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Do you have a mortgage with an IRPH Index interest rate clause? You can now claim your money back / reimbursement of the unduly paid interest

If you are a mortgage loan holder, for which the IRPH reference index (or index based on the average rate of mortgage loans granted by the Spanish savings banks) was established as the variable interest rate, now and particularly as from the ruling of the Court of Justice of the European Union (CJEU) in March 2020, you could make a claim to the financial entity that provided your loan, for reimbursement of the amount of unduly paid interest during the term of your loan.

 

You can now claim your money back / reimbursement of the unduly paid IRPH interest in Spain

 

These types of clauses containing IRPH index referenced variable interest rates, have only been considered unfair when not meeting the transparency requirements.  For example, a consumer holding a mortgage calculated on the basis of the IRPH index instead of the Euro Interbank Offered Rate (Euribor), for a mortgage of approximately EUR 150 000, will have paid an average additional cost of EUR 25 000.  An amount which could be claimed.

Therefore, given the case that the index was not offered with the required transparency, the information provided regarding the implications when contracting a mortgage with IRPH was not clear, and neither were the comparative costs between other indices (such as for example the Euribor) and the IRPH made clear to the client, you could claim the IRPH.

How to initiate your IRPH claim

To confirm that your mortgage loan contains the IRPH referenced variable interest rate clause, we must analyse your mortgage loan deeds.

If you meet the necessary conditions to claim for reimbursement of interest, we would also need to review any modification or novation to your mortgage loan deed that may have been agreed with the financial entity during the term of the loan, and where applicable, we would also require you to provide us with the most recent mortgage repayment receipts that you have.

In the event that you cannot obtain all of the necessary information and/or documentation, particularly in cases of mortgage loans of a certain age where time has elapsed since signature, or those that have already been cancelled, we can resolve this by requesting the required documentation from the financial entity.

As from which date is it possible to claim?

For claims of this type, it is the nullity of the clause which is sought.  Therefore, it is possible to make a claim for amounts corresponding to both existing mortgages, and those that have already been cancelled.

Expert advice

Furthermore, your loan may contain other unfair clauses which our firm will thoroughly examine.  A claim for other unfair clauses can be made jointly with the IRPH.

Considering all of the above, at MSG LEGAL SOLICITORS, we would advise you to consult us if you have a loan of this type, or if you are unsure of whether your loan contains a clause of this type.  As already mentioned, this is independent of whether the loan is existing or has already been cancelled.

Therefore, if you have any questions regarding whether the IRPH applies to you, all you have to do is send us a copy of your mortgage loan public deeds and a recent loan repayment receipt.  At MSG LEGAL SOLICITORS, experts in the field of Property Law, we will analyse your case completely free of charge and without any obligation, and we will confirm the feasibility of your claim.

In the event that we proceed with your claim, we will NOT request any retaining fee, charge or expense generated during the claim process.  MSG LEGAL SOLICITORS acts under a NO WIN NO FEES format for these type of court claims, consequently, if we do not obtain a favourable court judgment for reimbursement of your money from the financial entity, our action will incur you no cost at all.

Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice.

 msg.legal

Procedure for acquiring the New Residency Document for British citizens residing in Spain

For British residents and their family members that are currently registered in Spain, or those British Citizens that register from the 6th of July 2020 until the end of the transition period, that is to say, until the 31st of December 2020.

The Directorate General of Migration, together with the Directorate General of Spanish Police, have adopted an important and awaited decision that regulates and defines the procedure for issuing the Residency Document for British Citizens in Spain (pursuant to Art 18.4 of the UK withdrawal agreement from the European Union).

 

For British residents and their family members that are currently registered in Spain, or those British Citizens that register from the 6th of July 2020 until the end of the transition period, that is to say, until the 31st of December 2020.

 

On the 31st of January 2020, The United Kingdom formally left the European Union, and in the Withdrawal Agreement setting out the arrangements for an orderly exit, a Transition Period was established that will last until the 31st of December 2020.

During the transition period, it was established that British citizens shall maintain their rights to freedom of movement in Spain until the 31st of December 2020.

Therefore, those British citizens whom have already exercised their right to reside and/or work in Spain prior to the 31st of December 2020, shall have exactly the same rights (freedom of movement, residency, health care, employment…) after the finalization of the transition period.

However, those British citizens arriving in Spain after the 31st of December 2020, shall be considered third country nationals (Non-EU citizens) and will be governed by the general regulations on immigration currently in force in Spain, without prejudice to possible future agreements between the EU, Spain and the UK regulating this status.

Regarding the documentation to be provided to British citizens as proof of legal residency, Spain has opted for the provisions provided for under Art 18.4 of the withdrawal agreement.  Consequently, British citizens residing in Spain will NOT be required to apply for new residence status, neither will they have to undergo a new procedure of presenting documentation.  The Spanish authorities shall issue a new Residency Document that will substitute the EU Citizen Registration Certificate.  This new Residency Document shall include a statement expressly accrediting the beneficiary status of the British Citizen.

