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Rental of Holiday Apartments in The Costa Blanca area.

In this article we will explain the latest regulations governing holiday apartment rental in the Costa Blanca area.

Here we will approach the issue from the point of view of the Property Owner deciding to commercialise a property as a holiday home, generally by marketing it on specifically focused holiday rental websites, or by choosing to delegate the property management to an intermediary company in charge of marketing it on his or her behalf.

Regulation of the Holiday apartments at the Costa Blanca

 

Under the Spanish Legal System, the power to regulate these kind of rentals has been delegated to the various Autonomous Regional Authorities. Therefore, the rules for Holiday Rentals in the Costa Blanca area are governed by the Regulations laid down by the Authorities of the Region of Valencia, to be more precise, those established under Decree 92/2009, modified in part by Decree 75/2015 which regulate holiday homes denominated apartments, standalone houses, villas and similar, together with the corresponding property management companies, whether legal entities or legal or natural persons.

 

When is letting a property considered  a “Holiday Rental”?

The current legislation (D 92/2009) under Art. 2, defines the concept of a holiday home as one that has been granted to be used for the purpose of tourism, in exchange for payment, and on a REGULAR basis.

As REGULAR it is understood that the property is available rather than occupied, and leasing is carried out by means of:

  • Property Management Companies, including those legal entities and legal or natural persons, whom as part of their profesional activity manage the rental of at least 5 dwellings
  • Property owners themselves, provided that they offer hotel services (for example, cleaning during the stay, linen changing…)
  • Finally, properties are also considered to be holiday homes, and this is the most common situation, when rental is advertised via tourism marketing channels (such as Airbnb, Booking, HomeAway…)

 

Steps to follow for Registry of a holiday home

  • The property must be registered at the corresponding Regional Ministry of Tourism (this is a GENERAL requirement for ALL property owners commercialising short term rentals, including those that only commercialise ONE property and do so personally)
  • The registration request must be made via a statement of compliance at the General Registry for Businesses, Establishments and Professionals in the field of Tourism for the Region of Valencia, addressed to the Municipal Registry for Tourism corresponding to the province where the property is located

In the Province of Alicante, the Municipal Registry for Tourism is located in Calle                       Churruca 29, Alicante. Via the aforementioned request you will be provided with the                corresponding Holiday Home Registry Number

  • As from the date when the Property is registered, it is compulsory then onwards to state the property registry number together with the corresponding category, when launching any kind of advertising campaign. This is even compulsory when advertising or publishing on official tourism websites
  • Owners of holiday homes must assure that the accommodation is maintained in perfect conditions in accordance with the requirements for its category

 

Expert Advice

The regulations in force that govern the commercialisation of holiday apartments do not permit the possibility to rent either one or various rooms separately. Apartments must be rented in their entirety and it is not permitted for the owner to be living in the property when letting.

 

At MSG LEGAL we can advise you on how to regulate and formalise your business relationship with property management companies, in the case you decide to take that route.

We can also provide you with in depth information and advice regarding the range of legal obligations and responsibilities you shall be subject to if you decide to commercialise your property directly.

By way of example, we can assist you with the following transactions (among a multitude of others):

  • Legally established regimes of prices and reservation procedures
  • Legal publicity requirements (Registry Number), offer and management of holiday homes
  • Obtaining and managing complaint forms
  • Handling Guest Books and communication with law enforcement authorities

In the current climate, it is important to take into account that due to significant growth in this field, Public Administration bodies are carrying out campaigns and inspections to detect and  crack down on holiday homes that do not comply with the legal obligations in force. For this reason it is indispensable to seek correct and specialised advice from lawyers with expertise in the field of Property Law.

At MSG LEGAL we can advise and assist you during the entire process of legalising your holiday home, as well as with correctly handling its subsequent use, independently of whether you choose to manage the property personally, or to delegate the task to property management companies.

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

NIE. Foreign Identification Number

The Foreign Identification Number, known as a NIE, is a document which is granted to foreign citizens for economic, professional or social reasons connected with Spain. This identification number is personal, exclusive and unique to the applicant, its purpose being for fiscal identification reasons.

It is important to point out that the NIE certificate does NOT enable residency in Spain. A NIE is necessary, as we will explain later, to identify foreign citizens carrying out economic, professional or social activities in Spain.

 

spanish NIE

 

How do you request a NIE?

