Gunnercooke LLP shortlisted for UK Law firm of the year

 

Gunnercooke Manchester

 

Picture of Manchester where Gunnercooke LLP has one of its offices (together with London and Leeds).

An extract from LegalWeek

Allen & Overy (A&O), Kirkland & Ellis, CMS and Fieldfisher are among eight firms set to battle it out for Law Firm of the Year at the British Legal Awards next month.

The quartet will go head to head with Clyde & Co, Latham & Watkins, Gateley and Osborne Clarke for the coveted award, with the winner to be announced at a ceremony hosted by Legal Week on Thursday 30 November.

A host of law firms and in-house legal departments will compete across team and individual categories including M&A Team of the Year, General Counsel of the Year, London Office of the Year and UK Law Firm of the Year, with the event to be held in Finsbury Square in the heart of the City.

Some of The British Legal Awards 2017 firms shortlisted are :

UK Law Firm of the Year

gunnercooke
Harbottle & Lewis
Kennedys
Mishcon de Reya
Shoosmiths
Stevens & Bolton

European Law Firm of the Year

A&L Goodbody
Asters
Cuatrecasas
Garrigues
Kinstellar
Magnusson
Noerr
Perez-Llorca

Slaughter and May and Skadden Arps Slate Meagher & Flom will run against a strong line-up of firms including Linklaters and Herbert Smith Freehills for M&A Team of the Year (large deal), while A&O, Clifford Chance (CC) and Sullivan & Cromwell are among those chasing the banking and finance prize.

On the disputes front, Clyde & Co, Freshfields Bruckhaus Deringer and Signature Litigation are among those in contention for Litigation and Dispute Resolution Team of the Year

Meanwhile, the London Office of the Year award will see the likes of White & Case, Morrison & Foerster and Cooley compete with names including Ireland’s Mason Hayes & Curran and Portugal’s Gomez-Acebo & Pombo.

Other private practice prizes will recognise teams including property, restructuring, and private equity, as well as rewarding firms’ efforts in areas such as technology and diversity.

The in-house legal community is also well represented at the awards, with a number of new prizes open to legal teams within corporates. Virgin Media, Avaya, Nokia and Trainline are all in contention for Legal Department of the Year (TMT), while Barclays, TSB and LV are among those running for the equivalent financial services award.

Winners will be selected by an independent judging panel later this month. The panel includes senior business lawyers from major banks and corporates, as well as former private practice leaders.

Best of luck to all the law firms shortlisted.

Antonio Guillen

Spanish desk

Gunnercooke LLP

BUYING PROPERTY IN SPAIN UNDER-VALUE

 

Spain is still recovering from the brutal economic recession that has affected its economy for the last 10 years. One of the main consequences of the recession was the collapse of the property market where properties went down in value consistently, reaching lower values that left many property owners in negative equity as their properties were worth less than their mortgages.

In certain areas of Spain, like the coast and seaside resorts, the value of properties went down 30% to 40%. These properties are now being purchased by savvy foreign purchasers who have identified the chance to buy a property in a sunny place for very affordable prices. What many purchasers do not know is that we are facing some cases where the property is purchased below its tax value. As this may sound gibberish to those who are not familiar with Spanish law, let me explain what this means in layman terms and with an example.

Imagine that Joe Bloggs wants to buy a property in Fuengirola and the property is for sale for 100.000 Euro. Joe then makes an offer of 90.000 Euro and the seller, another British, let´s call him John Smith, accepts the offer because he wants to move back to the UK to be closer to his parents who are getting old and need some care. Joe Bloggs is delighted to have found a bargain and decides to buy the property for 90.000 Euro. However, Joe may not know that properties in Spain have a minimum tax value. This is the minimum value assigned by the Tax office to each property and the minimum value which the Tax expects the property to be sold. Joe did not instruct a lawyer to advise him in the purchase and decided to buy with the help of an estate agent. The latter did not check the tax value of the property and did not advise Joe that, actually, the property had a minimum value of 125.000 Euro.