The Procedure to obtain the new Residency Document for British citizens

The procedure for obtaining this residency document is determined by the following:

  • British citizens holding the Registration Certificate, either temporary or permanent; for this scenario obtaining the Residency Document will require one step, that step being to appear before the competent Police Authorities, whom will issue the certificate on payment of the established fees
  • British citizens not holding a Registration Certificate, whether due to not having requested it previously, or due to having arrived in Spain during the period between the 6th of July and that of the end of the transition period, the 31st of December; for this scenario obtaining this Residency Document will require two steps. Firstly, to appear before the Immigration Office whom will grant, where appropriate, the Residency Document, and secondly, before the competent Police Authorities, whom will issue the certificate on payment of the established fees

 Expert Advice

The agreement does NOT require physical presence in Spain when the transitional period comes to an end.

The Residency Document can already be requested on a voluntary basis (as from the 6th of July) during the transition period.  Therefore, requests for EU Citizen Registration Certificates made during this period will already be handled as requests for the new Residency Document.

At MSG Legal as experienced lawyers with expertise in the field of Immigration Law, accustomed to processing residency permits for British citizens, we are at your disposal to resolve any doubts or answer any questions you may have regarding the interpretation of, or the procedure for requesting this new Residency Document, given that depending on your current status in Spain (Temporary, Permanent, New request…), the procedure to follow will vary together with the supporting documents necessary for your request.

Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice.

msg.legal

Property Purchase contracts in times of Covid19

As a result of the global crisis we are currently suffering due to Covid-19, it is understandable that doubts or problems may arise regarding property purchase contracts signed previous to the pandemic (earnest money deposits, deferred payment purchases or rents to buy) and that cannot be fulfilled or are difficult to fulfil in compliance with the conditions agreed prior to this new scenario we are facing.

Following the Declaration of the state of emergency by the Spanish Government via Royal Decree 463/2020 of March 14th, the restrictions imposed may have affected the contractual relationship between parties, which may have given rise to a change to the original circumstances, such as delays, or in some particular cases even the impossibility to fulfil the contract.

 

SPAIN Property Purchase contracts in times of Covid-19

 

Before explaining the possible solutions with which we can deal with these situations, it should be taken into consideration that under the Spanish Legal system the principle of preservation of contractual relationships is of vital importance.  That is to say that any signatory of a contract (whether buyer or seller) is required to comply with it.  Whereas when unforeseeable and unexpected circumstances occur, such as the current situation of the pandemic, and under such anomalous circumstances, it is possible for the parties to agree to amend the terms of contract.

We may find ourselves facing two different scenarios depending on the type of seller, be it a private or professional one (Developer/Builder).

Purchase of a new build property from a Developer

In this case, due to the professional status of the seller, and regarding the potential buyer, in addition to the protection that current Spanish regulations establish for new build property purchasing processes, said protection would be reinforced by their status as a Consumer.

Furthermore, given the scenario in which we currently find ourselves, and that gives rise to this article (State of Emergency due to the Covid-19 Pandemic), in addition, we must also take into consideration the regulations that the Spanish Government have been developing over the past few months, in particular RD 11/2020, later amended by RD 15/2020.

According to the specific Regulation (Art. 31.1.2), in the case of new build property purchase contracts, the consumer would be entitled to rescind the contract, if it is a result of the impossibility to comply, and being a consequence of the measures adopted during the term of the state of emergency.  The Law itself establishes which procedure should be followed, making it obligatory for the parties to try and reach an agreement via various proposals to each other, prior to requesting rescission of the contract due to impossibility to comply.

Purchase of properties between private parties, typical cases of second-hand property purchases

In this case, being a purchase carried out between private parties, the strategy to be applied is the assumption of force majeure governed by the rules of the Spanish Civil Code, or via the application of the of the so-called «rebus sic stantibus» clause, intended to re-establish the contractual balance of the parties based on the principle of equity.

Nonetheless, The Spanish Courts are very restrictive when applying this doctrine to so-called single-performance contracts, property purchase contracts being considered as such.

Prior to going to court, it is advisable that the parties adopt flexibility criteria to ensure feasibility of the contracts signed, amending or modifying the content, and adjusting it to the new circumstances.

Expert Advice

As we have already explained, we are currently in an unprecedented situation due to which many contracts may be affected, and we must be equally attentive to the criteria that the Spanish Courts may adopt from now onwards, taking into consideration the specific circumstances of each contract.

At MSG LEGAL as highly experienced lawyers specialising in Property Law, we can advise and assist you by analysing the content and obligations of your purchase contract in depth.

Likewise, it is also important to analyse the conditions on which the contract was based; such as the purpose of the purchase (investment or permanent abode).  Likewise, the financial situation previous to and following the crisis should be considered, and the circumstances of the seller.

Finally, at MSG LEGAL, given our experience, together with our professional commitment to each and every one of our clients, we always establish realistic objectives by analysing the particular circumstances in question, and if necessary may consider other alternatives such as; to extend the compliance period, negotiate a reduction in price, or full or partial payment of the deposit.

Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice.

 msg.legal

Regulation of home rentals in Spain during the State of Emergency. Solutions to defer or reduce rent

 

In this article we are going to address the various circumstances that homeowners/landlords and tenants may be facing due to the COVID 19 Pandemic, and the State of Emergency declared in Spain.

The Spanish Government, via the approval of Royal Decree-Law 11/2020, has effectively introduced measures to aid vulnerable tenants by means of deferment, or even waiver of rental payments for main residences, whilst at the same time striking a balance between the parties in order to prevent the vulnerability of tenants being transferred to landlords.

