Spanish Honorary Consulate office in Manchester

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The Spanish Consulate in Manchester closed more than 2 years ago. Since then, all consular matters for the North West were transferred to the Spanish General Consulate in Edinburgh. Very recently an Honorary Consular office has been opened in Manchester and located in our Manchester office. The Honorary Consul is Antonio Guillen, writer of this blog, a dual qualified Spanish lawyer and English Solicitor at DWF LLP in Manchester. Antonio will cover the regions of Greater Manchester, West Yorkshire and North Yorkshire.

The functions of an Honorary Consul vary depending on the Country. When it comes to Spain and the Honorary Consulate in Manchester, the functions are restricted to giving support to both Spanish and UK nationals in those matters where the Spanish Consulate in Edinburgh requires assistance. Some of those functions are the following:

– Dealing with passport applications for Spanish nationals who are less than 12 years old

– Eventual support to Spanish nationals that require urgent assistance in this area of the country (subject to permission from the General Consulate in Edinburgh)

– NIE application forms for those cases where the applicant cannot travel to Edinburgh

– And in very specific cases, certificates and consular documents

The Spanish Honorary Consulate in Manchester cannot prepare Spanish powers of attorneys, wills or deeds but the firm where the Consulate is based can provide this service. Alternatively, those who need one of the 3 things quoted above can travel to the Spanish Consulate in Edinburgh where this service can be provided or fly to Spain and get the said documents done by a Notary Public.

For further information on Consular matters please contact Spanishconsul@dwf.co.uk

For further information on Spanish legal matters please contact antonio.guillen@dwf.co.uk

First use license and habitation certificate. Tomatoe, tomato. Are they the same thing?

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There are two documents which are essential before moving into a house in Spain. They are called first use license (“licencia de primera ocupación”) and habitation certificate (“cédula de habitabilidad”). These two documents sometimes have their own validity and in other occasions complement each other. It is difficult to summarize the requirements for these two documents because each region has its own legislation and also because they are very similar.

The First use license aims to check whether a property has been built according to the technical design and to the building permit. Once granted, it confirms that the construction has been built in accordance to the licence granted and the designs submitted at the Town Hall planning office. This licence is therefore vital for new properties or for properties that have been totally converted or with relevant major works. The person obliged to request this document is the holder of the planning and construction permit, generally the owner or the property developer.   It is an essential document required to apply for the provision of utility services, such as electricity and water and some regions in Spain demand this document prior to selling or letting a property.

In the most extreme cases, the absence of the said license could even imply a cause for the termination of a rental contract.  The lack of a first use licence can also prove a problem for an Estate Agent as he could be held liable for not checking this point and he could lose the right to receive his commission.

On the other hand, the Habitation Certificate is a document that certifies the minimum safety, health and occupation levels in a property in order to be dwelled. Furthermore it controls the minimum living surface and equipment in the property.

In certain areas like Cataluña, this document is compulsory and a property cannot be sold or let without it. In other areas, the first occupation licence covers the functions of the habitation certificate and therefore there is no need to obtain both. Depending on the kind of property and the place it is located, the expiration time will be different and will range from 6 months to 15 years. These are the reasons why it is advisable to verify this point before signing any contract or committing to the purchase of a specific property.

Obtaining this document is not complicated. If the seller does not have the document you must ask the seller to supply it before completion. If this is not possible and you are prepared to take the risk of completing without the habitation certificate in place, you must sort it after completion. The best way to do it is by contacting an Architect and requesting him or her for a certificate which will have to be endorsed by the Professional College of Architects. The Architect will inspect the property and verify that the property meets the regulations. It may be the case that someone appointed by the Town Hall also inspects the property prior to issuing the certificate of habitation, although this is not necessarily the case.  Once you have the Architect’s certificate, you have to present it before the corresponding public administration, together with the documentation required. Then, eventually, a certificate of habitation will be issued.

As indicated, these are vital documents that need to be requested prior to buying a property in Spain. Each region has its own intricacies but in general terms most of the regions in Spain request the existence of a document certifying the habitability of a property. These could mean both the First use licence and the habitation certificate or just one of them. When in doubt, the best thing is to seek independent legal advice as the lack of such a document could imply that the property is illegal and non-habitable.

