their wishes before signing the mortgage.
It is important to emphasise that the private individual has the right to freely choose the notary who provides advice on the transparency report. The same notary will authorise the mortgage, as stipulated by law, and the financial institution cannot impose a notary of its own choice. Furthermore, before signing, the bank must provide and explain to the private individual all the documentation required by law.
The transparency report is mandatory in Spain because it is imposed by law as an essential part of the pre-contractual phase when loans (or any other law) are to be formalised with a mortgage guarantee on a residential property, such as homes, storage rooms, garages and any other property that fulfils a domestic purpose, or loans whose purpose is to acquire or preserve property rights on built or buildable land, as long as the borrower is a consumer.
And it is mandatory not only for debtors, but also for other persons involved in mortgage loans, such as guarantors and non-debtor mortgagors, who mortgage a property they own to secure another person's debt.
If you are going to take out a mortgage in Spain, you are free to choose the notary you want to give you free advice on authorising the transparency report, so that you can get to know and understand better the scope and meaning of the contract you are going to formalise.