 

Regulation of home rentals in Spain during the State of Emergency.  Solutions to defer or reduce rent

 

The first element that we should analyse is the eligibility criteria that tenants must meet to request rent deferment from their landlords.

Eligible persons are those considered to be in a situation of economic vulnerability due to coronavirus and whom, during the month previous to the request for deferment, find themselves:

– Unemployed

– Affected by Temporary Employment Regulation Proceedings (ERTE)

– Under the special reduction in working hours scheme in order to care for dependent adults or minors

It is important to clarify that tenants, in addition to the abovementioned circumstances, must also comply with all of the following requirements in order to be considered to be in a situation of economic vulnerability:

– That the joint household income does not reach, in general terms, the limit of three times the Public Indicator of Multiple Effect Incomes (IPREM), which amounts to some 1,614 € per month.  Depending on the household members, or circumstances of each household, this amount could increase by applying corrective indexes

– That the rent payable, plus expenses and basic supplies and amenities, is equal to or exceeds 35% of the overall net income received by the household members as a whole

– That no member of the household is a homeowner or usufructuary of a dwelling in Spain

In turn, the regulations stipulate that official documentation must be presented as proof of economic vulnerability.  Nonetheless, it is understood that given the circumstances of the State of Emergency, it is complicated, if not impossible, to obtain said documentation.  Therefore, tenants are permitted to present an affidavit confirming compliance with the relevant criteria required, in order to be considered to lack sufficient financial resources.  Once the alarm state and its extensions have come to an end, the tenant shall have a period of one month to present the required documentation not already provided.

Regarding the landlord’s duty to defer payment of rent, or to waive it, different scenarios have been established depending on the type of landlord in question.  Accordingly, a differentiation has been made between:

Landlords and “major real estate holders”, the latter being those that own more than ten urban properties, this excludes parking lots and storage rooms, or a constructed area of more than 1,500 m2.

In the scenario that the parties do not reach a voluntary agreement, the landlord must expressly notify the tenant, within a maximum period of 7 working days, of his decision chosen from the following options:

  1. a) To reduce rent by 50% for the duration of the State of Emergency, and for the subsequent monthly payments if that period were to prove insufficient in relation to the situation of vulnerability. Under no circumstances shall this period exceed four calendar months
  2. b) To defer payment of rent, this will be applied automatically and shall be applicable for the duration of the State of Emergency together with subsequent monthly payments, renewable on a monthly basis, in the case that the initial period is insufficient in relation to the vulnerability of the tenant. Under no circumstances shall this period exceed four calendar months

The rent shall be deferred, as from the next monthly rental payment due, by dividing the instalments over a period of at least three years, which shall be counted as from the end of the above-mentioned term of four calendar months, and provided that it falls within the duration of the lease term, or any extensions to the contract.

For the remainder of the landlords, that is to say, those whom are not considered to be “large real estate holders”, being landlords who own less than 10 dwellings, may accept, at the tenant’s request, and on a voluntary basis, the temporary deferment of rental payment or total or partial waiver thereof.

In this case, and once the request has been received, the landlord shall inform the tenant about the deferment conditions within a maximum period of seven working days, or the conditions that he or she considers acceptable for restructuring the debt, or any possible alternatives that he or she wishes to propose.

Given the case that the landlord does not to accept any deferment agreement, and provided that the tenant is considered to be in the aforementioned situation of vulnerability, he or she may have access to a program of transitional financing aid.  This aid is provided in the form of loans from financial entities, aimed to cover the payment of rent, guaranteed by the Government, for people who find themselves in a situation of vulnerability.

Expert Advice

It is important to highlight that in the case of rent deferment the tenant shall not be liable for any type of penalisation, and the deferred amounts shall be payable to the landlord interest free.

At MSG LEGAL, as highly experienced lawyers specialising in Property Law, we are at your disposal to advise and assist you with any doubts or queries that you may have during this unexpected State of Emergency due to the COVID-19 Pandemic.  The scenario is changing on a daily basis, together with the decisions and regulations that the Spanish authorities are adopting.  Therefore, in one way or another, it is always possible to find an alternative option or a different solution to any issue that may arise throughout these uncertain times.

Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice.

msg.legal

It is possible to use Seasonal Leases as an alternative to Holiday Rentals

If you own a property in Spain, or you are thinking about acquiring one with the aim of designating it for Holiday Accommodation, you may have already experienced or read about the administrative and legal obstacles that the Spanish regulations in force establish for this type of rental.

The regulation and control of this type of rental (Holiday Rental) is delegated to the Regional Governments and City Councils corresponding to the area in which a property is located.  The aforementioned authorities are increasingly establishing more obstacles or requirements, thus making it ever more difficult to carry out such rental activity.  In addition to this, the Associations of Property Owners now have the authority to restrict (not to prohibit, as often mistakenly considered) Holiday Rental activity in the urbanisation in which a given property is located.

 

Holliday rental problems in Spain

 

In view of this situation, property owners or future investors should be aware that the Spanish regulations currently in force, allow other types of Property Leases governed by Urban Lease Law.  This Law is applicable in the whole of Spain, and is not limited to, or conditioned by, Local Authorities.

We can break down these types of leases into two categories, Property Lease Intended as a Main Residence, and Seasonal Property Lease (the latter also referred to as a Lease intended for use other than a Main Residence).

