Transparency report in Barcelona

When we apply for a loan secured by a mortgage, one of the first steps is to go to a notary's office, which must verify that the entire process is being carried out transparently, so that the client has full knowledge of the financial data, their rights and obligations, before assuming the significant consequences that the mortgage entails.

Therefore, a notarial deed known as transparency certificate or prior material transparency certificate will be granted, in which it is stated that the party wishing to contract a real estate loan with a banking entity has been duly informed and advised, and that, furthermore, they have received sufficient documentation before contracting said loan.

The origin of the prior certificates to mortgages lies in the Law 5/2019, regulating real estate credit contracts, which aims to solve some problems that occurred during the 2009 real estate crisis, such as the lack of knowledge of some clients or the issues caused by certain clauses. Therefore, before this law, there were no prior certificates in mortgages. The objective of this law is to ensure that people contracting a mortgage receive sufficient and understandable information from the Notary and the notary's office.

In the prior certificates, the Notary carries out a notarial intervention to ensure that the debtor party (those clients of the banking entity who wish to contract the mortgage loan) has understood all the terms of the mortgage and signs the procedure with informed and properly advised consent.

In which cases must the prior certificate be signed? The transparency certificate or prior material transparency certificate does not have to be signed in all cases, but only in those indicated in article 2 of Law 5/2019. According to said article, the prior certificate must be signed “when the borrower, guarantor or surety is a natural person and said contract has as its object:

1. The granting of loans secured by a mortgage or other real right of guarantee over a residential property. For these purposes, elements such as storage rooms, garages, and any others that, without constituting a dwelling as such, serve a domestic function will also be understood as residential properties.
2. The granting of loans whose purpose is to acquire or retain ownership rights over land or constructed or to-be-constructed properties, provided that the borrower, guarantor or surety is a consumer.”

Therefore, there is only a prior certificate when the loan is received by an individual or, even when a company receives the mortgage loan, there is a guarantor or surety who is an individual, and this prior certificate to the mortgage (or material transparency certificate) takes place before signing the mortgage deed and, where appropriate, the granting of the sale deed. The procedure and granting of the prior transparency certificate is necessary as it guarantees that the process is being carried out within the law. Furthermore, it protects the consumer by ensuring that they have understood the future mortgage contract and the consequences of its clauses, that they know their rights, obligations and, above all, the consequences in case of default on the mortgage loan payments.

For the signing of a preliminary mortgage deed, the client must basically inform their bank of the notary's office they have chosen for the procedure and sign the pre-contractual documentation, which the bank itself must have explained to them beforehand. Let us analyse this procedure step by step. Therefore, if you want to process your mortgage with JLA Notarios, you must request your bank to appoint as Notaries for your operation one of the Notaries of JLA Notarios, that is, you must ask the bank to appoint the Notary Luis Alberto Álvarez or the Notary Juan Madridejos Velasco, since the notary's office cannot be assigned directly but a specific notary must be appointed.

Next, the banking institution will send the pre-contractual mortgage documents to the notary's office. This is done through a special notarial IT system called SIGNO. From the time the documents are uploaded until the mortgage signing, at least 10 days must elapse. However, in Catalonia there are different deadlines for the transparency deed compared to the rest of the regions. Thus, in Catalonia, the mortgage deed cannot be signed until 14 calendar days have passed since the documentation was sent, although it is allowed that the client who wishes may expressly waive the additional 4 days required by Catalan regulations, provided the minimum of 10 days is respected; however, some banks require that if the 4 days are waived, after the total period of 14 days has elapsed, the client declares in a deed that they ratify the granting.

But what happens during this period? Once the information is received, the Notary, who is a legal professional, will perform different functions related to the material transparency deed stipulated in the Real Estate Credit Law.

The first is to assess the information provided by the banking institution (article 15 of the Law regulating real estate credit contracts). We can establish the relevance of the delivery of the information since the data it contains will determine whether or not the client contracts the mortgage. The following documentation will be studied, which must also be included in the deed:

• FEIN (European Standardised Information Sheet): with the financing conditions that are binding for a period of ten days. It includes interest rate, mortgage duration, number and amount of payments, bonuses, commissions, and consequences of default.

• FIAE (Standardised Warning Sheet): summarises relevant clauses and terms in the contract (such as possible consequences of the increase in the reference index in the case of variable mortgages, activation of the early maturity clause for non-payment of instalments, cancellation clauses or early repayment…)

• Copy of the draft contract of the mortgage deed so that the future debtor can read it in advance and carefully, as well as to be able to consult and analyse the key points and clauses before the Notary.

