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.

 

 

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

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

 

 

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

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.

 

 

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

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.

 

 

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

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.

 

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 1^st 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.

msg.legal

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.

 

 

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.

msg.legal

 

The European Court of Justice (CJEU) has laid down an important ruling overturning the cap limiting reimbursement for losses sustained due to excess charges by financial entities to May 2013 (established in the Spanish Supreme Court judgement) declaring the cap incompatible with EU regulations.

Therefore, the CJEU ruling establishes that the time-frame should be extended to the entire period of the loan, permitting recovery of the total amount unduly charged.

 

 

Given this new scenario we must keep in mind that the CJEU ruling does not imply an immediate reimbursement of amounts unduly charged by the banks. It is necessary to follow the claim process that we will explain below. In the case of absence of reaction from the banks, it would be necessary to take the claim to court and obtain an order rendering the fixed minimum rate clauses null and void to claim reimbursement of the undue excess charges.

Since the Supreme Court judgement that favoured the claimants on undue charges after May 2013, there have been numerous court claims. It is therefore necessary to differentiate between the types of situations that those affected may find themselves in, depending on the action they have taken to date:

 

– Those affected by fixed minimum interest rate clauses that following court action have obtained a court order. This scenario could be the most complicated as the claim has already been tried

– Those affected by fixed minimum interest rate clauses that have not made a claim to date. In this scenario it is possible to claim reimbursement for undue charges as from the date of entry into force of the clause

– Those affected that have come to an out of court settlement with the financial entity and have signed a waiver for future legal action to claim further amounts.

 

In this scenario it is important to underline the fact that various court rulings have established the aforementioned waivers to be null and void.

In any of the aforementioned scenarios, as always we recommend you contact a Law Firm specialised in the field, to study your case and determine whether it is feasible to initiate a claim.

 

Recommended action for the initiation of your claim

Always contact a Law Firm specialised in the field so as to determine the feasibility of your claim. In order to be able to recover your money, it is necessary for the clause in your mortgage agreement to have been declared null and void previously by the courts.

As in any proceedings you should always try to negotiate an out of court settlement with the financial entity, and if you do not reach a settlement or it is not satisfactory, then proceed to lodge the corresponding court claim.

First, and previous to lodging a court claim, you should make a formal complaint directly to the Customer Services Department of the Bank with which you signed the mortgage agreement, requesting the elimination of the clause and the reimbursement of the amount unduly charged. The Customer Services Department has 30 days from the date of receipt of the request in which to decide whether or not to accept the claim.

In the case that our claim is dismissed or no reply has been received within the stipulated 60-day period, the client may also take the complaint to the Bank of Spain. In any event the decision of the Bank of Spain is not binding.

Finally, if our out of court claims are disregarded, the party affected by the fixed minimum interest rate clause has the option of issuing a court claim in order to render the clause null and void, and demand the reimbursement of the excess amounts payed. The claim would include the undue excess payed plus interest at the legal rate (currently over 3%), plus legal costs (meaning that the court proceedings would not cost you anything). There is no expiry date for claiming the clauses null and void.

 

Possible out of court settlements with the financial entities.

As in previous cases, due to this new CJEU ruling, it is likely that financial entities begin to offer to sign agreements with their clients to reimburse excess amounts paid.

Nonetheless, these agreements must be well revised, as among other aspects they should include the interest generated. Therefore, the agreements offered by the banks should always be thoroughly checked by a legal expert.

At MSG LEGAL we have intervened in diverse claim proceedings for clients affected by fixed minimum interest rate clauses, and have proven successful results in both out of court settlements and court claims. We are at your disposal for any enquiry that you may wish to make at no cost, and will inform and advise you on the feasibility of your claim.

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

msg.legal

 

The Supreme Court Judgement 705/2015 of 23rd December, declares ‘abusive’ the clause in which the financial entity BBVA imposes on the borrower the payment of all expenses, taxes and commissions derived from taking out a mortgage.

 

 

Although the Supreme Court’s judgement refers to a type of clause used by BBVA bank, it is applicable to any bank that has used these kind of clauses in a generic manner in their mortgage agreements, under which they transfer expenses, commissions and taxes to the mortgage consumer.

In the same manner as with fix rate or so called ‘floor rate’ clauses, in order for the courts to render them null and void; it is necessary that the mortgage holder or debtor makes the required formal complaint to the Customer Service Department of the bank, and where applicable, takes legal action through the courts.

