Coronavirus - Conditions Micro-loans Rent Situations

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Author: Richelle de Wit
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Update 3.10.2020. Extended till 30 November 2020 for application, 31 December 2021 for formalisation.

Update from the Government on 29.5.2020.

The following banks and ‘cajas’ have formalized the adhesion contract to the Leasing Endorsement Line with the Official Credit Institute (ICO) Bankia, Santander, Sabadell, Cajamar, Liberbank, Unicaja, Abanca, Bankoa, Laboral Kutxa, Caja Pollença and Caja Onteniente.

In the coming days, more entities are expected to join this credit line. The list of adhered entities can be consulted on the ICO website, which updates the information daily.

For what kind of rental situations?

For rental situations anywhere in Spain, duely accredited, of habitual homes, so ‘uso vivienda’ rental contracts.

Costs and interest?

Zero for the tenant, the applicant for the loan.

Can the loans be used for another purpose?

No, they are ‘finalist’ loans, meaning they can only be used to cover rent payments.

Where to apply?

With credit entities connected to LÍNEA DE AVALES ARRENDAMIENTO COVID-19. Basically all banks and credit institutions in Spain.


What needs to happen before these loans become available?

The relevant ministry that is supplying the ‘avales’ (the financial guarantee for the loans) has to sign a ‘convenio’ with the Official Credit Institute (ICO) to which the credit entities will adhere. You can check the availability of the ‘avales’ on the ICO webpage.

Update 2.5.2020 Convenio as mentioned above signed and published in the State Gazette today.


Who can apply?

Those in accredited situation of economic vulnerability. The criteria have changed since the first announcement of this alleviating measure and are now as follows. To be able to apply, you need to meet ALL.
a) That the tenant or one of the members of the family unit is affected by a circumstance that implies a reduction in income, by becoming in unemployment situation, to be affected by a Temporary Regulation File of Employment (ERTE), for having reduced their working day due to care, for termination of activity of self-employed workers or by other supervening circumstances linked to work or business activity involving such reduction in income
as a consequence of the expansion of COVID-19.
b) That the total income of the members of the family unit, in the month prior to the application for the loan, do not reach the limit of five times (2.743 euros) the Public Indicator Monthly Multiple Effects Income (hereinafter IPREM).
c) That the rental income plus basic expenses and supplies is higher or equal to 35 percent of the net income received by all the members of the family unit. For these purposes, “basic expenses and supplies” shall mean the
amount of the cost of supplies of electricity, gas, diesel for heating, water, fixed and mobile telecommunication services, and possible contributions to the community of owners, all of them of the habitual residence that corresponds to satisfy to the lessee, referring to the period of one month.
To obtain these loans, it will NOT be required to be current in compliance of tax obligations or Social Security or payment of obligations by repayment of other grants.
2. For the purposes of this article, the family unit shall be understood as the one composed by the person who owes the lease, their legally separated spouse or registered domestic partner and children, regardless of age, residing in the housing, including those linked by a guardianship, guardianship or fostering relationship relative and his non-legally separated spouse or registered domestic partner, who reside in the house.
3. If there are several holders of the same rental agreement, it will be mandatory that all of them formalize as a single loan contract, of which all will respond in solidarity.

NOT considered to be in a situation of economic vulnerability are those that rent, but who also own property in Spain, or have ‘uso fructo’ of one. Or if any of the members in their family unit do. Unless you are only part owner as a result of an inheritance, or when it is impossible to live in the property as a result of a divorce/separation, or for whatever other reason no fault of your own, or when one member of your family unit is disabled and the property owned is not suitable for access by disabled.


How to accredit this situation of economic vulnerability?

Unemployment – certificate from SEPE that states monthly income from the benefits.
Autonomos de ‘baja’ for ‘cese de actividad’ – a certificate from the National Tax Office or relevant Autonomous Government organisation.
Number of people in the family unit – by Libro de Familia or Pareja de Hecho certificate and padrón certificate relevant to the current situation.
Proof of ownership property ( nota simple from the property registry index service ** for all members of the family unit).
Responsible statement of the debtor or debtors regarding compliance with the requirements to be considered without sufficient financial resources according to this Royal Decree-law.

If you cannot get the documents mentioned above because of the containment measures, you can use a responsible statement instead, and follow it up with the required documents, once the State of Alarm has been lifted, during a window of three months.

**The Collective of Property Registers has facilitated applying for this “Nota Simple de Indice” by email, during the State of Alarm. If you need a simple note from the index service to prove your situation of economic vulnerability you can request it by email to the Property Registry where you have registered your habitual residence or, where appropriate, to any of the Registries of the city where you have your habitual residence, necessarily incorporating a photocopy of the DNI of the person of whom the information should be issued or, where appropriate, of all the members of the family unit. List of offices with email addresses HERE.

If a tenant benefited from this special measure, but later it appears that they didn’t meet the requisites, consequences will be severe and they will be held liable for all costs involved. And re-payment of the loan payments plus all costs augmented with interest,  if they are found to have acted fraudulently.


Conditions for the loan to be formalised

The tenant will have to sign a contract for the loan with their bank.

The loan will be available for an amount up to 100% of the rent payments, with a maximum of 900 euros/month for 6 months. So for 5.400 euros max.

The cover can start with the rent payment for the month of April, but cannot exceed 6 months after signing the contract, or the end of the rental contract or one of its extensions if that date is earlier.

Re-payment of the loan in 6 years, to start once the period the loan covers, has ended. To be extended, exceptionally, once at least 3 years have passed, but at the latest 6 months before the 6 years are up, with 4 years more, to a total of 10 years. For the extension to be granted, you would have to show that you are still in a situation of economic vulnerability, under the criteria as mentioned above.

You can pay-off the loan earlier if you want, without any additional costs or commissions.


How to apply?

There is a template in the Annex to the State Gazette, link HERE that you need to use and present with your bank before the 30th of September 2020. The loan contract will have to be formalised before the 31st of October this year.
By signing the application you give your permission, necessary under Data Protection Law, that the relevant authorities verify the data you have provided, with the relevant authorities and institutions.

The bank or credit institution cannot oblige you to buy any other product or contract any service they offer.


How and when will the payments occur?

In general, monthly in 6 payments, directly to the landlord, unless parties have agreed to different installments, e.g. if the rent for April needs to be covered, then the payment can be in one installment covering 2 rent payments, and the remainder in monthly installments.
The credit institution must keep proof of the payments to the landlord.


Note from CAB: with the template for applications now available, the banks should not have any excuses to delay starting the application process, the funds have been allocated, all that is left is the convenio between the Ministry and ICO, which is a formality as all conditions are already established in this Royal Decree. See update in red at the start of this article.

Please note: The information provided is based upon our understanding of current legislation. It is not legal advice but is provided freely to enable you to be properly informed. We recommend that if you are considering taking action, you should seek professional advice.

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