NIEs requested in this manner are issued on the same day the application is made

  • It is also possible to make an application in Spanish territory by means of appointing a representative with sufficient power of attorney
  • Applications can also be made at one of the Spanish consular offices located in the applicant’s country of residence

Required supporting documents for a NIE application

It is necessary to present the following documentation:

  • Form number EX-15, duly filled in and signed by the applicant
  • Original Passport and full copy of the passport
  • Written communication of the economic, professional or social reasons for making the application, and the corresponding accreditation
  • Proof of payment of the corresponding fees (form 790-012) (The amount payable for the 2017 period is 9.54.-€)

Is it necessary to renew a NIE?

The answer is that NIEs do NOT need to be renewed. Although we must differentiate permanent NIEs from temporary ones.

Permanent. This kind of NIE is for foreign citizens whom intend to reside in Spain for a period exceeding THREE months, and, those citizens must make the application within 90 days as from their arrival to Spain.

Temporary. This kind of NIE is valid for a period of THREE months, and is aimed at foreign citizens residing outside of Spanish territory whom wish to carry out a particular economic or commercial transaction, or professional activity in Spain.

Why is a NIE necessary?

A NIE is indispensable for a wide range of transactions, economic or professional activities and processing of official documentation in Spain. For that reason, it is extremely advisable to make the application as soon as possible. It is the first transaction to be carried out in the case of a possible property purchase in Spain. By way of example we will list some of the transactions and procedures for which a NIE is required throughout the process of CONVEYANCING:

  • To open a bank account
  • To request and sign a mortgage
  • For proceedings at a Notary Public, signature of public deeds
  • For presenting documents at the Land Registry
  • For contracting utility supply companies

Expert Advice

Any public document which is a necessary supporting document or formality to a NIE application, and is issued by a foreign state, must be duly legalised and translated as per the requirements laid down in the factsheets provided by the General Secretariat of State for Immigration and Emigration.

At MSG LEGAL, as experts in the field of Property Law and Conveyancing, and as part of our comprehensive Conveyance service, we will handle the application and obtainment of your NIE from the outset of any real estate transaction you may wish to carry out, sufficiently in advance, so as to assure a successful outcome.

 

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

Down payment or deposit clauses –arras- in property purchasing contracts in Spain.

When formalising any real estate transaction in Spain, whether acting as the selling or buying party, those involved will usually come across a legally binding concept called an EARNEST MONEY DEPOSIT (or ARRAS)

In this article we are going to explain what legally binding earnest money deposits actually are, the different types of agreements currently valid under the Spanish legal system, and the true consequences they may have in the case of a breach of contract, depending on the clauses chosen.

 

The arras in the spanish transactions

 

Much confusion regarding the meaning of earnest money deposits and their legal implications generally arises from the initial phase of property transactions. This is when we find ourselves faced with signing different binding documents, for example a reservation contract, a provisional purchase agreement, a promise to purchase (in this article we are going to summarise them as reservation contracts). The misuse of the term stems from calling these type of documents down payment or deposit contracts, and given that deposit contracts do not exist as such neither are they recognised by Spanish law nor Spanish case law, earnest money deposits or ‘arras’ are simply possible agreements that can be included in a contract.

More specifically, earnest money deposits are additional clauses to reservation contracts, where both parties agree to the use the down payment or deposit as proof of reservation. This is a guarantee of compliance with the obligations laid down in the reservation contract. The agreement is of a voluntary nature, this is to say that the law does NOT compel the inclusion of these kind of clauses in contracts. Consequently, they should only be included by the free will and mutual agreement of the parties involved, and additionally, we highly recommend, with the assistance of an independent legal professional. Among other reasons, this is in order to assess your particular requirements and to apply the class of down payment agreement that will protect your personal interests.

Under the Spanish Legal System there are three classes of earnest money deposits:

FORFEIT DEPOSITS (ARRAS PENITENCIALES) These kind of deposits are the only ones expressly provided for under Spanish regulations, more concretely, under Article 1454 of the Civil Code. Ultimately, the use of this kind of deposit requires an ‘exit clause’, this is to say a lawful means for either party to unilaterally withdraw from the contract. The implementation of a forfeit deposit clause in a reservation contract (in the case of withdrawal or breach of contract) shall impede the party wishing to proceed with the purchase to be able to go to court to claim fulfilment of the contract. As explained above, this is due to the fact that forfeit deposits are unilateral exit clauses to reservation contracts.

They are the most common clauses found in reservation contracts presented for signature by REAL ESTATE agencies for the majority of property sale transactions, and in many cases, in an incorrect manner. This is either because the clause is not correctly included in the contract, or because it is contradictory to other clauses in the contract.

For this reason, it is absolutely necessary to seek the assistance of an independent legal professional expert in the field Property Law, whom in view of the particularities and requirements of all parties involved, and the purchase conditions in question, will make a correct assessment in order to include the appropriate and correct clause in the reservation contract in question.

