(English) Spain Top Court Freezes Andalusia Anti-Eviction Decree

(English) July 11, 2013

By David Roman

Spain’s constitutional court has suspended a regional decree that makes it harder for banks to conduct evictions and penalizes lenders and real-estate firms for holding vacant properties, a spokeswoman for the government of Andalusia said Thursday.

The decree, which came into effect in April, favors people hurt by Spain’s recession over the interests of the country’s banks, including many that have received government bailouts. The left-wing government of Andalusia, Spain’s most populous region, approved the measure, despite opposition from the conservative central government in Madrid.

The spokeswoman, who spoke on customary condition of anonymity, declined to discuss the court decision further. Court officials weren’t immediately available for comment.

But the law books state that the court, the country’s highest, now has five months to decide whether the decree violates constitutional rights or to prolong the freeze.

The decree is controversial in Spain and has also come under fire from the European Union’s governing body. Just Wednesday, the European Commission said the decree could further undermine Spain’s ailing financial industry, and in turn the entire economy.

Spain’s recovery depends in part on whether the banking system, which received a EUR41.3 billion ($52 billion) rescue from the European Union last year, can unload foreclosed properties and mortgages that are in default.

At the same time, the measure has many supporters, who say evictions are becoming a serious problem in regions clobbered by high unemployment, such as Andalusia. Other regions are considering similar measures.

The decree allows the Andalusian government to expropriate homes in the eviction process and keep low-income families in their homes for up to three years. Authorities would collect 25% of household income in rent to compensate creditors.

The measure also imposes fines of up to EUR9,000 for each empty property held by banks or real-estate companies for more than six months.

The aim is to discourage real-estate speculation and make affordable housing more available. But it could inflict big unexpected costs on creditors, as well as potential ones for investors interested in buying the assets.

 

Source: The Wall Street Journal

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