- On 6 November the Supreme Court’s full bench reversed itself and put the tax back on the customer.
- On 8 November the government approved a decree so that from then on banks would pay it.
- Where the legal framework is uncertain it is wise to decide with advice and to check which rules apply at the time of signing.
On 6 November 2018, the full bench of the Supreme Court reversed course and again placed the stamp duty on mortgage deeds on the customer. Two days later, on 8 November, the government approved a decree so that from then on banks would pay it. In a few weeks, the same question had received opposite answers from the courts and a different solution from political power. For citizens, the result was a sense of uncertainty about what the rule really was.
The episode left confusion among those who had a mortgage or were about to take one, and it highlighted something important for any economic decision: the legal framework can change, and sometimes does so very fast. For business owners and families, understanding what happened and why helps them handle more calmly a situation in which the headlines contradict one another. It helps to read in detail what was decided, who decided it and to which cases it applies.
An unexpected turn
After the October ruling, the full bench of the Supreme Court changed its approach and again placed the tax on the customer. The change caused confusion, because it broke the expectation created by the earlier criterion. Anyone who had planned on the first criterion had to rethink their expectations.
Courts can reverse themselves, especially when a question is put to a higher instance or to the full composition of a body. It is not an anomaly, but it is a source of uncertainty for those who had taken decisions based on the first criterion. The principle of legal certainty, which allows people to foresee the consequences of their own acts, comes under strain when rules change so quickly and visibly. The stability of rules is part of the value of any long-term contract.
The government’s response
Two days later, the government responded with a decree that moved payment of the tax to the financial institutions. That rule resolved the question for the future through a political rather than a judicial decision, which brought clarity to mortgages yet to be signed.
A decree is a rule with the force of law that the government may approve in urgent cases and which must afterwards be validated by Congress. Its effect is immediate, but its permanence depends on that validation. That is why it is also worth following what happens to the decree in its parliamentary passage. For mortgages still to be taken out, the rule was clear; for those already signed, the question continued to depend on the courts’ approach. That is why the distinction between past and future is essential for interpreting what happened. What the rule says going forward is one thing, and what happens to what has already been signed is another.
Legal certainty and prudence
This episode shows that, when the legal framework is uncertain, it is wise to decide with advice and not on impulse. For a mortgage already signed, the sensible course is to keep the documentation and consult a lawyer about the possibilities. For a new one, to check which rules apply at the time of signing.
In practice, before signing it helps to ask in writing for the detail of the costs and who bears them, to compare offers from different lenders and to read the conditions calmly, without being pressured by artificial deadlines. If in doubt, a lawyer or an independent adviser can answer questions before signing, when it is still possible to change one’s mind and negotiate at no extra cost. And it is worth keeping a copy of everything signed and of communications with the lender.
On a legal issue in flux, reliable information is worth more than speed.
This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.
