Christina Koliatou, M.Sc., PgCert
Summary: Law 4738/2020 provides for special measures to take care of the primary residence of vulnerable debtors - natural persons at the stage of either their discharge from their debts, with simultaneous liquidation of their property (in the context of their declaration of bankruptcy), or in the case where a mortgage or mortgagee enforcement action is brought against their primary residence. The term 'rescue' of their primary residence is used, but this concept could only be used in practice in a superficial sense, since the vulnerable debtor, if the current legal framework were to be applied, would in essence lose the right of ownership and possession of the property and would retain only the right to occupy it as a tenant, with the possibility of repossessing it only in the future. In this article, we will set out the conditions that must be met for a debtor to be classified as "vulnerable", as well as the possibilities provided for in Law 4738/2020 in his favour, in order to avoid being evicted from his main residence in the event of accelerated enforcement or its sale in the context of bankruptcy proceedings.
1. Concept of a vulnerable debtor
A vulnerable debtor is a debtor (natural person), whose person cumulatively meets the income and property criteria in accordance with Article 3 of Law 4472/2017, in conjunction with Article 4 of the Joint Ministerial Decision issued under delegated authority under the reference YA 716/2021 (YA 71670 Government Gazette B 4500 2021). Thus, a vulnerable debtor is a person whose annual income is up to EUR 7,000 for a single person household, increased by EUR 3,500 for each additional household member. For a household with an unprotected child/children (i.e. a minor member of the household who is orphaned by both parents or whose parental care cannot be exercised by either parent due to illness, disability, detention or military service and whose custody has been entrusted by court decision to a member of the household), an additional increase of EUR 3 500 is set for each unprotected child. The total income may not exceed EUR 21 000 per year, irrespective of the composition of the household. At the same time, the total taxable value of the household's real estate, as determined for the calculation of the supplementary taxable value of the household's real estate under the provisions of Law 4223/2013 (A 287) and resulting from the last issued tax assessment act, may not exceed in total the amount of 120,000 euros for a single-person household, increased by 15,000 euros for each additional member and up to a maximum amount of 180,000 euros. The main residence is the property that the debtor has declared as his/her residence in his/her last income tax return, preceding the application under Article 219 of Law 4738/2020 (on the transfer of the main residence to the Acquisition and Re-leasing Agency) or, as evidenced by other evidence, sufficiently proving the use of the property in question as his/her main residence, in case the debtor's main residence has changed since the time of submission of his/her last tax return. A property criterion is also introduced, which sets a deposit limit of EUR 7 000 for a single person household, EUR 10 500 for a household with two members, EUR 14 000 for a household with three members, EUR 17 500 for a household with four members and EUR 21 000 for a household with five or more members.
2. Transfer of the main residence of the vulnerable debtor to the transfer and repossession agency
In order for the vulnerable debtor to "protect" his/her main residence, he/she will have to submit initially, before the Special Secretariat for Private Debt Management, an application for certification/confirmation that he/she is indeed vulnerable, which will be granted through the relevant electronic platform created for this purpose (Note. In the context of its operation, relevant checks (e.g. income, property, etc.) are carried out, in order to prevent/deal with strategic defaulters), in accordance with the procedure of the joint decision of the Ministers of Finance and Labour and Social Affairs (B' 3571) under item 96550 EX 2021 and proves that the necessary requirements of the Law are met. Then, it submits an application to the Acquisition and Leaseback Agency, as defined in Article 218 of Law 4738/2020 (Note. that to date it has not been established, and its official operation has been postponed to the second half of 2024), which undertakes by law the obligation to acquire the main residence of the vulnerable debtor who applies for it, lease it to him, and transfer it to him, subject to the more specific conditions set out in articles 219, 220 and 222 of Law 4738/2020.
With the latter application, therefore, the debtor requests that the aforementioned Entity acquire his/her main residence (through the required transfer), with the relevant transfer price to be paid by the Entity to the debtor's creditors, but, at the same time, to grant the debtor, on behalf of the aforementioned Entity, the possession of his/her main residence, within the framework of its lease by the latter. In other words, the debtor transfers his property to the competent body and remains in it as a mere tenant. In case of bankruptcy, the price for the transfer of the property (equal to the market value of the residence, according to the report of a certified appraiser) is paid by the Entity directly to the receiver for distribution to the creditors, in accordance with the terms of Law 4738/2020. If the request is submitted due to accelerated enforcement against the debtor, the price for the transfer of the property is paid by the Entity to the auction official. The payment of the price shall entail the transfer of ownership to the Acquisition and Leaseback Entity, as well as the cancellation of the auction in case of enforcement. It should be noted that the deadline for submitting the relevant applications is within 60 days from the date of service of the seizure document or the publication of the decision declaring the vulnerable debtor bankrupt in the Electronic Insolvency Register of Article 213 of Law 4738/2020.