Buying property in Spain from a bank- Initial tips

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These days, as a result of the economic situation and the increase of people who do not pay their mortgagees, the banks have gathered a huge housing stock and, sometimes, these kinds of properties, which have been acquired by way of foreclosing procedures, are offered for sale at very low prices.

Some people can think that these are good opportunities to acquire a property without spending a lot of money but…sometimes the `opportunities´ can be costly. To make sure there will not be any surprises later on, precautions should be taken to be protected and to ensure that we are carrying out a sound transaction.

These precautions are referred basically to the property situation and to the possibility of the existence of debts linked to the same because if an indebted property is sold, the new owner will become responsible for some of these debts.

Firstly, we need to ensure that the property complies with the construction regulations. ¿How can we do that? There are some documents which can bring important information with regards to the planning situation of the property. For example, the first occupation licence or the certificate of occupancy. Asking for these documents could be a good first step towards a safe conclusion.

Another relevant document is the 10 year building insurance guarantee. This is an insurance policy that covers constructive defects during ten years. If you are going to buy a property which is less than 10 years old, check the existence of this policy.

Once we have this information, we can go to the next step: the debts. Most times these kinds of properties sold by banks come from owners who have several debts such as debts with the supplies companies or the community of owners. Some of these debts are real liabilities, like the debt with the Community of owners, and they are attached to the property and the seller/bank needs to pay them before completion. In some occasions, the bank is going to cover some of these debts, but, in other occasions they are not going to pay anything and the buyer will be liable for them. As the price in these sales is attractive, you may accept taking over some reasonable debts BUT first you need to know exactly the nature of the debt and the amount involved, otherwise you could end up being liable for thousands of euros.

After bearing in mind all this information, the six-million-dollar question is: How can I obtain all the documents and information before completing the purchase? The seller, in our case, the bank (or a company connected to the bank) must provide you with this information, as they are the current owners. They have all the documents and you are entitled to analyse them in order to avoid risks. Sometimes, gathering all the information can be more complicated than initially expected because the bank will put pressure on the buyer to sign promptly. Instructing your own lawyer will certainly help as he will be able to check the documentation and provide you with his professional opinion as to how safe is to proceed with the purchase.

This article has been written in collaboration with Laura Perez Gil de Gómez from DWF LLP.

Photograph by www.istockphoto.com

 

WHAT IS THE ENERGY PERFORMANCE CERTIFICATE (CERTIFICADO DE EFICIENCIA ENERGETICA)?

 

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From June 1st the Energy Performance Certificate will be required in all contracts of sale or rental in Spain. This regulation comes from a European Directive and it is already in force in other EU countries.

This certificate analyzes the demand and energy consumption of a building and its result is summarized in a label very similar to what we’re used to seeing in appliances. With a color code, it classifies households according to a scale ranging from the highest category, the “A” (lower consumption), to the lowest, the “G” (higher consumption). It also incorporates some measures recommended by the relevant technician in order to consume less and reduce the amounts of the bills.

Be aware that the certificate should be included in the information that the seller or landlord must provide to the purchaser or tenant when selling or letting the property, so this document should be available before entering into any transaction. The Energy Performance Certificate is valid for 10 years.

A qualified technician must visit the property and take the necessary information to issue the certificate and sign it. You don´t need a particular grade to sell or rent your home. You just need to ensure that you get this certificate for prospective tenants or buyers. However, a good grade will definitely add value to the property.

The cost of the energy performance certificate shall be determined by the market. There are no official prices for this work, and currently there are a lot of companies offering this service, but you must be careful, because the Energy Performance Certificate should be signed by a competent technician like an Architect, Technical Architect, Engineer and Technical Engineer, and it must be authorized by the Ministry of Industry.

There are some exceptions to this obligation of providing the certificate and we take the opportunity to mention the most important ones:

  • Isolated buildings or units with a total useful floor area of ??less than 50 m2.
  • Buildings or Properties used or intended to be used for either less than four months a year or for a limited time a year and with expected energy consumption of less than 25% of which would be of use throughout the year.

If you are interested in selling or letting a property, we can help you checking if it is applicable to your property or not, and if you need it, we can deal with several companies authorized to issue these type of certificates.