Regarding the expenses incurred by the mortgage holder in the setting up of the mortgage, as established in Judgement 750/2015, those applicable are as follows:

• Notary and Land Registry Invoices. The Supreme Court’s ruling establishes that by not permitting a minimum reciprocity in the distribution of expenses deriving from the involvement of a Notary and the Land Registry, and making the borrower bear total responsibility for settlement, this produces an imbalance to the detriment of the consumer, for this reason the clause has been ruled unfair

• Stamp Duty. Equally the Supreme Court establishes that regarding Stamp Duty, the lending Bank or Entity shall be the taxpayer. Namely, payment liability lies with the Financial Entity rather than the mortgage consumer. For this reason, it should be included in the claim

Therefore, if you have signed a mortgage agreement which contains clauses making you liable for payment of all expenses, commissions and taxes, you may make the relevant claim in accordance with the following guidelines:

First you should make a formal complaint to the Customer Services Department of the Bank with which you signed the mortgage agreement. The complaint should be made in writing via registered fax with acknowledgement of receipt and certification of content, in order to place it on record for subsequent proof. Equally you can submit the compliant directly to the corresponding branch of the bank, in writing to the Director or Financial Controller, whom are required to issue a copy duly dated (to certify the registration date), and stamped with the official stamp of the branch or entity.

Within a reasonable period of time following the registry of the complaint (60 days), and in the case that you have not received a reply from the bank, or if the response is negative, it would be necessary to issue a court claim before the Court corresponding to the domicile of the Bank.

The claim lodged in court, will request the clause be rendered null and void due to unfair terms, and the restitution of the expenses payed as a consequence of the mortgage agreement in question. In order to do this, it is necessary to support the claim with proof of payment, fully documented with the corresponding invoices. The handling invoice issued by the bank at the time of the operation should include all payments made in concept of processing the deeds for the loan (Notary, Land Registry, Handling and Taxes). Due to the type of proceedings, the involvement of both a lawyer and a court solicitor are required.

As an example, we will take the claimable expenses for a mortgage set up in 2016 for the amount of 150,000 euros, with a legal liability in event of default amounting to 255,000 euros, and a tax rate of 1.5% (in the Region of Valencia). In this scenario, on top of the tax, around 425 euros in notary fees and 125 euros in Land Registry fees would be added. This amounts to a total of approximately 4,375 euros to be settled by the mortgage consumer due to the ‘abusive’ application of the aforementioned clauses imposed by the banks.

Who can claim a refund of their money?

The period in which you can recover the expenses incurred from your mortgage agreement is unlimited (there is no time-limit or deadline) due to the clause in question being deemed ‘abusive’ in our legislation.  The corresponding claim to be taken before the courts is known as ‘action to render abusive clauses null and void’.

We should take into account that although the claims in question are supported by the aforementioned judgement of the Supreme Court, to date there is no case law in which the doctrine has been applied. Nonetheless, due to the flurry of claims that we foresee to be filed, legal precedents will soon be set on the measures adopted by the courts.

At MSG LEGAL we can advise and assist you from the moment of writing and submitting your initial complaint to the financial entity, as well as throughout the entire process of taking your claim to court if you decide to take further legal action.

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

msg.legal

 

It would appear that sale and purchase of off-plan property has revived, and in some areas with great strength and little criterion. The view of numerous construction cranes decorating our scenery once again, complemented by eye catching advertising panels and temporary sale offices with tempting offers from promoters, is a reality.

 

 

The customer profile for this kind of product is usually a purchaser that does not require the property on a short-term basis, and on occasions purchases with forward sale under competitive initial payment conditions offered by the promoter up until the signing of the deeds. As a result, the purchaser may subconsciously reduce his or her level of precaution and demand, absolutely necessary in any kind of property investment.

In light of sales teams often making haste with slogans such as waiting lists, high level of interest, fear of not making a down payment on time… We are ultimately faced with scenarios and situations that for numerous reasons we assumed would not recur here, at least in the short term.

Due to this scenario, in this article we would like to propose a series of recommendations to be taken into account before signing any kind of private document (waiting list, pre-reservation agreement, down payment, reservation contract…. In any form the Property Developer may present it) and above-all, before handing over any money. These recommendations can only truly be effectively put in practice under the supervision of an independent specialised Property Law and Conveyancing lawyer.

First of all, it is necessary to verify with the Land Registry that the property development plot is registered under the name of the property developer in question.

It is also necessary to verify that the property developer is registered with the Commercial Registry, and that the representative for signing the private contract has sufficient power of attorney.

The following verification that is absolutely necessary, is to confirm that the property development has all of the compulsory administrative permits, in particular the corresponding Construction Permit. If this qualification does not appear in the documentation certifying the ownership of the plot, it is necessary to consult the corresponding City Council to verify the administrative authorisation of the project.

