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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.

msg.legal

 

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.

msg.legal

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.

msg.legal

Repairs on rented properties. Who is liable for payment, the Landlord or the Tenant?

In this article we will deal with a common problem in any rental agreement, usually leading to disputes, disagreements and complaints between the Property Owner and the Tenant.

 

Rental repairs. Spanish Law

 

Spanish legislation, in particular the regulations in force pursuant to Article 21 of Urban Lease Law (LAU), establish the limits and responsibilities between the Landlord and the Tenant, under the following two provisions:

Article 21.1 (LAU), regulates the repairs that the Landlord is liable for, it establishes that “the Landlord shall be responsible for carrying out, without the right to raise the rental price, all necessary repairs to maintain the property fit for use for the agreed purpose”, at the same time the article establishes that if the property becomes unfit for use due to any action taken by the Tenant, he or she shall be held responsible. Therefore, the burden shall lie on the Tenant to prove that the loss or damage has occurred by no fault of their own.

Article 21.4 (LAU), expressly states which repairs the Tenant shall be liable for; “Minor repairs due to daily wear and tear on the property, shall be payable by the Tenant”.

Due to the aforementioned provision being key to this Article, any dispute subject to it shall be resolved by defining repairs as “minor”. The legislation itself does not define a clear interpretation of this definition. The courts however have followed a line of reasoning in their case law which establishes that a repair shall be considered “minor” if its cost is inferior to approximately 150€.

Therefore, we can conclude that that any repairs or damages caused by abnormal use (non routine or non-standard daily use) shall be payable by the Tenant.

Regarding repairs or damage caused by normal daily use, liability for payment is divided into two main categories. On one hand, any repairs that are “significant” (as mentioned above, with a cost exceeding 150€) shall be payable by the Landlord, on the other hand, any repairs that are considered “minor” (with a cost not exceeding 150€) shall be payable by the Tenant.

In view of the above, these issues become subject to evidence, meaning it shall be necessary to prove whether the repairs or damages are caused by normal daily use or abnormal use, or, whether the cause is natural deterioration due the item in question having reached the end of its lifecycle or warranty.

Expert Advice

If you are the owner of a property and you wish to safeguard a solution to these kind of incidents (which will most certainly arise during the term of any rental contract), one option is to include a clause in the rental contract expressly stating that repairs considered to be “minor” are those that do not exceed a cost of 150€, and therefore shall be remedied by the Tenant. As we mentioned previously, this is an approximate amount established by case law, therefore obtaining tenant’s the written acknowledgment of this valuation would prevent any possible conflict on liability.

At MSG LEGAL we remain entirely at your disposal to provide you with expert preventative advise when formalising a rental contract, to protect your interests in the most secure and comprehensive manner possible, whether from the point of view of a Property Owner or Landlord, or from that of a Tenant, providing you with advice and assistance throughout any Real Estate Leasing conflict, whether in or our out of court.

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

Power of Attorney for the transfer of ownership of dwellings in Spain.

During purchase transactions for properties located in Spain, and in the case that one of the parties (whether the buyer or the vendor) resides abroad, it is possible that the party in question is represented by a third party with Power of Attorney to act on their behalf during the purchase process.

 

Power of Attorney in Spain

 

In this article we are going to explore some of the practical aspects of granting Spanish Powers of Attorney (or Notarial Powers), with a focus on their use in real estate transactions. We advise that during the entire process from preparation to signature for granting power, you should seek the advice of a Spanish lawyer.

Power of Attorney in Spain is a public document, approved by a Spanish Notary that permits a person (the donor or granter) to appoint another person (the representative) to act on their behalf for specified legal transactions. In order to be able to act on behalf of the donor or granter for certain legal procedures, the representative must always provide proof of his or her capacity to act as a representative by means of a certified copy of the Power of Attorney.

The person granting Power of Attorney may revoke or annul it at any time by requesting the representative to return the certified copy of the Power of Attorney. In the case that the representative does not do so, it shall be necessary to issue a public deed revoking the power and to duly notify the representative, under the requirements of the Notary.

How to grant Power of Attorney

  • Before a Notary in Spain
  • In the Spanish Embassy or Consulate corresponding to the place of residence of the donor or granter
  • Before a Notary in the country of residence of the donor or granter (Notary Public in the UK, Notaire in France)

The least complicated, fastest and most cost effective option to grant Power of Attorney is before a Notary in Spain. If you are not a Spanish citizen you must be accompanied by a witness that will act as a translator, your lawyer should carry out this task.

If you choose to grant Power of Attorney through the Spanish Consulate, your lawyer should prepare the documentation in double-column format with both required languages (Spanish, and the official language of the donor or granter’s country of residence) and send it to the embassy or consulate in order to proceed to signature of the declaration. In this case Hague Apostille validation (under The Hague Convention) shall not be necessary.