The transfer tax or stamp duty in Fuengirola, Andalucia, for a property of that value is 8%. Joe, after completion, pays 8% of the purchase price (7,200 Euro) to the Tax Man in Spain and then forgets about this matter.

6 months letter he receives a letter from the Tax Office saying that he has bought under value and that the tax paid should have been 10,000 Euro (8% on 125,000 Euro). The letter states that Joe needs to pay the shortfall of 2,800 Euro plus another 25% penalty charge. Joe can choose between a) paying the shortfall and the fine or b) appealing the decision. However, option b will probably involve legal fees in the region of 1000 Euro and a valuation fee of around 500 Euro. Furthermore, there is no guarantee that Joe will succeed with the appeal. In a case like this one, Joe might be better paying the shortfall and the fine.

All the above could have been avoided if Joe, his lawyer or his estate agent had checked the minimum tax value of the property before committing to purchase the property. It could well be the case that Joe, after getting this information, would have still bought the property as it was a bargain but this fact is an important fact that Joe and any potential purchaser should know and consider before buying property in Spain. The minimum tax value should be considered to avoid surprises. Unfortunately, the only way someone like Joe would have learnt about this would have been if he had used a diligent independent lawyer. Food for thought.

I am British. Can I still get a Spanish passport?

I have connections with Spain. Can I apply for a Spanish Passport so I can keep my European status in the event of a potential hard-brexit?

Claudia Font
Claudia Font
Antonio Guillen
Antonio Guillen

 

 

 

 

 

 

 

 

 

Now that Brexit has been implemented, some British citizens with connections with other European countries are considering applying for dual citizenship (nationality) in those countries to which they have a close connection (whether is by blood or marriage), so they can keep a European passport.

We will briefly explain in this article how British citizens with connections with Spain can apply for a Spanish passport. You will note that not everyone with links in Spain qualifies automatically for a Spanish passport. However, there are numerous cases where a Spanish passport can be obtained.

See below a summary of the most common questions that our clients have been asking to us after Brexit in this regard:

I have a property in Spain, and I spend my holidays there with my family. Can I apply for Spanish Passport?

NO. Owning property and spending holidays in Spain, even if you have been doing so for a long time, will not allow you to apply for Spanish citizenship.

My partner is Spanish. Can I apply for a Spanish Passport?

NO/YES. Being married to a Spanish citizen, even if you have children together, does not entitle you to become a Spanish national. However, if you are resident in Spain, have been living in Spain, legally and continually, for the last twelve months, and you are married to a Spanish citizen, then you are entitled to apply for Spanish citizenship.

I am currently living in Spain. I am retired and moved to Spain some years ago.

NO/YES. The residence is one way to be able to apply for Spanish passport. However, there is a limitation period of 10 years. If you have been living in Spain, legally and continually, for the last ten years, then you are entitled to apply for Spanish citizenship.

There are some exceptions that may allow you to apply before the end of the 10 years period. A Spanish lawyer, or ourselves if you do not have one, should be able to advise whether some of the exceptions to the rule will apply to your case.

My parents are/were Spanish but I am British and I don’t have Spanish Passport. Can I apply for it?

YES. If your father or mother are/were Spanish but you do not have a Spanish passport because you were born in the UK and they did not register your birth in Spain, you can still apply for a Spanish passport.

You will be considered a Spanish national “by origin” as you are already considered Spanish by Spain. However, there are some formalities that you should follow to obtain a Spanish passport.

First of all, you will need to register your birth at the Spanish Civil Registry and once you have your Spanish Birth certificate, you will be able to apply for Spanish passport. Once again, a Spanish lawyer should be able to help with the paperwork if you prefer to get some assistance.

Can I be I sure that I will not lose my British nationality?

Although the United Kingdom and Spain have not signed any dual citizenship agreement, at present there is no reason to think that you cannot hold both passports.

At present, current laws in the UK allow British citizens to be British and to have a passport of certain countries. Dual citizenship is therefore allowed in the UK in certain cases, such as with Spain. You can therefore apply for a Spanish passport and keep your British citizenship. Â

Spanish law only accepts dual citizenship or nationality with some countries (the UK is not one of them). However, as the UK accepts dual citizenship, to avoid losing the Spanish citizenship, a formal statement needs to be made if you want to keep your Spanish citizenship, within three years from having obtained the Spanish citizenship. With that statement before the Spanish Authorities, you will not lose your Spanish citizenship.