A Lease contract for a Property Intended as a Main Residence, is a contract applicable to an urban property; fit for human habitation; with the primary purpose of meeting the tenant’s permanent requirements for a main residence.  The minimum term of contract for this kind of lease is of five years.

In the case of Seasonal Property Leases the term of contract is not defined by Law.  In theory, the term of a seasonal property lease could be for example, one month, several months, a year, a year and a half…

What truly defines a Seasonal Property Lease is the purpose or reason for which the tenant requires the dwelling for any given period.  The parties should therefore establish the term of the seasonal contract accordingly.

In order to draft a Seasonal Lease Contract correctly, what is most important is that there are true grounds to justify this type of contract, and that they are expressly stipulated in the contract.

Here are some examples that would justify a Seasonal Lease contract:

– The need for temporary accommodation for the duration of renovation work in the tenant’s main place of residence

– The tenant requiring temporary professional relocation (during the summer season, winter season etc.)

– The tenant requiring temporary accommodation during the holidays

– The tenant requiring temporary relocation for study purposes

On the other hand, in the case of Holiday Rentals however, the landlord rents the property to third parties, furnished and equipped in a suitable condition for immediate use. Furthermore, the property is commercialised or advertised via tourism channels.

The requirements established in order to gain permission for commercialisation of Holiday Rental Properties are specific and distinct from those applicable to Seasonal Leases.  That is to say, that in contrast to Seasonal Leases for which any type of dwelling is deemed suitable, in the case of Holiday Rental Properties however, not all dwellings are eligible for this type of rental.

Expert Advice

In order to correctly draw up a Seasonal Lease Contract and differentiate it from a Holiday Accommodation Rental Contract, and from a Lease Contract for a Property Intended as a Main Residence (with an obligatory minimal term of contract of five years), it is necessary at the very least to stipulate in the contract that the tenant does not seek to lease the property indefinitely, nor does he or she intend to lease the property as a main residence.  In addition to this, details of the tenant’s main residence should be included.  Likewise, the grounds for the lease should be stipulated together with the reason for the nature of the contract, for example the term of the tenant’s employment contract if the purpose of the lease is for professional reasons.

 

At MSG Legal as highly experienced lawyers specialising in Property Law and Conveyancing, we can advise and assist you regarding the various Lease contract options that are most suitable for your requirements, either as Property owners interested in leasing, or as possible Property investors with a view to future commercialisation, and we will protect your legal rights whether you are a property owner or a tenant.

Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice.

msg.legal

The new mortgage process in Spain. It is possible to sign the Mortgage and the pre-contractual Notarial Act by Power of Attorney

The new Law governing mortgages in Spain entered into force on June 16th 2019, and is applicable to all mortgages on residential properties signed from June 16th onwards.

One of the most significant amendments to the Law, is that the consumer or mortgage borrower shall choose the Notary where signature of the deeds will take place, and whom must be also be provided with (free) advice from the chosen Notary Public prior to signature of the mortgage deeds.  This is an important factor affecting all Mortgage signees.  However, it may cause particular inconvenience to foreign clients in terms of availability, given that it is necessary to attend a Notary on two separate days.

 

The new Law governing mortgages in Spain entered into force on June 16th 2019, and is applicable to all mortgages on residential properties signed from June 16th onwards. One of the most significant amendments to the Law, is that the consumer or mortgage borrower shall choose the Notary where signature of the deeds will take place, and whom must be also be provided with (free) advice from the chosen Notary Public prior to signature of the mortgage deeds. This is an important factor affecting all Mortgage signees. However, it may cause particular inconvenience to foreign clients in terms of availability, given that it is necessary to attend a Notary on two separate days. At MSG Legal, as a law firm specialised in the field of Property, we would like to provide you with clarification regarding the process to be followed for signature of a mortgage when purchasing a property in Spain. The new Law was enacted with the primary purpose of aligning Spanish Regulations to the provisions laid down under EU Regulations, with the aim of increasing consumer protection. Regarding the pre-contractual information that the mortgage consumer should receive, the Financial Entity must submit the following documentation: - The European Standardised Information Sheet-ESIS (Ficha Europea de Información Normalizada-FEIN) a document constituting a binding offer for a minimum of 10 days, and that contains the personalised Loan terms - The Standardised Warning Sheet (Ficha de Advertencia Estandarizada- FiAE) in which the specific clauses, expenses and most relevant data is contained - The draft mortgage contract - The terms and conditions of the insurance policy - In the case of variable-interest mortgages, a simulation of the mortgage instalments payable As explained previously, the signature process is divided into two appointments, or compulsory visits to the Notary: First visit to the Notary (both mortgage holders and guarantors, if any) During the ten-day period prior to signature of the Mortgage (the latter being the second visit to the Notary) and at least one day in advance of signing the Mortgage, the holder (and guarantors) must attend the Notary to seek prior free advice and take a test. The Notary Public shall explain the clauses contained in the mortgage contract and will carry out a Test to assure that the mortgage consumer has fully understood the terms and conditions, and will draw up the minutes or Notarial Act thereof (this process is free of charge). Second visit to the Notary Following signature of the Notarial Act described under the first visit, and not until the following day (consequently, signature of the Notarial Act and that of the mortgage cannot take place on the same day) the mortgage deeds and property purchase deeds shall be signed simultaneously. Expert Advice The requirement to attend the Notary on two separate days may prove problematic in terms of availability for some clients. Likewise, given the personal nature of the first visit to the Notary, the question regarding whether or not it is possible grant Power of Attorney for this stage of the procedure, may initially arise. The answer to this question is YES, it is possible for an appointed representative or attorney to carry out both the pre-contractual consultation, and signature of the mortgage deeds on behalf of a client. It is imperative that the Notarial or Consular Powers of Attorney are correctly drafted, this is to ensure that the appointed representative or attorney is also able to: - Sign the binding loan offer together with any other financial documentation related to it (ESIS and Standardised Warning Sheet); and - appear before the Notary on the First visit, respond to the Test and sign the Notarial Act as established by Law At MSG LEGAL as a law firm with expertise in Property Law and Conveyancing, we can advise you on all of the necessary steps, and settle any doubts you may have regarding the formalisation of a loan for purchasing a property. Equally, we can act on your behalf by Power of Attorney during the entire process of formalising the loan.