3. Lease of the main residence by the vulnerable debtor
The duration of the lease (in the reverse lease agreement of the "sale and lease back" type) is set at a maximum of twelve years, while the rent will be calculated on the basis of the ministerial decision issued and on the basis of the value of the transferred main residence. In practice, the lease will be treated as a loan, i.e. each lease will be treated as a loan repayment instalment ('granted to the debtor') consisting of capital (commercial value of the main house) and interest (NB: the lease will be treated as a loan). which will be calculated on the basis of the yield corresponding to the average interest rate of a variable-rate mortgage loan in force, according to the statistical bulletin of the Bank of Greece, adjusted by the reference rate of the European Central Bank's main refinancing operations). It is also noted that it is foreseen that a housing allowance of EUR 70 per person plus EUR 35 for each additional member of the household and up to a maximum of EUR 210 will be paid by the Greek State directly to the Acquisition and Re-letting Agency in partial repayment of the rent. However, any non-payment of three rent payments by the debtor and his failure to comply within one month of the relevant notice will result in the automatic termination of the lease, the loss of the repurchase right and the obligation of the vulnerable debtor to return his home.
4. Repurchase of the main residence by the vulnerable debtor
According to Article 222 of Law 4738/2020, if the debtor fulfils the above obligations and pays all the rental payments corresponding to the agreed lease term, he may exercise his bifurcated right to repurchase and repossess his main residence for a repurchase price calculated in accordance with the decision of the Minister of Finance to be issued (and corresponding approximately to the market value of the property at the time of exercising the repurchase right). The right to early exercise of the above repurchase right is provided for, i.e. before the expiry of the relevant lease term, provided of course that the debtor pays in advance all the outstanding rentals. It is worth noting that the right to acquire the main residence cannot be transferred to a third party, but it can be inherited, while debt assumption is also permitted, under which a third party may assume the debtor's debt and undertake to repay it.
5. The interim public contribution and suspension of execution programme under Law 4916/2022
In the context of the above and pending the establishment of the Acquisition and Re-leasing Agency for the implementation of the above "rescue" plan, Law 4916/2022 provides for an interim programme of support for the vulnerable debtor to protect his main residence, through the suspension of its forced execution against him, but also through the special contribution of the State. This intermediate programme includes a State subsidy of up to 80% of the mortgage instalment of the main house of vulnerable debtors, from EUR 70 to 210 per month, for a period of 15 months, as well as the suspension of enforcement measures by creditors against the main house (e.g. seizures, auctions and evictions). In particular, under the above law, any natural person for whom a certificate of vulnerable debtor has been issued, upon request, is entitled to apply for the suspension of enforcement or sale in the context of bankruptcy and for the State's contribution to the reduction of its liabilities, through the electronic platform of the Special Secretariat for Debt Management, created for this purpose, and within 60 days of the imposition of the relevant seizure or declaration of bankruptcy. In any case, it is noted that the submission of all applications shall be completed at the end of 15 months from the launch of the aforementioned special electronic submission platform, i.e. under the current provision, until 15.12.2023 or until the operation of the Acquisition and Re-leasing Entity, whichever occurs first.
In the event that such application is accepted, in which the vulnerable debtor declares that he/she consents to the transfer of his/her main residence to the Acquisition and Re-letting Agency at the end of the suspension period (interim programme), the enforcement procedure is suspended subject to the payment by the debtor of a monthly instalment, calculated by the online platform of the EIDICH, based on the value of his/her main residence, under which the State contributes part of the instalment. More specifically, the vulnerable debtor has the obligation to pay an instalment to the creditor/syndicator, on a monthly basis, which is determined at 3.5% of the value of the main residence, divided by 12, including the State's contribution. The State contribution for vulnerable debtors per category is calculated at EUR 70 per month for the applicant and EUR 35 per month for each additional member of the household plus EUR 35 per month. Single-parent families shall be granted an additional EUR 35 per month, households with unprotected child(ren) shall be granted an additional EUR 35 per month for each unprotected child. The Housing Allowance is capped at EUR 210 per month, irrespective of the composition of the household.
