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

 

Holiday apartments in Spain. Do I need a licence?

Sombrilla

 

 

 

 

A few days ago I wrote a post in connection to the property market in Barcelona and the increase of holiday apartments in the city.  The Catalan Government has recently regulated the holiday rentals market and now allows holiday rentals as long as the owners comply with certain obligations. Unfortunately, the situation is different in other touristic places such as the Balearic Islands or the Canary Islands where there are several restrictions to holiday rentals. Take the case of Mallorca, for example. In Mallorca it is only possible to let out for short periods of time dettach and semidettached houses. This leaves apartments and terrace houses outside of the regulation and therefore unable to be let out on a short term basis. There are some exceptions with some apartments but these usually involve the whole building counting with a touristic licence.

When it comes to deattached and semidettached houses in Mallorca, these can be let out for holidays as long as a touristic licence has been obtained and the owner has complied with the following requirements:

– File the necessary declaration of commencement of activity (DRIAT)

– The property is let out for short periods of time that can never exceed the period of 2 months

– The property is let out in its entirety and not on a “per room” basis

– Cleaning and maintenance services are provided

Having said that, what happens if the owner of an apartment in Mallorca or Menorca wants to let it out for short periods of time to different occupiers and he does not have a licence? Well, in that case it would be better to let it on a long term basis. The income might be lower but at least there will be no fines or penalties for breaching the law.

The above applies to the Balearic Islands but each region in Spain has different rules and therefore not all regions face the same restrictions. As always, it is advisable to do some research before embarking on buying a holiday apartment, specially if the ulitmate intention is to let it for holidays.

 

 

 

Buying under-value in Spain Part I

housefighting

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.