How should I proceed if I am entitled to apply for Spanish citizenship?

You can see the legal requirements to apply for Spanish nationality on the Spanish Government website (www.mjusticia.gob.es) or contact the Spanish Embassy or Consulates in the UK (www.exteriores.gob.es). Doing the process yourself is free so you only will need to pay some taxes and stamp duty.

You can also contact a Spanish lawyer to assist you with the procedure. The Spanish desk of Gunnercooke www.gunnercooke.com provides a tailored service for this type of matters.

Claudia Font & Antonio Guillen

Spanish Desk

Gunnercooke LLP

 

 

 

 

 

 

 

Question to a UK solicitor: Do your clients need a Spanish will for their assets in Spain?

Phot for IHT article

It is quite likely that you will have one or two clients with assets in Spain and when it is time to deal with their estates, the probate in Spain could be a source of uncertainty or a source of conflict if there is not a Spanish Will in place. We can help you and your clients to avoid delays when dealing with cross-border estates between UK- Spain.

As you are aware, the European Regulation on Succession (EU) No 650/2012 started to create effects on 17th August 2015 (its rules are applicable to the succession of persons who die on or after 17 August 2015). The EU Regulation was ratified by Spain but not by the United Kingdom. However, English nationals can still take advantage of one of its important points which is to opt for their national law in a Will.

One of the main changes that the EU Regulation introduced is the fact that the connecting factor on applicable law has changed from Nationality to Habitual Residence. (Please note that the EU Regulation does not contemplate the concept of “domicile” that on the other hand, does not exist under Spanish law). This will help us to solve disputes on applicable law in cross border estates UK- Spain.

We should distinguee between British citizens living in Spain and British citizens living in the UK with assets in Spain.

In both circumstances, we would suggest drafting a Spanish Will along with the English Will. It will help your clients to avoid intestate successions in Spain which would turn the probate process in Spain time-consuming and complicated.

At that point, it is important that both you, as their advisor on the English side, and the Spanish lawyer, work collaboratively to ensure that the Spanish Will applies only to the Spanish assets by choosing the national law, and ensuring that none of the wills revokes each other.

A Spanish Will can be signed either in Spain in front of a Spanish Notary or in the UK, complying with certain formalities of a UK will and certain formalities of a Spanish will, which if drafted by the right professional would be easier for your clients.

A Notarial Will Signed in Spain, requires to be signed before a Notary Public, no witnesses are required and should preferably be drafted in two languages unless a translator is present. Finally, the Will should be registered with the Wills Registry, as in Spain, when a person dies we can ask for a last Will certificate that will show us when the last will was signed, before which Notary and in which date.

If your client opts to sign a Spanish Will in the UK, it should preferably be drafted in two languages, with one or two witnesses (depending if it is signed in England or Wales or in Scotland) and it should be preferably signed before a Public Notary and legalized with the apostille of The Hague Convention. Finally, the Will should be registered with the Wills Registry in Spain.

Does your client really need a Will specific for Spain? It is not compulsory but advisable. As mentioned above, it helps to avoid potential conflicts of law, allows to focus on the tax side of each jurisdiction, speeds the administration process, and last but not least avoids interpretation problems.

In terms of IHT in Spain (which is payable by the beneficiary, and not the estate), it should be noted that in Spain there are different tax laws applying depending on the location of the assets (Autonomous Regions).

If you have clients with assets in Spain we would strongly recommend them contacting a Spanish lawyer, with some knowledge of the laws in the UK, to advise on the different types of wills, tax consequences and practicalities of each will, specially now in the verge of an exit from the European Union.

Gunnercooke LLP

Spanish Desk

Antonio Guillen antonio.guillen@gunnercooke.com

Claudia Font  claudia.font@gunnercooke.com

PRACTICAL CASE:

I NEED TO APPLY FOR A SPANISH NATIONALITY FOR MY CHILD WHO LIVES IN PAKISTAN. HOW CAN I DO IT?