This article has been written in collaboration with David Lorenzo García, Spanish lawyer and intern at DWF LLP.

 

Buying under-value in Spain Part I

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It is no secret that the Spanish property market is very quiet. Nowadays, any person wanting to sell reasonably quick has to make a noticeably discount on the sale price. This could mean reducing the price in 20% or 30%. This could prove very atractive to the purchaser as it would allow him to buy a bargain but the said purchaser needs to be careful with a potential comeback from the Spanish Tax office in respect of the unpaid transfer tax. This is due to the fact that all properties in Spain have a minimum tax value. This is the minimum value assigned by the Tax office to each property.  Nothing stops someone from selling under that value but this could bring some consequences to the buyer.

The first one is in respect of transfer tax. As any person who has bought property in Spain will know, the purchase of a property in Spain is subject to transfer tax, which ranges from 7% to 10% depending on the area and price. This tax is paid by the purchaser. Now, imagine that Mr Joe Bloggs buys a property in Mallorca for 100,000 €. The minimum tax value of that property is 150,000 €. Mr Bloggs is supposed to pay 7% of the purchase price of 100,000 €, that is 7,000 €. However, the minimum tax value for that property is 150,000 €. This means that it is very likely that the Tax office will revert to the purchaser ande demand the outstanding transfer tax over the tax value, in this case a further 3,500 €. Why? Well, the Tax Office believes that the property is worth more money and although it accepts the sale for less than its tax value, the Tax Office is not prepared to give up on the potential revenue that would be genereated if the property had been sold for its minimum tax value and hence the requests for another 3,500 €.

Market value        100,000 €

Transfer tax 7%        7,000 €

Tax value               150,000 €

Transfer tax 7%         10,500 €

7000 € + 3,500 €= 10,500 €

If Joe Bloggs has paid 7000 € in respect of transfer tax then the Tax Office will request a further 3,500 € because it believes that the total tax that should have been paid was 10,500 €.

This is clearly unfair but unfortunately this seems to be the situation in many areas in Spain, where the tax values have not been adapted to the reality of the market.

The aggravated buyer can pay the tax and forget the matter or he can appeal the decision. Any appeal in this respect will require support with an independent valuation confirming that the price value is in accordance to the market value and therefore proving that the tax value is outdated. The Tax office will then consider the appeal and make a decision, which in some cases could imply withdrawing the request for extra payment. The main problem is that the appeal will involve lawyers and valuers and in some cases it may not be worth the effort. As always, each case needs to be studied separately as one solution cannot be applied to all the cases. However, if you are going to buy property in Spain for a very attractive price, you better check the tax value first to ensure that you will not be asked to make a further payment a few months after completion.

 

Can I complete the purchase of a property in Spain without a NIE?

 

In a clear homage to my youngest daughter’s favourite cartoon: yes you can!

I am talking about NIEs and not laying bricks but contrariliy to what happens in the Bob the Builder’s cartoons, the lack of NIE will not necessarily lead to a happy ending. A NIE number (tax number for non-residents who either live, work or own property in Spain) is very important and has to be obtained sooner or later.

The common  perception is that it is not possible to complete the purchase of a property in Spain without a NIE. This is not true as it is in deed possible to sign and complete the purchase without the said number. The Notary who drafts the deeds will warn the purchaser of his/her obligation to obtain the said number but completion will not be stopped. However, once the purchase has been completed, the purchaser will have 30 days to obtain the NIE and pay the transfer tax as no tax can be paid without a NIE in place. This 30 days window seems wide enough but the purchaser needs to bear in mind that obtaining a NIE is not as straightofroward as it looks and the procedure could take several days and sometimes weeks. In the meantime, the property will continue to be registered in the name of the previous owner. Furthermore, if the tax is not paid withing 30 days from completion, penalties will be applied to the tax due, increasing unneceasrily the tax liability.

This is why although a NIE is not compulsory for completion, it is strongly advisable and we always prefer to wait until the client has a NIE number in place. If the client is in a hurry to complete (imagine a purchase with a large discount being offered on the basis that the purchase is completed in one week) then the lack of NIE will not be an impediment to complete the purchase. It will be sufficient to inform the purchaser of the need to obtain the said NIE as soon as possible or, if instructed by the client to obtain it ourselves on his behalf, take the necessary steps to obtain the said number. 