The consequences of forfeit deposits are as follows:

  • If the contract is rescinded by the buying party, he or she will lose, to the favour of the selling party, the money paid in concept of an earnest money deposit
  • If the contract is rescinded by the selling party, he or she must return the money received in concept of an earnest money deposit, in duplicate

The other classes of earnest money deposits provided for by the Spanish legal system, and more concretely Spanish case law, are as follows:

CONFIRMATORY DEPOSITS (ARRAS CONFIRMATORIAS) These kind of deposits are considered to be an amount of money given on account of the final price, termination or cancellation of the contract is not allowed.

The distinctive feature of confirmatory deposits is that if no class of deposit is expressly specified in the reservation contract, this one will be applied by default.

PENALTY OR ENFORCEABLE DEPOSITS (ARRAS PENALES) These are included in sale contracts to reinforce compliance. This is to say that if the party paying the deposit breaches the contract, they will lose the amount paid. Furthermore, he or she could be liable for contract enforcement and also face payment for losses and damages. This class of deposit should be mutually agreed and must expressly stipulated in the reservation contract.

Expert advice

If the agreed class of earnest money deposit is not expressly stipulated, a confirmatory deposit will be enforceable.

In the case that both parties intend to apply a forfeit deposit, a clause must be included in the reservation contract clearly stipulating that the intention of the parties is to apply “a forfeit deposit in accordance with the provisions of Art. 1454 of C. Ci.”  and that “the amount payable shall be a down payment of the total sale price stipulated in the contract”.

It is of vital importance to seek appropriate advice from a legal professional with expertise in the field of Property Law before signing any preliminary document to the sale completion (such as a reservation contract, a provisional purchase agreement, a promise to purchase…). This will assure that previous to signature the document is adapted to your actual requirements, and amended in such a manner to guarantee the protection of your interests.

At MSG LEGAL, as lawyers with expertise in the field of Property Law and Conveyancing, we can provide you with our services from the outset of the real estate transaction. Whether you are the buying or the selling party, we will act in your defence, to protect your needs and find the best legal solution for you.

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

Selling property in Spain as a non-resident. The buying party’s obligation to retain 3% of the sale price.

Selling property in Spain as a non-resident. The buying party’s obligation to retain 3% of the sale price.

In this article we are going to address the issue of property sale in Spain by non-resident citizens, and the buying party’s obligation to retain 3% of the sale price.

 

Selling property in Spain as a non-resident. The buying party’s obligation to retain 3% of the sale price.

 

Therefore, when a property is sold in Spain by a non-resident, any profit made shall be taxed as Capital Gains against their Non-Resident Income Tax (IRNR).

The gross profit shall be established by calculating the difference between the acquisition price (any expenses and taxes resulting from that acquisition shall be included), and the sale price (any expenses and taxes resulting from the transaction shall be deducted).

The procedure governing the aforementioned 3% retention is established by the Regulations on Non-Resident Income Tax (RD 1576/2006), which provide that:

  1. In cases of real estate transactions concerning property situated in Spanish territory by Non-Resident Income Tax payers, the acquirer shall be obliged to retain and deposit 3% of the agreed price, as an advanced payment against the Non-Resident Income Tax corresponding to the non-resident selling party.
  2. The acquirer shall NOT be obliged to retain and deposit the advanced payment when the selling party provides proof that they are subject to Personal Income Tax via a certificate issued by the competent body of the Inland Revenue (subsequently, we will provide more information on the prerequisites for the certificate, being a fundamental requirement to the entire process)
  3. The party obliged to retain or deposit the advanced payment (the acquirer) must present a declaration before the Delegation or Government Agency of the Inland Revenue corresponding to the area in which the property is located, and pay the retained amount of tax due, on account of the selling party, to the Public Treasury, within a period of one month as from the date of the transaction. Together with the official form nº 211
  4. The taxpayer whom is non-resident in Spanish territory must declare, and settle the definitive Capital gains Tax (the current tax rate in force for EU, Islandic and Norwegian citizens is 19%, and 24% for any other taxpayers), deducting the amount of 3% retained by the acquirer from the amount due, within a period of three months following the sale, together with the official form nº 210.

In the case that the selling party does not make any profit from the sale, the non-resident selling party shall not be liable to pay the tax and can therefore request a refund of the tax withheld              by submitting form nº 212.

If this occurs, the inland revenue will proceed, following the necessary verifications, to refund the taxpayer the excess withheld or payed.

  1. If the above-mentioned amount payable is not retained o settled, the transferred property shall remain liable for payment if the amount settled is lower than the amount withheldor played in advance, and the corresponding tax. The land registrar will record this to that effect in the corresponding registration, stating the amount outstanding on the property.

