Credit disputes: apartment for rent and the consumer in court. The CJEU issued a judgment

In autumn, the Court of Justice of the European Union resolved a preliminary question asked by the District Court in Warsaw. It concerned whether persons renting property purchased on credit could be considered consumers under Directive 93/13. The CJEU found that they are consumers and will be able to apply for the invalidation of loan agreements due to unfair clauses.

Apartment for rent and consumer status

– The CJEU pointed out that a natural person who concludes a mortgage loan agreement in order to finance the purchase of a single residential property for the purpose of renting it out for a fee falls within the concept of “consumer” within the meaning of this provision if that natural person acts for purposes unrelated to his/her business or professional activity. The fact that a natural person tries to earn income from managing this property cannot in itself lead to the exclusion of this person from the scope of the concept of “consumer” within the meaning of the above-mentioned provision – comments attorney Maja Urbańczyk from the Sobota Jachira law firm in Wrocław.

In practice, this means that a natural person who has concluded a mortgage loan agreement in order to obtain funds for the purchase of one property intended for paid rental should be considered a consumer in a dispute with a bank, and therefore may use the rights established in the above-mentioned. directive.

SUMMARY

• The Court of Justice of the European Union, in its judgment of October 24, 2024, in the Zabitoń case, C-347/23, found that a natural person concluding a mortgage loan agreement in order to obtain funds for the purchase of premises to be intended for paid lease (buy -to-let), should be considered as a “consumer” within the meaning of Directive 93/13/EEC of 5 April 1993. on unfair terms in consumer contracts.

• The CJEU judgment may have broad consequences, affecting other matters of Swiss franc borrowers who rent apartments, both after purchasing them and as a result of subsequent life changes. This applies in particular to people who do not run a business related to renting, but treat renting as a way of financial security. A favorable judgment of the CJEU will enable them to invalidate defective contracts, explains Maja Urbańczyk.

The most expensive mortgage loans in Europe

The case in question concerns Swiss franc borrowers, i.e. a group of borrowers who, at the time of taking out the loan, assumed that they were taking advantage of a good offer – but over time it turned out that there were many shortcomings in the Swiss franc mechanisms. Today, they win most disputes with banks, and financial institutions also seek to conclude agreements with them.

However, the fate of PLN borrowers is only seemingly better. In Poland, we currently have the highest interest rates on housing loans in the entire European Union. The banks are happy because they make money from it. Interest is one of the main sources of income for banks granting loans. This process can be explained in several ways:

a) bank margin: The mortgage interest rate consists of two elements: the bank’s margin and the base rate (e.g. WIBOR, LIBOR, EURIBOR). The bank’s margin is the profit that the bank makes on the loan. The bank determines it based on the risk it bears, operating costs and its profit goals. The higher the margin, the greater the profit for the bank.

b) loan interest: The main part of the bank’s earnings is the interest that the customer pays for borrowing money. For mortgage loans that are long-term (e.g. 20-30 years), the amount of interest can be significant. Although the customer repays the loan in installments, the bank earns interest on the loan for many years.

c) spreading risk and costs: Banks can obtain financing from various sources (e.g. through customer deposits or issuing bonds) at lower interest rates than those they offer in mortgage loans. The difference between the cost of raising capital and the interest rate on loans is the profit for the bank.

d) loan repayment structure: Mortgage loans are usually repaid in annuity installments, where at the beginning a larger part of the installment is interest and a smaller part is principal. This means that the bank earns the most in the first years of repayment, when interest is higher, which maximizes its profits.

The text below presents the interest rates on loans in other European countries.