At Gunnercooke LLP we have seen a noticeable amount of enquiries from Spanish-Pakistani families where one of the members of the family is Spanish and the other one is usually from Pakistan (or another country). In most of those cases, the family lives in the UK and has a son or a daughter abroad (either in Spain or in Pakistan) waiting to obtain a Spanish nationality in order to reunite with the family.

The normal practice is for the parents of the child to apply for the minor´s Spanish nationality at the Police station in Spain or at the relevant Consulate abroad (for instance Islamabad). However, very often the minor lives abroad (Spain or Pakistan) and the parents cannot travel abroad because they are working in the UK. In those cases, one of the parents or a third person can apply for the minor´s nationality by way of a notarial power of attorney.

See below the possible scenarios and their solution:

A.- Parents and minor living in Spain.- They can apply for the minor´s Spanish nationality at the local Police Station.

B.- Parents and minor living in Pakistan.- They can apply for the minor´s Spanish nationality at the Spanish Consulate in Islamabad.

C.- Parents and minor living in the UK.- They can apply for the minor´s Spanish nationality at the Spanish Consulates in London and Edinburgh.

D.- Parents living in the UK and the minor living in Spain with relatives.- The parents can grant power of attorney to each other to apply for the minor´s nationality in Spain or alternatively, grant power of attorney to a third person to enable him/her to apply for the minor´s nationality in Spain.

E.- Parents living in the UK and the minor living in Pakistan with relatives.- The parents can grant power of attorney to each other to apply for the minor´s nationality in Pakistan or alternatively, grant power of attorney to a third person to enable him/her to apply for the minor´s nationality in Pakistan.

 

It is therefore possible to find a solution in scenarios D and E. The Spanish desk at Gunnercooke LLP has experience in drafting the necessary powers of attorney to enable one of the parents or a third person to apply for the minor´s nationality at the country where the minors is residing.

Obviously, our expertise is restricted to drafting the power of attorney. We do not advise on Spanish nationality applications but we can certainly help with the power of attorney and save the families the hassle of having to fly to the relevant country when their normal life is taking place in the UK.

For further information please contact

Antonio.guillen@gunnercooke.com

07872808598

 

 

Have your clients paid high Inheritance or Gift taxes in Spain in the past?

Gunnercooke

Pursuant to the European Court of Justice´s decision of the 3/9/2014 they could be entitled to ask for a refund

The Spanish inheritance and gift tax is a national tax but the Spanish Government transferred it to the regional bodies (autonomous communities), who have autonomy to legislate and collect the tax. The autonomous communities have legislated a number of tax benefits that are applicable to taxpayers, resident in their regions.

The key point is that most of the Autonomous Regions have introduced tax benefits to their residents, i.e. in the Balearic Islands (Mallorca, Ibiza or Menorca) the inheritance transfers between immediate family members, if they are residents, are taxed with a maximum of 1% in most estates.

The problem is when we are talking about non-Spanish residents because the tax is not transferred to the regional bodies and the state rules apply without the said benefits. This implied that in the past a person who was not resident in Spain was paying a higher Inheritance tax than a person who was resident in that country. This was clearly a discrimination within the EU and many groups of affected individuals and professionals complained before the EU Courts.

In 2007 the European Commission sent a warning to Spain about a potential incompatibility between the Spanish inheritance and gift tax rules with Articles 21 and 63 of the TFEU and Articles 28 and 40 of the EEA. The Commission formally requested Spain on the 5th May 2010 and 17th February 2011 to take action to ensure compliance with EU rules. As Spain failed to take action, the Commission decided to take Spain to the CJEU and the European Court of Justice declared in its Decision dated 3th of September 2014 that this legislation breached the free movement of capital and it was contrary to the European laws. Spain was therefore forced to amend its legislation in that way.

Knowing that at present the inheritance or gifts between non-Spanish residents have the same benefits that residents have, the key questions are:

What about the taxes already paid by non-Spanish residents before that European Decision? Can we claim a refund for the excessive taxes?