• Periodic instalments in fixed interest loans: the interest rate and total payment at the end of the mortgage must be stated. In variable interest mortgages, possible scenarios with different interest rates must be simulated.

• Conditions of the insurance policies contracted or linked products offered by financial institutions to improve the loan conditions and their terms. You should know that you must always have home insurance on the mortgaged property but you can freely choose the home insurance provider, as the law prohibits the bank from forcing a client to contract the insurance with them, although it can offer a discount on the interest rate.

• Costs of the future mortgage operation. All costs are borne by the bank and the Notary must carry out all the work of the preliminary mortgage deed free of charge, being able to charge only the mortgage to the bank and nothing for the preliminary deed.

• Document certifying that the client has the right to notarial advice before signing the mortgage deed. You should know that the law establishes that the person requesting the mortgage is always the one who chooses the notary.

The Notary's second function is to ensure that the information delivered is that dictated by law and that the law is respected in all its terms. The delivery of the documentation prior to the mortgage signing and its verification allows some room for manoeuvre to finalise changes just before the final signatures. From the moment the Notary receives the documentation electronically, they can prepare the final deeds to be signed after the preliminary deed, thus making use of the time the law requires to wait from when the documentation is uploaded.

Thus, we arrive at the moment when the Notary will summon the debtor to sign the transparency deed within the period agreed according to the law, and provided that the bank's binding offer is still valid.

On the day of the preliminary deed, you should only bring your DNI, as the notary will have already obtained the necessary documentation through the bank. If you do not have a DNI, you may bring a residence card or identity card from your country or a passport with NIE.

The rest of the documents will be at the notary's office to explain them to you when you go to sign the preliminary mortgage deed.

On the day of signing the preliminary mortgage loan deed, the Notary must personally explain the documentation provided by the bank, answer all and each of your questions, doubts and concerns, explain your rights, obligations and responsibilities. Furthermore, it is advisable that if the mortgage loan is accompanied by a sale, a brief explanation of the costs and taxes of the sale is given.

Likewise, the Notary must ensure that the debtor understands the characteristics of the loan, especially the FEIN and FIAE sheets, for which a small test will be conducted to verify their knowledge on the day of the transparency deed. This test contains questions related to the contract such as the total financed capital, the chosen interest rate, the commissions to be paid or the consequences of defaults… A bank debt entails a high responsibility, so it is important that the legal professional explains the legal and financial risks and the possible consequences of defaults.

Do not worry about the test, because it is a comprehension test of the aspects previously explained to you by the Notary and any doubts can be raised at that moment.

Similarly, the Notary will inform you of your right to cancel the mortgage loan early, either partially or totally; your right to change the conditions or to change banks if the conditions of the mortgage market change during the life of the loan; your obligation to take out home insurance as a guarantee for the bank in case of fire, explosion, etc.; or your universal liability in case of default and foreclosure of the mortgage.

If all the legal requirements are met, the preliminary transparency deed is granted and the notary will inform the banking entity that the process continues with the aim of summoning them for the signing of the deeds.

And the most important thing at this stage, do not remain with any doubts, ask everything you wish. The Notary will answer you.

Once the transparency deed at the notary has been completed, and at least one day has passed, you will be summoned to sign the mortgage loan, and the sale contract if applicable. Always bearing in mind that the period established by law must have elapsed since the documents were uploaded.

As we have mentioned, a minimum of ten calendar days must have passed between the signing of the pre-contractual documentation along with the sending of the information to the notary and the signing of the mortgage loan deed (in Catalonia this period is fourteen days).

Within this period of time we must include the transparency certificate, which must be signed at least one day before the mortgage loan deed.

If the signing of the deed is after the ten days, there is no problem, as the important thing is to respect the minimum legal period, because it is a minimum period but it can be signed at any time after this period has elapsed.

• Presentation of the Notary with name, surname, place and College.
• Information relating to the future mortgage debtor (name, age, nationality, marital status, address and identification document).
• Statement of the parties involved and the content.
• Documentation uploaded to the electronic system and designation of the system used.
• Notarial advisory tasks carried out.
• Specific questions raised by the mortgage applicants, if any.
• Proof of understanding of the documentation required by law.
• Declaration of compliance with all legal obligations.
• Data protection clause.
• Signature, sign and seal of the Notary authorising the deed.