It is important to indicate that at the time of addressing the issue of whether or not to retain the 3%, that accreditation of residency or non-residency is neither sufficient or valid, neither is proof of being in possession of a residency card or certificate of residency, even a certificate of Fiscal Residence is not sufficient, the only valid document is the certificate that proves subjection to Income Tax in Spain.

In the case that the amount due is NOT payed, the property will remain subject to the outstanding payment. For that reason, the purchasing party should in all cases retain the 3%, which will therefore be reflected in the public deeds, unless the selling party presents a certificate issued by the Inland Revenue providing proof that the transferor is subject to Income Tax in Spain.

Expert Advice

Transferors whom are EU citizens, and furthermore are Non-resident taxpayers, shall not be liable for Capital Gains Tax on the sale, provided that the amount obtained through the sale is reinvested in a main residence.

At MSG LEGAL we can advise you on whether or not there is an obligation to withhold tax for any property purchasing transaction, from your point of view, being either the buying party, or the selling party. We can also handle the preparation and presentation of the various official forms required for settlement or refund of revenue, generated by the property sale procedure to be followed when the selling party is a non-resident citizen.

 

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

Brexit. Consequences for British citizens residing in Spain. The importance of the Green Card.

Following the announcement made by the British government to the EU Authorities on the 29th of March 2017, much uncertainty has arisen regarding the consequences withdrawal may cause.

The consequence that most concerns us, and the one that we are going to address in this article, is the impact on British citizens residing in Spain.

 

Brexit. Consequences for British citizens residing in Spain

 

Currently, British Expats residing in Spain have EU citizenship, and therefore enjoy rights to freedom of movement, the free movement of workers and freedom of establishment, across the EU member states.

The UK’s withdrawal will mean that British citizens will no longer enjoy EU citizenship, nor the inherent rights of the EU legal order.

This leaves us facing different hypothesis regarding the consequences that Brexit may hold for British citizens residing in Spain.

Some of most flexible scenarios, in the case of a more tolerant Brexit, supposing that the UK comes to some kind of international or bilateral agreement with Spain, would be as follows:

  • That the right to freedom of movement for British citizens in the EU is protected
  • That this right is maintained but with nuances or limitations

But without a doubt, under our criteria, given that precisely one of the main reasons Brexit triumphed in the UK is due to the existence of freedom movement and residence for European citizens in the UK, the most likely scenario is that of a total or hard Brexit, which would mean the reciprocal loss of the right to freedom of movement and residence for British citizens in the remaining EU member states.

This is the scenario that we are concerned with, and are therefore going to analyse. Would this mean a hypothetical loss of rights for British citizens that are currently legal residents in Spain? In our opinion it is unfeasible that a status of legal residence could be converted into that of an illegal status.

That being, among other reasons, due to the fact that the Spanish regulations in force establish procedures for people to be able to modify their regime of leave to remain, or legal status (for example, modification from the EU regime to a situation of residence and self-employment due to the annulment of a marital link or divorce). Consequently, when the time comes, the Spanish Government will establish the necessary course of action to be taken to modify the residential status of British citizens residing in Spain.

Therefore, it will be possible, on a case by case basis, to initiate legal procedures for modification from EU Legal Status to Foreign Legal Status, with some deadlines and a series of requirements of an economic nature, taking into account the personal circumstances of each and every applicant.

Some practical examples of this kind of procedure are:

  • A British citizen with Spanish family could request an EU residency card
  • A British citizen who has resided in Spain for less than 5 years could request temporary leave to remain, whether non lucrative (without work) or with the right to work
  • A British citizen who has resided in Spain for more than 5 years could request long term leave to remain

And to our understanding, another of the substantial reasons for which British citizens in Spain will maintain their rights after Brexit, will be either due to accession to the European Economic Area (e.g. Norway, Iceland) or due to bilateral agreements (e.g. Switzerland) between the UK and the EU which allow the free movement of their citizens.

 

Expert Advice

In view of the scenario of a hard Brexit, which would entail the loss of the right to freedom of movement for British Citizens, and as we have underlined above, in order to modify your status of residency in Spain (From EU to Non EU), applicants should be legal residents in Spain. That is to say that applicants should have requested and obtained the Certificate of Registration as a European Citizen (Green Card), which is the only (and obligatory) document that certifies residency of the aforementioned British citizens in Spain (please note that the NIE neither grants nor enables residency in Spain). Therefore, the Certificate of Registration as a European Citizen is the only document that certifies your legal residency in Spain, and, is the document that will allow you, if necessary, to modify your status of legal residency in Spain, from EU to Non EU.