The effects of the CJEU Decision 3/9/14 are not temporary limited and therefore if your clients have paid the inheritance or gift tax in Spain as a non-resident they should be able to claim for the reimbursement of the excess paid.

We would recommend contacting a Spanish Lawyer to review the Inheritance or Gift taxes already paid by your clients in Spain before 2014, and more importantly, if your clients are going to pay taxes in the following months, a Spanish Lawyer will also help them to decide the best way to minimise taxes, without the need to appeal for a refund.

On the other hand, we would also recommend your clients when buying in Spain, to consider the different tax rates and take into account the different regions and their tax rule, before deciding where to buy. We all know that laws can change, but why do not take this into account if it can help clients to save some money?

Claudia Font & Antonio Guillen

Spanish lawyers at gunnercookellp

1 Cornhill London EC3V 3ND 53 King Street Manchester M2 4LQ

 

E-mail: claudia.font@gunnercooke.com       E-mail: antonio.guillen@gunnercooke.com

D: 07788585115                                                  D: 07872808598

 

 

Spanish mortgages – Latest news.

 

Following our previous article about mortgages in Spain.

The CJEU resolution (21th of December 2016) allows consumers to claim their money back retrospectively from Spanish Banks

 

As we explained in our previous article, The Court of Justice of the European Union (CJEU) was recently asked to decide about an important case for Spanish consumers as well as for Spanish Banks. The final decision has now been issued and this is good news for those individuals who got a Spanish mortgage but not for the banks.

Some of you will recall that some Spanish mortgages signed in the last 15 years contained a clause that Spanish Courts recently declared null and void because of the “lack of transparency” and “the failure to inform customers adequately” when they signed the mortgage deed. These clauses are known as a “cláusula suelo” which means that they are subject to a minimum monthly payment even if the interest rate, which usually has a variable rate linked to the Euribor, is negative.

If you bought a Property in Spain during the property bubble (2000 to 2008) you were probably paying the appropriate interest. However, the interest rates were quite low after the recession and those who had a “clausula suelo” on their mortgages have been paying an unfair and excessive interest on their mortgages which they can probably claim back.

The consumer’s action group (Adicae) started in 2013, on behalf of 15.000 mortgage holders, a claim against banks claiming for the nullity of the “cláusulas suelo”, after these had been declared “abusives” by the Spanish Supreme Court but with a retrospectivity to May 2013. This was clearly unfair. If a clause in a mortgage was considered abusive then the consumer’s right to claim should not be capped to May 2013. It should be retrospective to the date in which the mortgage deed was signed.

The said action group went to Luxembourg asking for the backdating to the date that the mortgage was signed and the CJEU has today decided that Spanish Banks have the obligation to refund unlawful interest from the very beginning: backdated to the date the mortgage was signed (instead of May 2013).

This means that Spanish banks have to pay consumers around €4.000.000. Goldman Sachs says that BBVA will be the Spanish Bank with a higher debt in front of consumers with €1.815.000.000; CaixaBank (La Caixa) with €750.000.000; following them: Banco Popular and Bankia with €160.000.000. These are the main banks but there are around 40 more banks involved.

Obviously, there are some exceptions depending on the mortgage holder’s profiles or depending on the specific circumstances of each case, but what is clear is that if you or your clients signed a mortgage in Spain during the property bubble years you or them could have the right to claim some money back.

In the following months Spanish Banks will probably try to sign transactional agreements with consumers. We strongly recommend to contact a Spanish Lawyer for advice to 1) analyse your mortgage in detail and inform you if contains a “cláusula suelo” and 2) see if you have the right to ask for a refund when that Decision takes place and last but not least 3) to deal with your Bank to ask for the refund or to negotiate with it.

 

 

Claudia Font & Antonio Guillen

Spanish lawyers at gunnercookellp

1 Cornhill London EC3V 3ND 53 King Street Manchester M2 4LQ

 

Spanish Powers of Attorney signed in the UK

image-for-poaA new Spanish case Decision by the Director General of Notaries and Registrars in Spain (DGRN) has been issued on the 14th of September 2016 affecting Spanish Powers of Attorney signed abroad and therefore also those signed in the United Kingdom.