 

At MSG LEGAL, as a law firm specialised in the field of Property, we would like to provide you with clarification regarding the process to be followed for signature of a mortgage when purchasing a property in Spain.

The new Law was enacted with the primary purpose of aligning Spanish Regulations to the provisions laid down under EU Regulations, with the aim of increasing consumer protection.

Regarding the pre-contractual information that the mortgage consumer should receive, the Financial Entity must submit the following documentation:

 

  • The European Standardised Information Sheet-ESIS (Ficha Europea de Información Normalizada-FEIN) a document constituting a binding offer for a minimum of 10 days, and that contains the personalised Loan terms
  • The Standardised Warning Sheet (Ficha de Advertencia Estandarizada- FiAE) in which the specific clauses, expenses and most relevant data is contained
  • The draft mortgage contract
  • The terms and conditions of the insurance policy
  • In the case of variable-interest mortgages, a simulation of the mortgage instalments payable

As explained previously, the signature process is divided into two appointments, or compulsory visits to the Notary:

First visit to the Notary (both mortgage holders and guarantors, if any)

During the ten-day period prior to signature of the Mortgage (the latter being the second visit to the Notary) and at least one day in advance of signing the Mortgage, the holder (and guarantors) must attend the Notary to seek prior free advice and take a test.  The Notary Public shall explain the clauses contained in the mortgage contract and will carry out a Test to assure that the mortgage consumer has fully understood the terms and conditions, and will draw up the minutes or Notarial Act thereof (this process is free of charge).

Second visit to the Notary

Following signature of the Notarial Act described under the first visit, and not until the following day (consequently, signature of the Notarial Act and that of the mortgage cannot take place on the same day) the mortgage deeds and property purchase deeds shall be signed simultaneously.

 

Expert Advice

The requirement to attend the Notary on two separate days may prove problematic in terms of availability for some clients.  Likewise, given the personal nature of the first visit to the Notary, the question regarding whether or not it is possible grant Power of Attorney for this stage of the procedure, may initially arise.

 

The answer to this question is YES, it is possible for an appointed representative or attorney to carry out both the pre-contractual consultation, and signature of the mortgage deeds on behalf of a client.  It is imperative that the Notarial or Consular Powers of Attorney are correctly drafted, this is to ensure that the appointed representative or attorney is also able to:

 

  • Sign the binding loan offer together with any other financial documentation related to it (ESIS and Standardised Warning Sheet); and
  • appear before the Notary on the First visit, respond to the Test and sign the Notarial Act as established by Law

 

At MSG LEGAL as a law firm with expertise in Property Law and Conveyancing, we can advise you on all of the necessary steps, and settle any doubts you may have regarding the formalisation of a loan for purchasing a property.  Equally, we can act on your behalf by Power of Attorney during the entire process of formalising the loan.

Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice.

msg.legal

The Non-requirement for Title Insurance in the Spanish Real Estate System

During the preparation of a real estate transaction in Spain, property purchasers coming from the U.S. will face the lack of availability of Title Insurance in Spain.

Contracting Title Insurance during the property purchasing process in the U.S. is not only a guarantee of protection, but the most important one.  It provides property owners with financial protection for their investment in the event of potential issues, covering among others, those related to title deeds or encumbrances to which the property is subject.

Consequently, the impossibility to obtain the aforementioned guarantee of protection, may be met with some mistrust by purchasers accustomed to the U.S. real estate system.

 

Do you need a Title Insurance for a purchase in Spain

 

In this article, from MSG LEGAL as a law firm specialized in PROPERTY LAW, we would like to explain why taking out Title Insurance coverage to guarantee a purchase, is totally unnecessary in the Spanish real estate legal system for the acquisition of a property in Spain.

The current Spanish real estate system, based on close cooperation between the Notary Public and the Land Registry, provides maximum legal certainty for the acquisition of a property in Spain.

The Notary Public, appointed to perform duties as regulated in Spain, ensures among other matters, legal certainty; identity verification; information regarding property ownership; validity of the seller’s title to the property and information regarding encumbrances recorded at the Registry.  Moreover, private documents in Spain (sale and Purchase contracts) cannot be recorded at the Land Registry.  Therefore, the process of acquiring a property must always be formalized by signature of the purchase deeds before a Notary Public.  This is required in order for the acquisition of the property and the new title deeds to be duly registered.