Supposing that all of the previous requirements have been satisfied, we will find ourselves in the phase of signing the private reservation contract and making a down payment towards the final amount.  Thereon the following points should be taken into account:

Regarding the signing of the private document, it should always be revised by a specialised property lawyer whom will make sure that it does not contain any unfair terms, that all aspects are covered and necessary information included (plans, building specifications, completion and handover dates, penalisation clauses for late delivery, cost distribution…). All of the above required by law and in defence of the interests of the purchaser.

Regarding down payments, it is of crucial importance and necessary to demand that the property developer complies with two conditions; Firstly, proof that the amounts paid are deposited in a special account solely for the purpose of financing the construction, and secondly, that from the first instalment that the amounts are guaranteed via an insurance policy or a bank surety to cover the reimbursement of any amount paid plus statutory interest in the event of the development not being completed or the handover of the property being delayed.

Finally, we would like to reiterate once again that you should always consult an independent specialised lawyer from the beginning of the purchase process. It is possible that the vendor or property developer may appear surprised by the presence of a lawyer from the outset of the negotiations (it is not common practice among local purchasers due to the inexistence of Conveyancing in the Spanish legal system), but without doubt it is the most sensible decision to be adopted to assure the protection of your interests, and your peace of mind.

At MSG LEGAL, as independent specialised lawyers in Property Law y Conveyancing, we will advise and guide you during the entire purchase process and act as mediators with all of the intervening parties.

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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As stated in our headline, it is of great interest for those citizens with long-term residence and property ownership in Spain, or those planning to acquire property in the future with the intention of residing on a long-term basis in Spain, to make a Spanish will. Without doubt, we also advise non-resident property owners in Spain to make a Spanish will.

 

The reasons are clear and beneficial for the testators, obviously a Spanish will would only apply to any assets situated in Spain. It would avoid costly probate and translation procedures, and the recognition process of an English will by the Spanish authorities, leading to delays in the inheritance process. All of the above affecting the heirs during emotionally difficult times.

Finally, the reason we consider to be most important is that inheritance regulations established under national laws differ. While the British inheritance law allows discretionary last will and testament, in contrast the Spanish inheritance law limits who you can leave your assets to, it is obligatory that descendants (children) receive two-thirds of your assets. An option which could conflict with the legitimate wishes of the deceased.

Once we have taken the appropriate decision to make a will in order to regulate the inheritance process of our assets in Spain, we should now concentrate on the correct manner to do so.

For that reason, wills should be made in accordance with the requirements laid down by EU Regulation 650/2012, of 4th July 2012, which contains an important amendment as from its entry into force on the 17^th of August 2015 (Article 84).

Although over a year has passed since its entry into force, it is extremely relevant today to warn of its impact. This is due to the fact that there are many foreign residents in Spain whom due to unawareness or incorrect advice, have not acted in accordance with the law. This includes those foreign residents that before the 17^th of August 2015 made a specific will for their assets in Spain, and have erroneously interpreted not to be affected by the amendment.

In fact, initially it was widely interpreted that due to neither the United Kingdom, nor the Republic of Ireland having adopted the regulation, citizens of those nations would not be affected. This deduction, and any other that may have arisen for example from the range of speculative theories resulting from BREXIT, have no legal foundation. Given that the we are subject to the scenario of assets located in Spain, and that the Spanish State has ratified the EU regulation, there is therefore no doubt that any assets in Spain are affected by it.

Previous to the 17th of August 2015, the Spanish Legislation (Civil Code Art. 9.8) applied the national inheritance law corresponding to the country of citizenship of the foreign resident in Spain. As from the entry into force of the EU Regulation 650/2012, wills made by foreign residents in Spain will be bound by default to Spanish legislation and not to that of their country of origin.

So, what happens to wills made previous to the amendment (of 17^th August 2015)? Can we supplement them or include an addendum that clarifies the interpretation?

The only valid solution is to make a new will, expressly stating, as laid down by Art. 650/12, that the testator wishes for the inheritance of his or her assets to be governed by the country of citizenship. This new version will automatically replace any previous version at the National Will Register, providing total security and legal guarantee for the testator and his or her heirs.

Finally, we would like to advise that the options commented in this post and more concretely the decision making capability provided for under Regulation 650/12, only applies to inheritance law (governed by this process). It does not affect under any circumstances any fiscal aspects. This is due to the fact that we are dealing with assets located in Spanish territory, which makes them subject to Spanish taxation legislation. Therefore, the inheritance tax payable will be in accordance with Spanish legislation. In our coming articles we will analyse the topic of management and settlement of inheritance tax, and more specifically the local legislation applicable to the Costa Blanca (Region of Valencia).

As always, we advise you to consult a local expert lawyer before drawing up a will (whether new or a modification of one made previously) in order to protect your interests and above-all the interests of the heirs that you choose.

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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