Given all of the above, at MSG LEGAL our advice is above all to stay calm, not to take rash decisions (such as proceedings to gain citizenship in other EU countries, sale of property in Spain…) to stay informed via official channels o via Law Firms with expertise in the field, on any specific news affecting the rights of British citizens residing in Spain, and to legalise your residency status (Certificate of Registration as a European Citizen).

 

At MSG LEGAL we are at your disposal for any enquiries you may have on this matter, to advise you on any course of action you should take, and handle the obtainment of the Certificate of Registration as a European Citizen for you, 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

 

Purchasing Plots of Rustic Land for the construction of property.

In this article we are going to examine the requirements that must be taken into account previous to acquiring rustic land (or non-building land – suelo no urbanizable -) with the aim of initiating a construction project in the Costa Blanca area (Region of Valencia).  With regard to any private investment project involving rustic (or non-building land) and subsequent construction, the restrictions laid down by the Regulations under Law 5/2015 of 25th of July, for Territorial Planning, Urban Development, and the Countryside in the Region of Valencia (LOTUP), must be taken into account, together with the various local urbanistic by-laws that regulate this kind of construction.

 

Spanish Property Lawyers and Rustic Land Plots

 

As we mentioned earlier we are going to provide you with an analysis of the above-mentioned process from its outset.  For that reason, we are not going to address the issue of purchasing properties already built on rustic land in this particular article, the legality of which depends on the existence of the corresponding Occupancy License, together with the necessary administrative checks that should be carried out by a legal professional, expert in the area of Property Law.  We will analyse that specific issue in detail in a separate article in the near future.

Therefore, as a starting point when evaluating the possible investment in a plot of rustic land with the aim of constructing a property on it, we must take into account the basic requirements laid down by the afore-mentioned Law 5/2014, under Article 197 (b), which stipulates the following:

“the use of a detached dwelling on non-building or rustic land may be conferred provided that the following conditions are met:

  1. Construction shall be exceptionally permitted on plots of an uninterrupted perimeter, which both in shape and size under no circumstances amount to less than one hectare per dwelling (10,000 m2)
  2. The surface occupied by the building shall under no circumstances exceed two percent of the total surface of the rustic plot; the remaining area must be kept in its natural state or be used for agricultural activity.  However, plans including non-masonry features at ground level, additional to the main dwelling may be permitted, as long as they do not exceed two percent of the total surface of the rustic plot
  3. The building must be located away from natural watercourses. Existing wooded areas must also be preserved, together with the topography or natural land forms of the plot
  4. Adequate provision for water supply, waste disposal, and waste water treatment impeding soil pollution shall be required
  5. The construction shall not form a neighbourhood. In accordance with urban planning, groups of dwellings on a single plot are strictly prohibited, as well as those with characteristics of collective housing

Therefore, as an example, and only taking into account the requirements laid down under the aforementioned Article; on a 10,000 m2 plot it is possible to build a property with a maximum surface of 200 m2, together with non-masonry features, additional to the main property, covering a maximum surface of 200 m2.  Without prejudice to compliance with Local Government Regulations.

It should be clarified that the Regional Government Regulations do not directly permit the construction of properties on rural land, but enable each Region to regulate construction via their corresponding General Urban Development Plan (PGOU), and local by-laws, at all times adhering to the restrictions of the general directives laid down by Law 5/2014.   Therefore, it is always necessary to take into account the specific restrictions established by each City Council for the land in its area.

Expert Advice

From all of the above, it is evident that in order to establish if it is possible to construct a property on a particular rustic land plot, it is not only necessary to take into account Law 5/2014 (a Law that is currently under modification by the Regional Government of Valencia), but that it is also necessary and fundamental that a professional, specialised in the field of Property Law revises and analyses the General Urban Development Plan (PGOU) and the specific by-laws of the area in which the plot is located.

At MSG LEGAL, as lawyers with expertise in the field of Property Law, and with extensive knowledge in the particularities and restrictions of the City Councils corresponding to the most sought after areas for foreign citizens acquiring these type of investments, we can provide you with the required conveyancing service to assure that your initial investment in a plot of rustic land is secure, and that you accomplish your future aim of constructing on it.

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

 

 

Second Occupancy Licences when purchasing property on the Costa Blanca.

In this article we are going to deal with some aspects of the so-called Second Occupancy Licence –Licencias de Segunda Ocupación– (also named the Second Occupancy Habitation Certificate –Cedula de habitablidad de Segunda Ocupación-, in some City Councils)

 

Conveyancing. Second Occupancy Licences at the Costa Blanca. Spain

 

The Second Occupancy Licence is a document of administrative nature, to certify that a dwelling satisfies the minimum housing requirements.