The Land Registry, which falls under the Ministry of Justice, is the Registry that plays the crucial role in the Spanish real estate system of ensuring protection of the rights recorded.  That is to say, it is in charge of protecting the rights of property owners, and has the authority to issue documents attesting title deeds to be true and authentic.

What Title Insurance really provides for future property owners is financial security, Not legal certainty.  By comparison the Spanish real estate legal system provides complete legal certainty by means of the intervention of the Notary Public and the Land Registry, and with the assistance of a lawyer with expertise in the field of Spanish Property Law.  Always recommended to carry out preliminary investigative actions previous to purchase (the equivalent to the Abstractor Attorney Method in the U.S. system) and that in the same manner protect the interests of the purchaser throughout the entire process of purchasing the property.

EXPERT ADVICE

Many other differences between the U.S. and Spanish property purchasing process systems, such as the absence of the Owner´s Property Disclosure Statement; the manner in which the Homeowners or Condominium Associations operate, and the requirement in Spain to grant public deeds for property purchases, make the intervention of an English-Speaking law firm specialized in the field of Property Law, essential for your peace of mind and protection.

At MSG LEGAL we can advise you throughout the entire process of purchasing a property in Spain, carry out the corresponding Conveyancing service which includes the elaboration of the corresponding Abstract.  We can explain the equivalent elements and guarantees of the Spanish real estate legal system in comparison to those of the U.S. real estate purchase system, and request a Surveyor Report of the property from a qualified surveyor or structural engineer on your behalf, if you so require.

Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice.

msg.legal

 

New regulations in Spain governing banking contracts for mortgages

On March 15th, a new Law 5/2019 was adopted to regulate immovable property credit contracts.  That is to say, mortgage transactions for the purchase of residential immovable property.  These new regulations align Spanish legislation with the provisions laid down under the European Directive.

Regarding entry into force, it should be noted that the new regulations entered into force as from June 16th 2019.

 

New regulations in Spain governing banking contracts for mortgages

 

This new Law aims to fully protect the consumer or mortgage borrower, and is of an imperative nature.  That is to say, all terms and conditions that financial entities may negotiate or impose not in compliance with the regulations established in the new mortgage law, shall be declared null and void.

 

Procedures and timeframes for signing new mortgages

 The consumer should receive all pre-contractual documentation at least ten days in advance of signing the public deeds for the loan.  The ten-day period is essential, if there is evidence that a mortgage has been signed without allowing this timeframe, it shall be declared null and void. Therefore, all documentation related to the loan shall be provided at least 10 days prior to signature of the mortgage.

During the aforementioned ten-day period (the time period which should elapse from the official submission of the pre-contractual documentation to signature of the corresponding public deeds) the client should seek prior free advice from the notary public.  The notary public shall provide information regarding the specific clauses contained in the European Standardised Information Sheet-ESIS (Ficha Europea de Información Normalizada-FEIN) and the Standardised Warning Sheet (Ficha de Advertencia Estandarizada- FiAE) on an individual basis, and will draw up the minutes thereof, as proof of the advice provided and affirmation that the borrower has understood and accepts the content of the documents.

The aim of the European Standardised Information Sheet-ESIS (Ficha Europea de Información Normalizada-FEIN) is to provide more clarity and understandability to the pre-contractual or financial information which the consumer should receive at least ten days in advance of signature.  We will outline and discuss the key elements.

Once the notarial act corresponding to the pre-contractual consultation has been signed and drafted, the so-called contractual phase begins, during which the purchase and mortgage deeds are signed, generally simultaneously.

Therefore, it is necessary to attend the notary on two separate days, firstly to receive information and advice, and secondly for signature of the contract.  Regarding this aspect and given the inconvenience that attending a notary on two separate days may cause for foreign purchasers not residing in Spain, together with the requirement of compliance with the timeframes previous to signature, we must highlight the fact that by granting power of attorney, duly limited, the appointed representative or attorney can carry out both the pre-contractual consultation, and signature of the mortgage deeds on your behalf.  At MSG LEGAL our lawyers with expertise in Property Law can advise you on this particular point, integrated in our Conveyancing service in Spain.

 

Documentation that should be provided by the financial entity to consumer and submitted to the Notary

 During the phase prior to the pre-contractual consultation, and of course, the mortgage signature, the financial entity must submit the newly required documentation.  As mentioned above, said documentation comprises the European Standardised Information Sheet-ESIS (Ficha Europea de Información Normalizada-FEIN), and the Standardised Warning Sheet (Ficha de Advertencia Estandarizada- FiAE).

The ESIS (FIEN) document contains personalised information regarding the credit agreement (such as the interest rate the creditor will charge, the amount, duration and currency of the loan), whereas the Standard Warnings Sheet (FiAE) document contains details of the clauses (such as the conditions for early repayment, or the distribution of expenses associated with the loan).

The financial entity should also provide an illustrative amortisation table indicating the interest rate of the loan, in addition to the amount and periodicity of the repayment instalments, and a simulation of how the interest rate of the mortgage instalments may vary according to a range of scenarios of interest rate fluctuation.

Finally, the document should reflect the expenses associated with the public deeds for the loan.

All of this information shall be submitted electronically by the financial entity to the notary.

 

Insurance

 As a general rule, the law prohibits tying practices in connection with granting and contracting mortgages.  However, it does permit the application of discounts between the differential of borrowing rates and each product contracted.