If you decide to grant Power of Attorney before a Notary in your country of residence, we would advise that your lawyer issues the document to the Notary in both languages in double-column format. In this case as well as granting powers they must be validated by The Hague Apostille in order for them to be legal in Spain.  In the case of the UK, you must contact the Foreign & Commonwealth Office in order to obtain The Hague Apostille validation stamp or vignette.

Regarding the content and duration of the Power of Attorney, we strongly recommend that if a specific Power of Attorney is required for a property transaction in Spain, that you delegate the matter placing it in the hands of specialised lawyers in this field. They will strictly delimit the content to the exact tasks required for the Conveyancing process, but at the same time with sufficient leeway to exercise the required rights and comply with the obligations derived from the contract until its extinction. They will assure that the power is sufficiently concrete and delimited to what is strictly necessary in order to avoid the authority being exceeded by the representative.

 

Expert Advice

By means of a recent ruling of September 14th 2016, the Spanish General Directorate of Registries and Notaries has questioned Powers of Attorney granted in the UK by Public Notaries in England. To our knowledge, by correctly wording the required clauses in the documentation prepared by the Spanish lawyer and stating more explicitly that the capacity of judgement of the donor or granter authenticated by the foreign Notary Public is equivalent to that of a Spanish Notary, this would be sufficient to circumvent the legal impediment.

At MSG LEGAL we provide a Power of Attorney preparation service to formalise property transactions, for both the signature of the powers in a Spanish Notary and the recognition of the signature in your country of residence. We coordinate our practice with the corresponding Spanish Consulate or Notary Public, take care of dispatching the documentation in both languages, the preparation for the donor or granter’s signature, and if necessary subsequent legalisation with The Hague Apostille.

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

Fees, expenses and taxes for the purchase of a property in Spain.

One of the most important issues for the buying party to consider when planning to purchase a property in Spain, is to foresee the costs they will face in addition to the applicable taxes on the transaction. In this article we will clarify the costs involved, the parties liable for payment, and to whom and when payment should be made.

 

Fees, expenses and taxes for the purchase of a property in Spain.

Purchase/sale fees

Real Estate Agency.  The real estate agency fees should be settled by the party that contracts their services, usually the selling party, and payment should be made when the sale takes place. The amount is not regulated by law, but in practice it tends to vary between 3% and 5% of the total value of the sale price.

Notary. The Notary fees are established by Law and can vary between 0.5% and 1% of the sale price specified in the public deeds. Regarding who is responsible for payment, the Law stipulates that , if nothing is agreed in the private purchase contract, the selling party will pay for the major part of the deeds (the master copy or original), while the buying party will pay for the remaining part, being the copies.

Land Registry. Land registry fees, like Notary fees, are regulated by Law and vary according to the value of the property. The buying party is responsible for payment. A very important aspect to be taken into account is the registry of the mortgage (if there is one involved). As we already mentioned in a previous article, the Spanish Supreme Court ruling (ST 705/2015 of 23rd of December) declared to be unfair the clauses in mortgage contracts that impose on the borrower (or purchasing party), payment of all expenses, amongst which are those of the Land registry fees.

Solicitor. The expenses corresponding to contracting a solicitor for Conveyencing services are calculated by applying a percentage on the final purchase price (between 1% and 1.5%) together with an additional minimum service fees of €1,500. As always we recommend that when contracting a solicitor for your purchasing process, you choose one from the area where the property is located, specialised in Property Law and duly registered and recognised by the Illustrious Bar Association.

Mortgage Expenses. the expenses involved in obtaining a mortgage correspond to the valuation of the property, and those that the financial entity establishes as implicit to setting up the mortgage. In that regard we reiterate the position held by the Spanish Supreme Court regarding certain expenses that the financial entity is liable for (amongst others Notary fees, Registry fees, Stamp Duty and handling fees).

 

Taxes derived from the purchase of a property.

The buying party is liable for payment, and the taxes involved depend on the type of property in question.

If it is the first transfer of ownership (a new-build property) the transaction will be subject to Value Added Tax (VAT). In the case of a dwelling the tax rate will be 10% of the total purchase price. It will also be necessary to pay Transfer Stamp Duty, which will also be a percentage of the asset value, this varies depending on the region in which the property is located. In the Costa Blanca (Region of Valencia) the general taxation rate is 1.5% (0.1% if the property will be the main residence of the buyer).

If the property is second hand, the transaction will be subject Property Transfer and Certified Legal Documents Tax (TPO y AJD) and similarly the tax rate will be a percentage of the asset value, this also varies depending on the region in which the property is located. In the Costa Blanca (Region of Valencia) the general taxation rate is 10%.

 

Taxes and expenses derived from Property Ownership

Associations of property owners. For properties under the Horizontal or Condominium Property Regime (those situated in residential buildings or urbanisations), both the amount payable, and dates the applicable fees may be due, will be approved by the corresponding General Board of Owners. For that purpose, a meeting should take place on a yearly basis.

Local Property Tax (IBI).  This is an annual Council Tax. It is calculated based on the cadastral value (not the sale price of the property). Legally, the party liable to pay this tax is the party registered as the property owner on the 1st of January of the year in question, independent of any private agreements which may have been reached between the buying and selling parties.