The said decision of the DGNR rejected the registration in Spain of a purchase transaction where a Spanish Power of Attorney signed before an English Notary Public had been granted. The reason for rejecting the registration of the document was that the Land Registrar considered the powers and faculties of the English Notary Public who notarised the Power of Attorney (POA) not sufficiently proved.

Under the aforementioned Decision, a foreign POA should have the same structure than the Spanish public documents. This means that the document should be signed by an authorized person with capacity to give faith and certify the identity of the donor/grantor and his/her capacity.

 

This Decision stated that the foreign POA should also mention that it will be legalized according to the relevant International rules. In the case of a POA signed in the UK, this means the legalisation of the document with the apostille of the Hague Convention.

 

The key point is to ensure on the document that the UK Notary public is giving sufficient warranties to the relevant Spanish authorities as to the capacity of the donor/grantor. From now on, a Spanish POA where the UK Notary Public is restricted to certifying the identity of a person will not be sufficient. A Judgment on capacity will also be required.

 

We are of the opinion, that the said decision cannot be extrapolated to all cases. The power of attorney that created this “storm” of doubts was a power of attorney solely drafted in Spanish and the Notary Public in question limited his involvement to adding a certificate to the power of attorney which lacked any mention to capacity. We therefore think, and hope, that Spanish Notaries and Land Registrars will reconsider their position with regards to the powers of attorney executed in the UK and will soon start to recognise these again. However, there could be the odd exception where a Spanish Notary or Land Registrar will turn down a perfectly valid power of attorney executed in the UK. To avoid these kind of situations, some carefully attention needs to be put into the drafting of the power of attorney to ensure that the document has a higher chance of being accepted in Spain.

Do not hesitate to contact gunnercooke’s Spanish desk if you require further information or help with the signing and execution of a Spanish Power of Attorney in the UK.

A quick guide on buying property in Spain for UK solicitors

Beach huts

 

 

 

 

 

 

Do you have a client looking to buy property in Spain?

How can you help him/her from the UK?

 It is quite likely that you will have one or two clients looking for a property in Spain. The uncertainty of Brexit and the temporary weakness of the Sterling pound has not stop British buyers from their dream of buying a home in Sunny Spain. It is true that they are not buying as much as they did before the recession but they are still buying second homes and looking for a place to retire or a place to spend family holidays.

Very often, clients will contact their trusted advisors to see if they can give them some guidance or recommend a lawyer able to deal with the purchase of the property in Spain. Obviously, you cannot be expected to be versed on Spanish law and the normal thing is to recommend the client to look for a Spanish lawyer or to recommend one, if you have come across a firm in the past and you were happy with the service provided. Having said that, knowledge is never a burden and therefore see below a few tips on what should and what should not be done when buying property in Spain which will prove of help if you are approached by one of your clients asking for advice:

1) Help your client to make an accurate budget.

Apart from the price of the property your client should consider other costs involved in the transaction:

– Taxes, Notary and Land Registry: Approximately 10%-12%.

– Spanish Lawyer fees*

– Surveyor**

* althoughnot mandatory (because the Spanish Notary usually carries out the main checks on the title and charges), we would always recommend instructing a Spanish lawyer who can collaborate with you when your client is buying in Spain. He will carry on a full due diligence on the property and draft the necessary contract. The Notary Public will not do the above.

** we would recommend to have one when your client is buying a resale property in order to be 100% sure about what yourclient is going to buy.

2) Inform your client that he/she should save a 30%-40% deposit plus 10%-12% for the Notary, taxes and Land Registry fees.

Nowadays, most of Spanish banks are not offering mortgages which exceed 70% of the appraised value of the property. Your client will need to ensure that he/she has enough deposit to complete on the purchase, usually around 30%-40%.

3) Your client should have a clear idea of what he is planning to buy before committing to a purchase

Spain has different regions with big differences between them in terms of weather, lifestyle, tourism, etc and most importantly, in terms of price. We would recommend your clients to visit the place in winter so they can get an idea of the way of life outside the tourist season.