In the case of home insurance, the consumer or beneficiary may present an insurance policy from another company, granted that the conditions are the same or improved, and the financial entity will have to accept such a policy without worsening the loan conditions offered.

 

Fees

 Arrangement or completion fee.  This fee is not prohibited by law.

Fees for changing or modifying the terms and conditions of mortgages.  If the change or modification is carried out by subrogation or transfer to another financial entity, or by contract substitution with the existing entity, the fees shall not exceed 0.15% of the capital repaid in advance during the first three years of the contract term.

Following that period, financial entities are not entitled to charge any fees.

 Exit or closure fees.  If the consumer wishes to return all or part of the loan before the agreed term, the law states that in the case of fixed rate mortgages the fee shall not exceed 2% of the capital paid in advance, not the pending amount, during the first ten years, and as from the tenth year onwards, the fee shall not exceed 1.5%.  In the case of variable mortgage rates, the fee shall not exceed 0.25% of the capital paid in advance during the first three years of the contract term, or 0.15% of the capital paid during the first five years.

 

Expert Advice

 A very important aspect to consider is how the expenses generated in connection with signature of the public deeds for the credit agreement should now be distributed.

Until the new regulations entered into force, the consumer was liable for payment of fees corresponding to the Administrative Agency, Notary, Land Registry and mortgage valuation.  As from June 16th the financial entity is liable for payment of Administrative Agency and Notary fees, and the Land Registry fees for the inscription of the property.  The consumer is liable for payment of the mortgage valuation and may use the Authorised Appraisal Company/Surveyor of their choice, there is no requirement to use the same company as the financial entity with which the mortgage is signed.

Stamp Duty on the loan shall be payable by the financial entity.

 

At MSG LEGAL as expert lawyers in the field of Property, and as part of our CONVEYANCE service, we can provide you with comprehensive advice on contracting and formalising mortgage loans.

We will carry out a detailed assessment to protect your interests and assure that all terms and conditions established under the new mortgage law are complied with.  Equally, we can act on your behalf with Power of Attorney during the entire process of formalising the loan.

Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice.

 

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Important amendments affecting holiday rentals and horizontal property owners in Spain

On March 6th 2019 the Spanish Government approved important legislative amendments which have modified significant aspects of lease contracts, norms of the Associations of Property Owners, and holiday rentals.  We explained the significant impact of these amendments to various areas of Spanish Property Law in our article of December 22nd 2018 ‘Important reform to Urban Lease Law in Spain’.

 In this article we shall be focusing more specifically on the amendments directly affecting dwellings designated for holiday rental.

 

Important amendments affecting holiday rentals and horizontal property owners in Spain

 

Regarding holiday rental, Urban Lease Law (LAU) was modified together with the regulations governing how the Associations of Property Owners (LPH) may operate:

 

When is a lease to be understood to be a Holiday Apartment rental?

The characterisation of a lease being a holiday rental, is no longer determined by the circumstance of the property being let or advertised via tourism channels, but via the regional regulations governing the area in which the property is located.  These regulations determine whether or not a property is considered to be designated for holiday rental.

 

The regulations governing the Costa Blanca fall under Law 15/2018 of the Region of Valencia, that defines holiday rentals as dwellings which are transferred in their entirety for a price, on a regular basis, under the terms of immediate availability, and for touristic, holiday or leisure purposes. 

 

This aspect is extremely important, given that the Urban Lease Law (LAU) is not applicable to holiday rentals, therefore, the corresponding contracts and the regulation of the rentals (deposits, penalty, cancelation and waiver clauses etc.) may be freely determined by the property owners.  Therefore, the handling is totally different from that of a ‘standard’ lease contract, and we advise that you seek legal advice from a lawyer with expertise in Property Law to advise you accordingly.

 

Restriction of use under the  Association of Property Owner norms

Motions proposed by the Association of Property Owners to limit or determine the conditions of holiday rental now only require a favourable vote of three fifths of the total number of property owners.  Previously, for these kinds of decisions a unanimous favourable vote was required, a situation that evidently lead to deadlock issues.  That is to say, if one property owner renting his or her property out for tourism purposes were to oppose the motion, it could not be adopted.

A very important feature of this reform is that it now also permits, with the same three-fifths majority vote, the possibility of adopting a motion that establishes special service charge quotas or an increment in the share of common fees for the property in which the activity is carried out, provided that these amendments do not entail an increase exceeding 20%.

 

Expert Advice

 

For property owners that have already been carrying out Holiday Rental activity

Neither of these types of agreements, whether the limitation of holiday rental activity by the Association of Property Owners, or the increase of the Association fees for the property in which said activity is carried out, shall have a retroactive effect.  That is to say, that those property owners whom previous to entry into force of the Law of March 6th 2019 were already carrying out holiday rental activity in a correct manner, shall not be affected by any subsequent limitations agreed by the Association of Property Owners.

 

For the Associations of Property Owners that approve the abovementioned limitations

It shall be necessary, once any limitations by Association of Property Owners are approved, that such an agreement is registered with the Land Registry.  This is to assure that possible future acquirers of any property forming part of the Association of Property Owners, shall be bound by the approved limitations.

 

As we have mentioned previously, at MSG Legal as highly experienced lawyers specialising in Property Law, we can advise and assist you in any matter regarding holiday rental activity, whether from the point of view of an owner renting out a property for holiday purposes (drawing up holiday rental contracts, acknowledgement of pre-existing activity to adopted limitations etc.), or from the point of view of an Association of Property Owners interested in adopting limitations (advice and assistance for the preparation of Assemblies, registration of the adopted motions etc.).