Rates for the Collection and Disposal of Household Waste. This is a Council Tax corresponding to the district in which the property is located. The corresponding District Council will establish the amount payable and the annual periods payment shall be due.

Wealth Tax. A tax levied on personal capital (if a property is of shared ownership each of the owners will settle the amount due for the percentage of their share in the property). This is a Central Government tax applicable to property or taxable assets, subject to their net value. It is settled on an annual basis and there is a minimum threshold of 700,000€.

It must be taken into account that there is a bilateral agreement in force between Spain and the UK, which prevails over the domestic law of each State. Under this agreement, UK residents who own properties in Spain shall pay Wealth Tax in Spain on properties that they own, but not on any other assets they may have, such as funds in Spanish bank accounts, shares, or shareholdings in Spanish companies.

Non-Resident Income Tax (IRNR). Non-resident property owners in Spain shall be liable for Non-Resident Income Tax (IRNR). The taxable income shall be 1.1% of the assessed value of the property (or cadastral value), applying an additional 24% to the resulting figure (19% in the case of EU citizens).

 

Expert Advice

If the selling party is a property developer, it is forbidden by law for the buying party to take responsibility for expenses that legally correspond to the developer. For example, Capital Gains tax, expenses for registry of the new development and horizontal property division, or cancellation fees for any mortgage that may exist on the property, when acquiring the property free of encumbrance or choosing to take out a mortgage oneself.

At MSG LEGAL, as an independent law firm specialised in Property Law and Conveyancing, we remain entirely at your disposal for any doubts or further questions you may have regarding the information we have provided in this article.

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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Purchase of second hand property. Claims for defects or hidden imperfections.

In this article we will deal with issues that may arise when purchasing second hand or used property, and in particular the purchase of property on an ‘as is’ basis. This can involve important consequences for the purchaser with regard to claims for compensation in the case of defects, imperfections or repairs following acquisition of the property.

 

second hand property purchase in Costa Blanca

 

We stress that the advice provided in this article refers to cases of purchasing second hand properties, and by no means applies to off-plan purchases, or new build properties purchased directly from the property developer, where the acquirement comes with a series of guarantees not applicable to kind of acquisitions we will explain below.

Spanish Law, and in particular the Civil Code establishes that the vendor is obliged to take responsibility for any HIDDEN IMPERFECTIONS found in items sold if the vendor has made them unfit for the use they were intended for. Or, if the vendor has diminished usability to a degree that if the buyer had been aware, the purchase would not have gone ahead, or a lower price would have been agreed.

Nonetheless, it is important to take into account that when selling a second hand property, the vendor will NOT be responsible for evident defects or those that are visible. Neither will the vendor be responsible for those that are not visible if the purchaser is a surveyor and due to his or her profession should be aware of them.

Therefore, according to the regulations in force, and the doctrine of case-law, in order for the vendor to be responsible for defects or hidden imperfections in the sale of second hand properties, the following requirements must be met:

  • The imperfections or faults must be hidden, this is to say, the defect must not be evident or visible. In this case the buyer would be aware of the defect and therefore the purchase would not go ahead, or a lower purchase price may be agreed
  • The imperfections or faults must be pre-existent to the sale. The defect must already exist at the time of signing the contract even if it appears later. Therefore, the buyer is required to prove not only the existence of the defect, but also its existence at the time of signing the contract. If this is not the case, the vendor will not be deemed responsible
  • Finally, the defect must be serious, that is to say that the level of seriousness causes the purchase to be devoid, totally in terms of the designated use of the property in question, or that the designated use is diminished partially to an extent that that had the buyer been aware of the reduction in value, he or she would not have acquired the property

Claims period

The vendor of a second hand property is responsible for the hidden imperfections found, provided that the imperfections appear within six months as from the handing over of the property.

The purchaser should file the claim within this six-month period, being the expiry date for any claim. We must also support the claim with an expert report proving the existence of the aforementioned legal requirements (being the existence of a defect, hidden, serious and pre-existent to the sale).

Expert Advice

In the case that you are the vendor of the property, you must assure that it is clearly stipulated both in the initial sale contract, and in the subsequent Public Notary Deeds, as an ‘as seen’ property. You must also assure that the buyer expressly waivers the right (allowed by law) to make any claims subsequent to purchase for any defects found in the property.

In the case that you are the purchaser of the property, you should make sure the property is professionally surveyed, and that any defects, imperfections or repairs required are certified previous to signing any contact or handing over any deposit or partial payment on the property. You should then make sure that the findings are included in the private sale contract.  You can either negotiate a reduction in price corresponding to the estimated repair costs by way of compensation, or stipulate that the repairs must be carried out by the vendor previous to signing the deeds.

In both cases, at MSG LEGAL, our team of Property Law experts can advise you flawlessly on drafting the terms and agreements to be included in the contract, therein protecting your personal interests and rights in any scenario which may occur.

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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