For this reason, it of utmost importance that your lawyer makes sure that the dwelling has a First or Second Occupancy Licence during the initial phase of the CONVEYANCING process (revision and analysis of the documentation).

The validity period of the initial Occupancy Licence or Habitation Certificate varies according to the issue date:

– Occupancy Licences issued before 2004 shall be valid for a period of 10 years from the issue date onwards, and consequently will now have expired. Therefore, the vendor is required to provide you with a Second Occupancy Licence

– As from 2004 onwards, Occupancy Licences are valid for a period of 15 years

An Occupancy Licence or Second Occupancy Licence in force, is an official document required to satisfy compliancy with housing regulations. It should be submitted by the vendor on signing the handover of the property, and it should be declared by the Notary Public in the corresponding Public Deeds. It is important to take into account that when signing deeds for second hand properties, the Notary Public will only make a record of whether the Occupancy License has been provided or not, this will not guarantee the purchasing party that the license has not expired. It is essentially the responsibility of the lawyer in charge of conveyancing to supervise and examine all of the documentation to protect the interests of the purchasing party.

The license is essential for contracting the supply of basic amenities to the property (such as electricity, water, sewage discharge, landline and broadband connections…), and to be able to complete a second resale or any subsequent resales.

The renewal of an expired Occupancy Licence shall be carried out via submission of a Declaration of responsibility –Declaración Responsable– to the corresponding City Council, this must be accompanied by the required supporting documents which differ depending on the City Council in question. In general, the main documents required consist of proof of payment of Stamp Duty, and the Habitation Certificate issued by a competent Technical Architect. By presenting this documentation in the correct manner, we will obtain to immediate effect and for the designated purpose, the Second Occupancy Licence.

Expert Advice

If the vendor fails to submit the Second Occupancy License, it may simply be due to the previous license having passed its expiry date. This can be easily remedied as explained above. Nonetheless, failure to provide a valid license will lead to delays in contracting the supply of basic amenities and to a series of additional expenses, that in our expert opinion, under no circumstances should be undertaken by the purchasing party.

For this reason, if you are faced with a vendor failing to submit an Occupancy License, or with an expired Occupancy License, we strongly advise you that your case is studied on an individual basis to be sure that you are fully aware of your particular situation. Only an Independent law firm with expertise in Property Law can advise you correctly throughout the entire purchasing process, and protect your interests and peace of mind.

At MSG LEGAL, as part of our CONVEYANCING service, we revise and analyse all of the necessary documentation, and in particular verify whether or not the property has a valid Occupancy License. Likewise, we can assist you in renewing the initial Occupancy License with the City Council corresponding to the location of the property, or in resolving any legalisation issues that the dwelling may 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

Claims for defects or imperfections in New Build Properties in Spain. Time Limits.

The owner of a new build property or any subsequent owner who purchases the property within the maximum warranty period established by Law (10 years), has a right to make a claim against any of the parties intervening in the construction process, if any material damage appears in the property during that period of time.

 

Spanish Lawyers Experts. New build properties claims.

 

The Building Standards Regulations (LOE) 38/1999, stipulate implementation rules for the construction of newly-built properties, and for the refurbishment of existing properties, under the condition that the corresponding planning permission has been obtained, and as from the entry into force of the regulations on the 6th May 2000.

The aforementioned regulations define the respective joint and several liability of the major players involved (Property Developers, Builders or Contractors, Architects, and Technical Architects or Building Engineers… and their respective Insurance Companies). Measures to protect the consumer are also defined within different guaranteed timeframes, and a limitation period (the timeframe for lodging a court claim).

 

Moreover, the Law establishes a clear distinction between the warranty periods and the limitation period:

 

I- A threefold warranty period: One, three and ten years. The warranty timeframe is established by Law to protect consumers acquiring dwellings and commercial premises against damages caused by poor quality construction. It is applicable within a stipulated time-frame of ten years which counts as from when both the construction is finalised and the corresponding certificate has been issued

The regulations establish three warranty periods, which in turn depend on the category of the material damage in question:

– ANNUAL warranty (1 YEAR). The builder or contractor shall be held responsible for material damages in the form defects or imperfections affecting the finishing of the property

– TRIENNIAL warranty (3 YEARS). All professionals involved in the construction process shall be held responsible for material damages to the property in the form of construction defects or imperfections, or those affecting installations that consequently cause incompliance with housing standards (such as hygiene, watertightness, airtightness, acoustic and thermal insulation…)

– DECENNIAL warranty (10 YEARS). All professionals involved in the construction process shall be held responsible for material damages to the property in the form of structural defects or imperfections, or those affecting the foundations, pillars, girders, floor structure, load bearing walls, or any other structural elements that directly compromise the stability of the property

It is essential to clarify each and every one of the aforementioned warranty periods, which shall commence as soon as both the construction is finalised and the corresponding certificate has been issued (this is the official time of handover from the builder or contractor to the property developer). The property developer shall always provide this information to the consumer, whether directly if the property is detached or semi-detached (a villa or a townhouse), or indirectly via the Association of Property Owners in the case of an apartment building. This information can also be obtained from the Land Registry.