 

 

Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice.

 

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EU Family Residence Card or EU residence card in Spain

In this article, we are going to provide you with information regarding the EU Family Residence Card, also known as the EU Residence Card. We will also clarify the purpose of the card and whom is entitled to request it.

 

EU Family Residence Card or EU residence card in Spain

 

Firstly, we would like to reiterate the following regarding EU citizens according to both the Spanish and EU regulations in force:

Citizenship of the Union confers on every citizen of the Union a primary and individual right to move and reside freely within the territory of the Member States, subject to the limitations and conditions laid down in the Treaty and to the measures adopted to give it effect.

 The community regime is not only applicable to EU citizens, but also to nationals of the States constituting the European Economic Area (EEA EFTA). That is to say, Iceland, Liechtenstein, and Norway together with citizens of Switzerland. All citizens of the latter countries are granted the same freedoms as those of EU Member States. Therefore, their family members could benefit from obtaining the EU Family Residence Card.

 

The family relationships that satisfy the requirements to request the EU Card are the following:

  • A spouse, as long as the marital requirements or declaration of nullity of the marital tie such as divorce, legal separation or marriage annulment are satisfied
  • A partner with whom an EU citizen has formed a union equivalent to marriage, duly registered at an established public registry of an EU Member State or a State belonging to the European Economic Area
  • A child, whom is the direct descendant of an EU citizen or of his or her spouse or partner, under the age of twenty-one or in the case of being older than twenty-one, a dependent member of the household
  • Any family member whom in their country of origin is dependent on, or lives with an EU citizen. Proof of living together shall be understood to be valid if duly certified to be of a period of at least 24 months in the country of origin
  • Any family member, whom due to serious health reasons or disability, strictly requires an EU citizen to be in charge of his or her personal care

 

Supporting Documents required to request the EU Residence Card

Correct presentation of the supporting documents to your application is a key aspect to obtaining your EU residence card, which is why we advise you to consult and seek the assistance of a lawyer with expertise in Immigration Law at this point.

In general terms, and in accordance with article 8.3 of RD 240/2007, The EU Residence Card application should be presented together with the following supporting documents:

  • The official application form (EX–19) in duplicate, duly filled in and signed by the family member of the EU citizen
  • The original valid and non-expired passport of the applicant. In the scenario that his or her passport has expired, it is necessary to provide a copy of the passport together with the renewal request
  • Documentation providing proof, in this case, duly translated and apostilled or legalised, of the existence of a family tie, marriage or registered union that grants the right to the card (e.g. Marriage or Birth Certificate…)
  • Certificate of Registration of the family member whom is citizen of an EU Member State or citizen of a State party to the Agreement on the European Economic Area, whom the applicantis accompanying or joining
  • Documentation providing proof (only in those cases where applicable), that the applicant of the card is dependent on a citizen of an EU Member State or citizen of a State partyto the Agreement on the European Economic Area (e.g. descendants over twenty-one years of age)
  • Three recent passport sized photographs taken on a white background
  • In the case that the applicant is not currently working or carrying out professional activity in Spain, it is necessary to provide:
    • Proof of public or private healthcare insurance, contracted in Spain, or in another country, as long as the insurance provides coverage in Spain during the period of residence, and is equivalent to that provided by the NHS. We would advise you to contract the insurance for a period of at least one year
    • Documentation providing proof of sufficient financial resources to maintain the EU citizen and his or her family members during the period of residence in Spain. It is possible to certify this by any legally acceptable means or evidence. For this aspect of the application it is important to consult a lawyer with expertise in Immigration Law, hence assuring that the correct the evidence to prove sufficient financial resources is presented to the Spanish authorities. Failure to present proof of sufficient financial resources are the main grounds for refusal of EU Residence Cards

 

The application procedure

  • The family member of the EU citizen must submit the application in person
  • It is necessary to make a prior online appointment with the corresponding Foreign Office in order to present the application
  • The place of submission shall be the Foreign Office of the province where the applicant plans to reside, or at the corresponding Police Station
  • The deadline for submission is of three months as from the last date of entry into Spain. When presenting your application, you will be provided with a receipt certifying that it has been submitted, this is sufficient proof of legal residence until the card is issued
  • It is necessary to pay a fee (via Form 790-Code 012) and before the EU Family Residence card is issued
  • The EU Family Residence card should be issued within a period of three months as from that date of submission of the application
  • The EU Family Residence card is valid for a period of 5 years as from the date of issue

 

Expert Advice

When submitting documents from another country they must be translated into Spanish or the co-official language of the territory within the country in which the application is submitted. On the other hand, all foreign public documents must be previously legalised by the consular Office in Spain with power of jurisdiction in the country where document was issued.

 

As we explained earlier, we strongly advise you to seek the advice and assistance of an expert lawyer, given the diverse regulations governing these kinds of procedures, and due to the fact that the correct preparation and presentation of the documentation is fundamental to the success of your application.

At MSG LEGAL we are at your disposal for any guidance or assistance you may require regarding the application procedure for your EU Residency card or any other services you may require in order to regularise your residency situation in Spain, for both Community citizens and non-Community citizens.

Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice.

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