Once again, not all urbans legends surrounding Spain are true. This is just another example of an urban legend that has been manipulated and misunderstood although, as usual with urban legends, there is some wisdom behind the advice.

 

 

 

What is a “cedula hipotecaria”?

You may have heard about the “cedulas hipotecarias” or covered bonds.

A “Covered Bond” is a financial product guaranteed by the whole mortgage portfolio of the bank itself with an interest linked to it. This is a safe product in a normal economic climate and it could be quite profitable (in fact, during the property boom it brought a lot of investors). But in the current economic climate it does not give any benefit, and it has a big defect: if the investor wants the money back, he will need to sell the Covered Bonds and who would want to buy anything linked to mortgages these days? Nobody!

Therefore, the investor has a problem. He has the money and needs it but he cannot take it. What can he do? Spanish Banks usually offer the following: The bank will take the covered bonds in exchange for a 4 year term deposit account, with low interest and the prohibition of getting the money out during the first year. It does not look like a great investment (except for the bank), but it is a good solution for those investors with this problem.

Prior to signing any agreements, the investor who got trapped in the covered bonds, needs to consider some important issues:

Firstly, he should check all the details of the offer, read all the clauses and seek advice from a professional to avoid being caught in trouble again, and finally compare the options available. Obviously, Banks usually look for themselves and therefore the agreement may not be as attractive for the investor.  The investor should ask for copies of the offer and the contract, take them home and read them carefully.

Of course, most foreign investors will struggle to understand the language and the terminology. It is therefore advisable to seek professional advice from a qualified Spanish lawyer or Economist. If in the end, the investor opts for this agreement with his Spanish bank and he is living in the UK, he will be able to grant power of attorney to either the bank or someone he trusts to sign the necessary paperwork in Spain. As mentioned in previous posts, a power of attorney can be signed in this country without the need to travel to Spain and this could prove helpful to those who do not want to use their holidays just to sign an agreement.

As always, it is better to be safe than sorry so don’t rush into agreements or products until you are entirely sure of what you are signing.

Photograph from www.dreamstime.com

 

Changes to the Spanish Tenancy Law- Hit or miss?

 

 

 

 

 

 

The current Spanish Government is betting for a surge in rentals as a way to compensate the stock of properties for sale that cannot be currently absorbed by the market. For this reason it has implemented a project of law that, in the Government’s opinion, will revive the rentals market. The project of law is based on three important pillars: more flexible rentals, speeding eviction procedures and tax incentives.

Landlords will gain more rights and will be able to cancel rental agreements if the property is required for their personal use regardless of whether the tenancy period has come to an end or not. They will also be able to recover the property if the property is required by the spouse after a divorce or by close relatives.

There is a plan to speed the current eviction process which is still too slow and creates great problems to landlords. The idea is to proceed to the eviction without having to wait for a Court Order. For instance, it will be enough with the notice served by the Court or a Notary Public.

Tenants will also be able to terminate the tenancy agreement before the end of the agreed period as long as they serve 1 month’s notice. This is quite the opposite of the current situation whereby most tenants are forced to stay in the property for at least 12 months prior to being able to terminate the agreement.

The purpose of this project of law is to promote rentals and change the Spanish mentality in respect of renting. However, experts consider the reforms landord-bias as they will benefit landlords in a major scale than tenants. This is only a project of law. Spain has right now major problems to solve but there is no doubt that the rental market in Spain is less active than in the rest of European countries. Property owners are reluctant to let their properties because they are afraid of getting a bad tenant and terrified of the long eviction procedures. This law could help to revive this market but there will be a pay to price and tenants are the most likely to suffer the consequences of any new reforms in this respect.

Photo from www.freedigitalphotos.net

What can be bought these days for less than 150,000 Euro?

 

 

This is a question that I have asked myself in several occasions. I am obviously talking about Spain, the main subject of this blog.

Some experts state that the market is full of bargains. Lets see if it is true.