 

 

II-  A limitation period (timeframe for lodging a court claim) to enforce civil liability for the damage incurred. The timeframe is two years, pursuant to the provisions under Art. 18 of the Building Standards Regulations (LOE)

In other words, once the material damage has been identified (meaning as soon as the defects or imperfections appear), and the professionals involved in the construction process have been formally notified, a two-year timeframe is applicable. Therefore, any court claim for compensation due to damages incurred by the property owner, must be lodged before the corresponding deadline.

 

Expert Advice

In the scenario that we find ourselves with claimable material damage, and that this situation occurs within the various warranty periods established by Law, our advice is that in order to interrupt the warranty period, the affected property owner should make a claim against all of the professionals involved in the construction process (Property Developers, Builders or Contractors, Architects, and Technical Architects or Building Engineers… and their respective Insurance Companies). If we only make a claim against one of the parties, only that party shall be liable (together with the Property Developer, always jointly and severally liable). It is of utmost importance that the proceedings are carried out on time and in the correct manner, and that all requirements are met. MSG LEGAL can provide you with advice and guidance throughout the procedure for these type of claims.

At MSG LEGAL, as an Spanish expert Property Law firm, we are highly experienced in claims for building defects or imperfections, and are at your disposal for any questions, advice or guidance you may 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.

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Unfair or ‘Abusive’ clauses in property purchase contracts.

In this article we will deal with one of the generalised issues when formalising property purchase contracts. The possible unfair or so-called ‘abusive’ clauses that new owners can encounter when acquiring a new-build property.

 

Unfair or ‘Abusive’ clauses in property purchase contracts

 

Due to many foreign citizens being unaware of their rights and obligations when purchasing a property, together with the need to have a thorough understanding of Spanish regulations that the purchase of a property is subject to, it is advisable that a Spanish lawyer expert in the field of Property Law represents you from the very beginning of the negotiations with the Property Developer.

Frequently, in the general conditions of purchase contracts we come across unfair or ‘abusive’ clauses, namely those explicitly defined in Spanish regulations, that have not been negotiated individually, and that are detrimental to the purchasing party or consumer, causing damage or an important disparity to the purchasing party.

Spanish regulations, in particular the General Law on Consumer Protection (LGDCU), protects the consumer against these kind of irregularities in property purchase contracts. It protects the purchasing party or consumer, granting them the following rights:

  • Administrative sanctions. (LGDCU, Art. 32) If the selling party breaches a contract with these kind of clauses, under the regulations in force it shall be considered an infringement and may give rise to a penalty

 

  • Contract integration. (LGDCU, Art. 8) All information provided in both the advertising and the offer is claimable by the purchasing party, even if it is not expressly stated in the contract

 

  • Annulment of unfair clauses. If the contract contains unfair clauses they will be declared null and void even if they have been signed and accepted by the purchasing party

 

  • Contract interpretation. In the event of doubt regarding the interpretation of any of the clauses, the law stipulates that the interpretation most favourable to the consumer will prevail

Here we will set out a list of clauses or stipulations, that under both the law in force and the existent corresponding case law, have been classified as unfair or ABUSIVE for impairing the rights of purchasing parties or consumers:

  • Non- inclusion of completion dates clauses, or those subject to the discretion of the selling party or property developer. In the purchase contract the completion or handover date should be explicitly stated

 

  • Clauses unduly transferring costs to the purchasing party which correspond to the selling party:
    • Document processing and handling fees which as required by law, correspond to the selling party, such as Planning Permission, Registry of Horizontal Property and Registry of the Association of Property Owners, mortgages that finance the construction, Building Control or ‘First Occupation Certificate’, Building, Installations and Construction Work Tax, and insurance premiums
    • Other expenses such as Capital Gains Tax, Public Deeds costs, and any expenses derived from the provision of basic facilities to the property

 

  • Clauses allowing the selling party to unilaterally modify terms of contract:
    • Clauses allowing the selling party to modify the plans:

For any modification to be valid the motives should be explicitly stated in the contract, and in the case that such a modification results in reduction of quality, a proportional reduction of price should be foreseen, or in case that such a modification has serious consequences, the possibility for the purchasing party to terminate the contract should be foreseen