Once they decide where they want to buy, the second step is to consider the different types of properties they can buy, i.e. brand new, old property, off-plan property, urban or rustic land, and obtain legal advice to ensure they are fully advised on all aspects of being the ownerof a property in Spain.

4) Encourage your client to check different options of mortgages.

Make sure your client fully understands the conditions of the mortgage offer. We would recommend to have the draft mortgage deed reviewed by a Spanish lawyer in order to ensure that it does not contain abusive clauses. In our recent article about Spanish mortgages we talked about some abusive clauses that some Spanish lenders have been including in their mortgages in recent years and that should be avoided when getting a Spanish mortgage.

Look for the mortgage which is most appropriate for your client´s income and financials. There is a range of mortgages on offer and yourclient should pay special attention to the interest rate, repayment period, fees for setting up the mortgage as well as early repayment and cancellation fees.

 5) Advise your client to reserve the property and sign a purchase agreement or “contrato de arras”.

If yourclient finally finds “the” property, he/she will have to reserve it while you and your Spanish lawyer will be collaborating and dealing with all the checks that the transaction requires to ensure that they are buying safely. Your client will need to pay a reservation fee of around 3000 Euro which will take the property out of the market. Then, once all the checks have been done, and the documentation has been reviewed, he/she will be asked to pay a deposit of around 10% with the signing of the purchase agreement (contrato de arras) and the rest will be due on completion.

Signing an “arras” contract means that both parties have the right to withdraw:

If your client decides not to proceed with the transaction he/she will lose the deposit, but if it is the seller who withdraws, or if the property has been misrepresented, yourclient will be entitled to claim double of the deposit: his 10% plus another 10% compensation.

6) Consider engaging a surveyor.

Your client may consider that the property needs to be surveyed by a professional with appropriate experience and qualifications. That is very sensible thing to do, but your client will find that some Spanish estate agents will discourage this. If that is the case, the client needs to follow his/her own instincts and still instruct his/her own surveyor.

7) Check the annual expenses of owning a property in Spain.

Be certain of the likely annual expenses your client will incur, including service charges, property tax (IBI), non-residents income tax, wealth tax if applicable, electricity, water, gas, etc.

8) Instruct an independent Spanish lawyer to collaborate with you.

All of the above-mentioned advice can became a terrible bureaucratic fight if yourclient does not engage the expertise and help of an independent Spanish lawyer.

A Spanish lawyer will guide you or your client through the entire process, avoiding extra costs and, what is more important, ensuring that the property your client is going to buy has all it needs to be transferred into his/her name: no charges, no development plans affecting it, etc.

You can instruct a Spanish Lawyer based in Spain or in the UK. Please note that there are several UK law firms with an in house Spanish lawyer able to provide legal advice without your client having to go to Spain.

 9) Warn your client not to declare a lower value than the actual purchase price.

In the past it was quite common to declare a low value for the property in order to minimize the transfer tax payable by the buyer and the CGT payable by the seller. Nowadays, the Spanish treasury will prosecute anyone who declares a price lower than the one effectively paid. The wrongdoer will be fined and additional interest will be applied. On the other hand, when your client decides to sell the property, he/she will be liable to pay Spanish capital gains tax on any profit made and he/she will be liable for CGT on a much larger (but not real) profit.

 10) Recommend your client to make a Spanish Will.

We would recommend your clients to sign a Spanish Will when acquiring a property in Spain. This in order to avoid potential problems in the future for their relatives and beneficiaries. It is not compulsory but in our own experience, really advisable.

Claudia Font & Antonio Guillen

Spanish Desk

Gunnercooke LLP

www.gunnercooke.com

 

London   Manchester

Do´s and don´t when buying property in Spain

dos-and-donts

 

 

 

 

 

 

 

Do’s & don’ts when buying in Spain.

DO’S.

  • Make your budget.