150,000 Euro is a relevant amount of money. This amount can buy you a very decent house in certain parts of Spain. However, this may not prove sufficient for the main cities. For instance, in accordance to our research this amount would prove insufficient in cities such as Guipuzcoa or Vizcaya. The picture is different in cities such as Alicante or Almeria and their surrounding areas where the stock of properties is larger. In those areas, 150,000 Euro could buy you a very decent house in a good area. However, punters need to be aware that most experts think that property prices will continue to fall for at least another 1 or 2 years. If you are buying the property as an investment you may see that the value of your property falls down, although it should not be as accute as for those who bought from 2005 to 2007.

Statistics show that there is a better demand for properties that are worth less than 150,000 Euro as these are the type of  properties that Spaniards can afford these days. These properties can also be let for an affordable rent that will hopefully cover the investor’s mortgage. As many know by now, committ to a very high mortgage and the rent will never cover the monthly instalments. On the other hand, if your mortgage is affordable, within the 400 to 800 euro range, you may have a chance to cover the mortgage with the rent.

The last trend in Spain is to buy from banks as they have a good portfolio of repossesed properties and in many occasions will die to give you a mortgage (and therefore get rid of a property that is affecting its balances account wise). However, not all banks have been realistic with their pricing and a good amount of their properties are still overpriced for the current times.

As Manuel Luque used to say in a very famous tv advert in 80’s Spain: Search, compare and if you find something better..buy it. 30 years down the line and still a very wise saying.

Dacion en pago for non-residents. Do we have a deal?

Do we have a deal?If you have read the Spanish press this week you will probably have seen plenty of articles on the Government’s new proposal to solve the current problems with those who cannot pay the mortgage.  Luis de Guindos, Minister of Economy, will announce this week some new measures to enable consumers to surrender their properties back to the bank in exchange of clearing the debt (a procedure known as “dacion en pago”).  

This would be applicable to low income families where all the family members are unemployed. The “dacion” will enable the debtors to return the property to the bank and have the mortgage debt cleared entirely. This can be positive as many property owners who are behind in their mortgages, are in negative equity and therefore owe more than what their asset is worth. Under the current rules, the borrower responds with all his personal assets and therefore the repossession of the asset does not end the debtor’s liability if the asset is in negative equity. The debtor will still owe money to the bank until he has repaid the full amount. This is extremely burdening for low income families and the new proposal will try to find a solution to the current problems enabling some families to return the “keys” to the bank and start from scratch without debts. The proposal will also contemplate the possibility of renting the property from the bank and paying the bank a “socially acceptable” rent until the debtors can get back into the employment ladder and refloat their finances.

The above will be, obvioulsy, subject to the bank’s approval but Miguel Martin of the Spanish Bank Association has already stated that the banks will be interested in co-operating and finding useful solutions for those families.

The above looks promising but unfortunately will only be applicable to those properties that form the main residence of the family. This means that non-residents owning property in Spain, such as the usual readers of this blog, will not be able to benefit from the new proposal.

So, where does the above leave non-residents who are currently struggling to pay their Spanish property? Well, the proposal has not been launched with their situation in mind. Those non-residents will have to contact their banks and suggest a dacion but the bank will not be obliged to accept these.  In fact, during my daily practice in law I have seen a decrease in the amount of “daciones en pago” accepted by Spanish banks. Some of them are even too busy to be concerned about non-residents debtors as they have more important defaults from Spain to deal with. 

I read a post the other day where the blogger indicated that a bank will not consider the “dacion” if the mortgage is in arrears. With all the due respect to the said blogger,  I have found in my practive that this is not always the case. In fact, I have seen banks telling me that they cannot consider a dacion until the mortgage is in arrears!!! Very confusing. 

In my experience the key thing is to try to keep with the payments and keep the property. Otherwise, all the money and dreams invested in the property will dissapear. However, sometimes this is not possible and therefore a person may have to consider a measure as dramatic as the dacion. In those circumstances, it is better to come clean with the bank and show all the cards. The financial situation should be explained and documentary evidence provided. Obviously, the assistance of a lawyer can also help as sometimes relevant information is lost in translation and in the peculiarities of the Spanish legal system.

So, there is some hope for Spanish based families who are struggling to pay their mortgages and are afraid of still owing a large amount of money to the bank after the house is repossesed. For those who do not live in Spain, the situation is not as good, if not worse, but Spanish banks will consider the possibility of a dacion and in some occasions approve it. 

 Photo from www.dreamstime.com