In Spain the granting and creation of a mortgage levies the so-called Tax on the Transfer of Assets and Stamp Duty (“Impuesto sobre Transmisiones Patrimoniales y Actos Jurídicos Documentados"), on the stamp duty modality (the “Stamp Duty“), at a rate which ranges -depending on the region (Comunidad Autónoma)- from 0.5% to 1.5% over the total amount secured by the mortgage granted. Royal Legislative Decree 1/1993, which regulates the Stamp Duty, stated -prior to its amendment on 10 November 2018- that the payee of the tax should be the acquirer of the right or asset or, alternatively, the persons requesting the issuance of the notarial documents or the persons for whose benefit such documents are issued. This regulation may have led to conclude that, in financing transactions secured with mortgages, the payee of the Stamp Duty should be the lender, since it is the one acquiring the mortgage right. However, Regulation 828/1995, which develops the regulation contained in the Royal-Legislative Decree, set forth that, when it comes to mortgaged loans, the borrower/mortgagor shall be deemed as the acquirer of the right and, thus, the payee of the Stamp Duty.
During November, the Spanish legal, banking and investment markets -not to speak of the wider society- have been in a state of turmoil due to a ruling passed by the Spanish Supreme Court (which is the highest judicial level in Spain and the only one able to create binding case law) on 16 October 2018, concluding that the lenders will be liable to pay the Stamp Duty levied on mortgage loans. It is a decision that has drastically modified the case law that the Spanish Supreme Court had been holding for the past twenty years. This Spanish Supreme Court ruling also declared null section 68.2 of Regulation 828/1995 which, as explained above, expressly established that the borrower / mortgagor was the payee of the Stamp Duty, on the basis that such section was contrary -according to the new doctrine from the Supreme Court- to the regulation contained in the Royal-Legislative Decree 1/1993.
On 19 October, the President of the Third Chamber of the Spanish Supreme Court (Contentious-administrative Chamber), which is the one that issued the ruling, called a plenary session to decide if this jurisprudential turn should be confirmed or not. According to the Spanish Supreme Court internal rules, this plenary session should have been called before the 16 October ruling was even made public, due to the fact that it meant a change in a settled case law doctrine. The economic impact of the result of the plenary session could be cumbersome if the Spanish Supreme Court decided to give retroactive effects (some experts said this could be backdated for as long as 15 years) to the 16 October ruling, meaning the revisions of thousands of mortgage loans, the filing of claims by taxpayers to the public administrations and the counterclaim by these to the lenders.
On 6 November the plenary session of the Spanish Supreme Court decided, after two intensive days of deliberation, to maintain their historical doctrine and their interpretation that the borrower/mortgagor should be liable for the payment of the Stamp Duty levied on mortgage loans, thus reversing the 16 October ruling of the Spanish Supreme Court. This may have ended the judicial crisis, but social sensitivity seems to be the rule these days and almost all politicians have thrown strong-hearted criticism and accusations against the Spanish Supreme Court, claiming that the court’s case law doctrine is utterly unfair “for the people”.
The Spanish Government reacted to this decision and social frustration by approving the Royal Decree-law 17/2018, 8 November, amending the above-mentioned Royal Legislative Decree 1/1993 in order to expressly include a statement saying that the lender is the payee of the Stamp Duty levied on mortgage loans. The statement of Regulation 828/1995 setting forth that, when it comes to mortgaged loans, the borrower/mortgagor shall be deemed as the acquirer of the right and, thus, the payee of the Stamp Duty, has been abolished.
In practical terms, it still is too early to determine the course of action that lenders in Spain will follow in order to revert the Stamp Duty cost to the borrower. Nonetheless and in our understanding, it may be concluded that the clause providing that the borrower (when they are not consumers) should be liable for the Stamp Duty cost is valid and it seems that it may result in such clauses being included as market practice in Spain in sponsor-driven transactions. However, it cannot be disregarded that lenders opt to implement other alternatives in order to deal with this unexpected recent legal development.
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