Renting property in Barcelona


 

 

 

 

 

Ah, Barcelona. Lovely city. Famous for its gastronomy, football, fashion and its Architecture, specially buildings designed by Antoni Gaudi such as the Sagrada Familia, Casa Mila or Parc Güell. A very cosmopolitan city with inhabitants of all countries and cultures. Also a great place for foreign remote workers and professionals to live and work. A vibrant city with a very fast pace rental market, probably driven by foreign and national demand, and a shortage of properties to let. This has caused some sort of  a rental bubble in the city and privileged surrounding areas such as the seaside (Gava-mar, castelledefels, Sitges) or more towards the mountains such as Sant Cugat and Valldoreix. It is estimated that rental properties are at their highest peak. Huge demand has caused an increase on rent of 20% to 30% in the last 12 to 24 months. An average 3 bedroom property in the city of Barcelona is let for around 1,400-1,500 Euro. This is very good news for those who own or want to buy property in Barcelona with the aim of letting them on a long-term basis.

It is clearly a Landlord´s market and tenants very often see properties disappear from the rental market in 48 hours. This puts landlords in an even stronger position and allows them to ask for rents that would be unthinkable 2-3 years ago. Excellent news for landlords and not so good for prospective tenants as they are now facing higher rents but we should always look at the bright side. This is a sign that Barcelona, in spite of the last political events and the absence of a local Government, is thriving when it comes to the property market and rentals are their highest performer at the moment. And if a city thrives, then their inhabitants, businesses and commerce should benefit as well.

The above only refers to long-term rentals. If we bear in mind that there is another market for holiday rentals, Airbnb and et al, then we can clearly see that Barcelona has a lot to offer to those foreign investors wanting to either get a property in a vibrant and sunny city like Barcelona or invest in a property that can be let with a good return.

Some caution needs to be placed on holiday rentals as not all properties count with a touristic licence. The current Mayor is targeting holiday rentals with no touristic licence and the penalties and fines applied can be very high. In light of this, any person wanting to buy a property in Barcelona and exploit it as a touristic apartament should make sure that the property counts with the necessary licences. Alternatively, a long term rental would be a good solution as it still brings a good return in the current rental market.

And for those wanting to rent a property, just two lines of advice:

  1. Reserve the property if you saw it and you like it (otherwise it may disappear from the market a few hours later)
  2. and get some independent legal advice if unsure as to the terms of the tenancy agreement.

I am writing this post from Barcelona, at 6:30 pm. The sun is still shinning and the Barcelonians are getting ready for the weekend. It is probably time to log off and have a glass of cava or an estrella beer outside!

 

What is the plusvalía tax? And why should it be charged after the death of a person?

This is a question very frequently asked by our clients. The question usually comes with a frown on the face. Clients understand the concept of Inheritance tax: someone dies, and the Tax office applies a tax because the beneficiary gets “presumably” wealthier. So far, so good but what is the plusvalía tax then? Clearly, the beneficiary has already paid a tax on death so why should he/she pay another tax when a person dies?

That´s a very good question and the answer is simple. There is another tax because this allows local councils to get more revenue. Now that we have faced the honest truth, we need to focus on understanding what this tax is and whether it could be avoided.

In order to understand this tax we need first to bear in mind that each property has a rateable value affixed by the local councils (valor catastral). This value is the base on which a multiplying coeficient will be applied to ascertain the minimum tax value of a property.

Ok, wait a minute. We are now talking about too many values. What is the rateable value and what is the minimum tax value? The former is the value recorded in the local council´s registry. It does not have anything to do with market values. The second one is the minimum value that the Tax office will accept in a property transaction. Buy or inherit a property for less than that tax value and you will most certainly have the Spanish Tax man knocking on your door asking for further tax on your property transaction.