The public contribution and the related suspension of the enforcement or sale in bankruptcy may not exceed 15 months from the date of acceptance of the relevant application of the vulnerable debtor, at the end of which period it shall cease automatically, and the enforcement or sale in bankruptcy proceedings shall resume from the point at which they were at the time of the suspension. In the event that the Acquisition and Re-leasing Agency becomes operational before the completion of the aforementioned 15 months, the State's contribution shall be discontinued for the future and the vulnerable debtor shall proceed to transfer his/her main residence to the Agency on the basis of the above-mentioned procedure.
6. Suspension of execution under the interim programme of Law 4916/2022
In the event that despite the issuance of a certificate of a vulnerable debtor and the submission of an application for inclusion in the above-mentioned interim programme of suspension of enforcement and public contribution (which has either been accepted, or a decision on it is awaited, or the ten working days deadline for a decision on it has expired without effect), the credit institution or debt management company in question does not suspend the auction, the vulnerable debtor may claim this from the competent local Single-Member Court of First Instance for the temporary regulation of the situation in accordance with Article 732 of the CCC.
Indicatively, in the context of the aforementioned, a relevant passage of the recently issued decision No. 15/2023 of the Patras Single-Member Court of First Instance, which suspended the execution proceedings under review and the upcoming auction of the main residence of the applicant - vulnerable debtor, stating the following: "[... ]it is possible, exceptionally and for reasons of clemency, to suspend the enforcement proceedings for a short period of time (until the adoption of the abovementioned decision of approval, after which, subject to the payment of the instalment provided for in Article 20, the enforcement proceedings will be suspended by law) in the form of a provisional arrangement, in order to avoid the creation of a permanent and non-distressing situation for the debtor, while any suspension will also apply de facto to the second applicant - co-debtor [... ] Consequently, the continuation of the enforcement proceedings against the applicants' first residence, which are being pursued by the defendant and which were imposed by virtue of Order No. ..../2020 of the first executor's certificate of the first executor of the court order no. .... payment order of the Judge of the Athens Court of First Instance with the below .... cheque for execution and, in particular, to suspend the electronic auction of the property seized by the above-mentioned seizure report [...]'.
It would be useful to note at this point, in addition to what has already been said, that the execution of the enforcement by the creditor in question, despite the fulfilment of the conditions for the classification of a debtor as vulnerable and the granting of a certificate to that effect, may constitute grounds for opposition to the enforcement procedure in question, on the basis of the abusive enforcement by the creditor, as has already been ruled by the judgment of the court in Case No. 109/2022 of the Court of Appeal of Piraeus in the context of its ruling on the application for suspension of the progress of the enforcement proceedings. At the same time, in the current practice, both the companies managing receivables from loans and credits, and the credit institutions themselves, relying on the decision of the Plenary of the Presidents of the Bar Associations on the abstention of lawyers from the enforcement proceedings to accelerate auctions, on behalf of banks or debt management companies, against the first home of vulnerable debtors, proceed to suspend auctions, without fully relying on the provisions of the above laws and the procedure provided for (indicatively on consent to the transfer of the main residence, etc.). ), contenting themselves with the classification of the debtor as vulnerable, a fact which it would be advisable for the vulnerable debtor to bear in mind, but also to use, in order to avoid, even temporarily, enforcement against his main residence.
7. Instead of an epilogue
As can be seen from the above, in the context of Law 4738/2020, the debtor's main residence is not directly protected, but the latter, in case he meets the conditions to be classified as "vulnerable", has the possibility to avoid being evicted from it and to ensure that he will not lose it permanently. In essence, the vulnerable debtor transfers his/her main residence to the Acquisition and Re-leasing Agency (contrary to what the previous laws, namely Law 3869/2010 on "over-indebted households" and Law 3869/2010 on "over-indebted households" and Law 3869/2010 on "over-indebted households"). 4605/2019 as the successor to the previous law for the protection of the main residence, under which the main residence remained the property of the debtor), leases it for 12 years by paying the monthly rent and then reacquires it, paying the repurchase price, having for this the exclusive first priority, if it has recovered financially or if it has possibly obtained a new mortgage loan. Although this option does not seem very attractive, as it requires the debtor's consent to transfer his/her main residence to the transfer agent, it may be a one-way street for some vulnerable debtors who do not reach a viable debt settlement agreement and are threatened with imminent auction and consequent eviction from their main residence.