Apart from the price of the property you should consider other costs related to the transaction such as follows:

  • Taxes, Notary and Land Registry: You should consider 10%-12%.
  • Spanish Lawyer fees*
  • Surveyor** although it is not mandatory to ask for a survey, we would recommend to have one in order to be 100% sure about what you are buying.
  • Real Estate Agency fees: if you are using a real estate agency for the search they will charge a percentage of the price, depending on the region although the norm is that this is paid by the seller.
  • * although it is not mandatory to instruct a lawyer when buying in Spain, because the Notary carry out the main checks (charges etc) we strongly recommend you to instruct one to ensure that your interests and investment are properly protected.
  • Ensure you have 30% for the mortgage deposit plus 10% for the Notary, taxes and Land Registry fees.

Nowadays, most of the banks are not offering mortgages which exceed 70% of the price, so you will need to ensure you are able to pay a deposit of 30%, as well as paying the costs.

  • Decide what and where you want to buy.

Spain has different regions with big differences between them in terms of weather, lifestyle, tourism, etc and most importantly, in terms of price. We would recommend that you visit in winter so that you can get an idea of the way of life outside tourist season.

Once you decide where you are going to buy, you should consider the different types of properties you can buy, i.e. brand new, old property, off-plan property, urban or rustic land, and obtain legal advice to ensure you are fully advised on all aspects of being a new owner.

  • Check different options of mortgages.

Make sure you fully understand the mortgage agreement you are going to sign. We would recommend to ask for the mortgage deed to be reviewed by a lawyer in order to ensure it does not contains abusive clauses.

Look for the mortgage which is most appropriate for your capabilities and needs. There are a range of mortgages on offer and you should pay special attention to the interest rate and repayment period, fees for setting up the mortgage as well as early repayment and cancellation fees.

  • Reserve the property and sign a “contrato de arras”.

If you find “the” property, you will have to reserve it while your lawyers are dealing with all the checks that the transaction needs to ensure that you are buying safely. You will need to pay a reservation fee of around 3000 Euro which will take the property out of the market. Then, once your lawyer is happy with the legal documentation, you will be asked to pay a deposit of around 10% with the signing of the purchase agreement (contrato de arras) and the rest will be due on completion.

Signing an “arras” contract means that both parties have the right to withdraw:

If you decide not to proceed with the transaction you will lose the deposit, but if it is the seller who withdraws, or if the property has been misrepresented, you will be entitled to claim for double of the deposit.

  • Consider engaging a surveyor.

You may consider that the property needs to be surveyed by a professional with appropriate experience and qualifications. That is very sensible, but you will find that some Spanish estate agents will discourage this.

  • Find out about the annual expenses of owning a property in Spain.

Be certain of the likely annual expenses you will incur, including service charges, property tax (IBI), non-residents income tax, wealth tax if applicable, electricity, water, gas, etc.

  • Hire a Spanish lawyer.

All of the above-mentioned advice can became a terrible bureaucratic fight if you do not engage the expertise and help of an independent Spanish lawyer.

A Spanish lawyer will guide you through the entire process, avoiding extra costs and which is more important, ensuring that the property you are going to buy, has all it needs to be transferred (no charges), no development plans affecting it, etc.

You can use a Spanish Lawyer based in Spain or in the UK. Please note that there are several UK law firms with an in house Spanish lawyer able to provide legal advice without you having to go to Spain.

  • Make a Spanish Will.

We would recommend to sign a Spanish Will when acquiring a property in Spain.

DON’TS.

  • Do not be forced by the bank to get their insurance or other bank products.
  • Do not sign any document if you do not understand them.
  • Do not pay more than what was agreed.
  • Do not sign any document without a Spanish lawyer.
  • Do not buy a property without taking legal advice.
  • Do not pay large amounts of money to developers who do not offer you the security of a Bank Guarantee for these payments.
  • Do not be tempted to declare a lower property value than the actual purchase price.

In the past it was quite common to declare a low value for the property in order to minimize the transfer tax. Nowadays, the Spanish treasury will prosecute anyone who declares a lower price. The wrongdoer will be punished and additional interest will be applied. On the other hand, when you decide to sell this property, you will be liable for Spanish capital gains tax on any profit made and, you will be liable for tax on a much larger profit when you sell later. The safest way is to ask at the payment office of the nearest tax agency and they will give you the exact value of a particular property.

By Claudia Font & Antonio Guillen