  • Clauses allowing the selling party to unilaterally modify the price of the property
  • Those clauses that allow the selling party to unilaterally waive the contract

 

  • Clauses limiting the responsibility of the selling party:
    • Those that limit liability for defects in the surface area: When the price is stipulated by unit of measurement (price per square meter of the property), in the case of reduced surface, the purchasing party can opt for a proportional reduction of the price or termination of contract; and, when the price is stipulated as ‘flat-rate’ there can neither be an increase nor a reduction of the price
    • Those that limit liability for quality defects: Any information provided in the advertising of the property shall be claimable by the purchasing party, even if is not explicitly stipulated in the contract
    • Those that limit liability for construction defects: joint and several liability of the property developer and any third parties (architects, builders, subcontractors…), should be a requirement

 

  • Clauses that oblige the purchasing party to renounce his or her rights:
    • Subjection to incorrect Judges and Courts
    • Renouncement to choose a Notary
    • Renouncement to insurance or bank guarantees, this is a requirement for Property developers under Law 20/2015. This is in order to guarantee the reimbursement of down payments provided by the purchasing party, and assure they are provided with the details of the special bank account set-up for the purpose of the purchasing process

 

  • Clauses that oblige the purchasing party to acquire complementary goods, services or extras not requested by them. This includes any increase in price for services, extras, financing, surcharges…

 

  • Clauses obliging the purchasing party to subrogation of the original mortgage, or to pay the cancellation costs. The purchasing party may decide whether or not to accept mortgage subrogation, and shall never be obliged to pay the cancellation costs

 

  • Clauses that impose disproportionate penalties in the event of breach of contract by the purchasing party. Those that anticipate the property developer shall retain all down payments made by purchasing party where the latter decides not to conclude the contract, without contemplating compensation for an equivalent amount if the property developer decides to renounce

 

At MSG LEGAL, as an expert Property Law firm, in the scope of our conveyancing service we offer a comprehensive advisory service throughout the purchase of both new build and second hand properties. We will protect your interests from the very beginning of the negotiations right through to the finalisation of the purchase process, to protect you (among other aspects) from any unfair or ‘abusive’ clauses that the property acquisition contract may contain.

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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Recovery the off-Plan Deposits in Spain

A major precedent in case law has been established by the Spanish Supreme court radically changing the prospects of recovering any payment on account or deposit paid for the purchase of a dwelling in Spain when, finally, the property is not built, its completion is late or the Occupancy Permit (Licencia de Ocupación) is not obtained for the dwelling

 

Recovery Off-Plan Deposits in Spain

 

An important ruling of the Spanish Supreme Court on 21 December 2015 establishes that the financial institutions are directly liable and shall be answerable to the buyers, refunding all the sums paid in the purchase process, plus the interest that these may have generated.

This modification to case law effectively establishes the right to recover the deposits paid, according to the following specific requirements:

  • You must file a legal claim directly against the financial institutions.
  • The financial institution is directly liable. Consequently, it is irrelevant that the financial institution did not provide guarantees or sureties for the amounts received or that the developer is solvent or insolvent.
  • You are no longer required to firstly claim against the developer or builder (many of the latter are in a situation of insolvency or liquidation or no longer exist at all).
  • It is irrelevant for the viability of the claim that the developer did not provide surety for the buyer or did not deposit the money received in a special account. The financial institution is also answerable.
  • In the event that a guarantee was provided for the money received (we have already explained that, as of now, such a guarantee is no longer needed to claim a refund), not only can you be sure that the money for which a guarantee was issued will be refunded but also any other amount paid by the buyer, even without a guarantee.

 

Therefore, such a claim is both viable and sound, and has a very good chance of success if the following requirements are taken into account:

The time limit for filing the claim is 15 years as of the date on which the deposit was made, consequently the date of expiry of the right to claim must be taken into account.

There must be a contact of sale or a reservation document signed with the developer. Such a contract must state that the persons who will sign as buyers will pay the deposit directly to the developer. (Consequently, to make the claim you will need the original or a copy of the sales contract and a copy of the payment documents – transfers, cash receipts and or, cheques).

A claim for this reason may only be filed once. Consequently it should be made through a local law firm, an expert in PROPERTY LAW.

If you find yourself in the situation that we have described and paid sums of money for the purchase of a dwelling that was not built,  was completed late or was not issued with the necessary administrative authorisations for occupancy, do not hesitate to contact MSG LEGAL for an initial non-binding free consultation when, after examining your case, we will inform you on the likelihood of success of your claim for the refund of the money you paid, plus the interest that it has generated.

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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