Now that we have a slightly good idea on the two types of values, we can explain that the plusvalía tax is a tax levied by the local council every time that a property is transferred, whether this is by death or a sale. In this case we are talking about a death and therefore the plusvalía tax will have to be paid by the beneficiary of the property or the estate. Regardless on whether the property is worth more or less than when the deceased acquired it, the local council will look at the rateable value on the date in which the deceased died and will also bear in mind the date in which the property was initially acquired by the deceased. Using some values and applying some multiplying coeficients the town Hall will the charge a tax, which is the plusvalía tax. The longer the deceased owned the property, the higher the tax (up to a maximum of 20 years, where the tax coeficients reach a ceiling and do not go any higher). This tax should be paid within 6 months of the death of a person and if it is not paid within that period of time, then penalties and interest will apply.

Can the plusvalía tax be avoided? Well, there is some discrepancy here. The general approach is that the plusvalía tax should always be paid and then, in those cases where the market value of the property has gone down then a refund can be requested but this will only happen in sale and purchase transactions, specially for properties that were acquired in the peak of the Spanish property market and have been sold recently for a loss. When it comes to the inheritance of a person, there is little that can be done to avoid it and the sooner is paid the better.

Your lawyer or the Notary Public preparing the deeds should be able to give you a pre-calculation of the potential plusvalía tax when he sends you his quote and estimate of costs. And once received, there is no other option than to pay it and as they say in the UK “bite the bullet”!

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

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.

 

 

 

Can I renounce to an inheritance in Spain?

A Business Men Climbing a Pile of Papers

 

 

 

 

 

 

 

 

In most occassions, inheriting from a dead relative or friend comes associated with an increase in wealth. The heir or beneficiary inherits the assets or money that the deceased had and once the inheritance tax is paid, which sometimes can prove very expensive, the heir is left with a property in Spain and hopefully some money in the bank. This, once we dettach it from the pain and grievance caused by the death of the loved one, usually has a positive side. There will be a property in Spain that can be sold, let or used during holidays. If the property is sold, the heir will be able to get some money after the sale and hopefully spend it or save it as he wishes.

However, this is not always the case. In some cases the property might be charged with a Spanish mortgage leaving no equity for the heir. In other occassions the property could be subject to very high maintenance expenses such as community fees, golf course fees, etc that make the whole thing of owning the property more burdening than having no asset at all. Finally, it may be the case that the inheritance tax due on the Spanish assets is extremely high and the heir is unable to pay it without selling the property. In those circumstances it is normal for the heir to question his intentions and weigh the possibility of renouncing to the Spanish estate.

In general terms, renouncing to the Spanish estate is not a good idea because in most of the cases there will be a property that can be let out or sold. Sometimes it will be a matter of waiting a few years until the market picks up or the mortgage is paid off, but most people do not renounce to what they inherit in Spain. Notwithstanding this, it is true that there is a small percentage of heirs that are not interested in inheriting the assets in Spain and who see the Spanish property more as a burden than an asset. In those circumstances, the heirs can renounce to the Spanish estate and their rights will pass to either the substitutes under the will or to their own beneficiaries, which usually means their children. This is something that needs to be considered before making any renounciation because the renounciation can trigger further consequences that may prove even more detrimental. For instance, imagine that Joe Bloggs dies with assets in Spain. His Spanish will states that everything will go to his daughter Isabelle. She is not interested in the Spanish property and therefore decides to renounce. However, the will states that if Isabelle renounces, everything will go to her children (the grandchildren of Joe Bloggs) and the said children are minors. Under Spanish law, minors cannot renounce to an inheritance without the consent of a Judge. This means that the inheritance will reach a dead point where the minors can accept the estate but not reject it without the consent of a Judge. As you can see this has caused an even bigger problem.

The above is one of the scenarios that can arise. The important thing is to seek legal advice before making any decision in this regard. Do not listen to those who say that you cannot renounce to a Spanish inheritance because this is not true. Anyone, who is of age, can renounce to the Spanish inheritance but before doing it they should seek legal advice to ensure that they understand the consequences of the renounciation and see the different options available. The heirs might be surprised to see that they can transfer their rights to a specific person who might be more interested in the property than them.