The fast and the furious- New speedy eviction laws in Spain

 

 

 

 

 

 

 

An unoccupied property is a lost opportunity to make money. After the summer, thousands of holiday apartments are vacant until the following holiday season. Many of the British who have purchased Spanish property are not using them for the rest of the year.  A good option for them is to rent them out. However, many are uncomfortable to commit to long term rentals due to the slowness of the Spanish eviction system.

Having a defaulter tenant in your holiday apartment can be a real nightmare as it could take you 1 year to evict him from the property. The Spanish Government is determined to improve the legal mechanism to warrant an efficient eviction system and has recently issued new laws which, between other points, are meant to speed the eviction procedure. The aim of the laws is to improve efficiency, avoid long term bureaucracy and increase the confidence in the legal system.

Since the enactment of new laws, the petitions are meant to be resolved in shorter periods of time. Less time should also mean less cost. In fact, eviction will now be possible even without any hearings.  A very simple petition to the Court will be sufficient. Once the petition has been admitted, the tenant will have two options:

A. He can object to the landlord’s petition. Then both landlord and tenant will be summoned to a hearing

B. He can ignore the proceedings, in which case he will be sentenced to evict the property and in certain cases, to pay the amounts owed.  

To avoid unfair situations, the tenant will only be able to appeal the decision if he deposits the amounts owed in the Court’s escrow account.

The initiative is really positive to improve the rights of both landlords and tenants. Renting properties should be considered a worthy option.

Citizens in general will welcome the new laws, although its success will rely not only on theoretical law but in its practical implementation. Lets remember that good intentions and changes in law can prove fruitless if they do not come along with some improvements in the current bureaucratic system.  

 Photograph from www.dreamstime.com

Can I buy my Spanish property in sterling?

 

 

 

 

 

This week a client who lives in the UK asked me if he can pay in sterling the purchase price of a house he is buying in Spain. The truth is that this is not an impediment. On the day of the signature of the purchase deed, the Notary will request evidence that the payment has been made i.e. a copy of the cheque. The purchase deed will also reflect the fact that the price has been paid in sterling and will show its equivalent amount in euros, which at the end of the day will be the one used for tax purposes and for the calculation of the transfer tax.

This is a scenario that is more and more often these days. Many Brits have bought properties in Spain and they are now willing to sell them. At the same time, other Brits who are currently cash privileged are still interested in buying in Spain and very often the transaction involves UK nationals on both sides. In this type of transactions, the parties might be interested in securing the deal in sterling in order to avoid currency fluctuations so this is something that I am seeing with enough frequency.

Food for thought if you are planning to buy in Spain and do not need a mortgage.

 

Photograph by Yusputra/dreamstime.com

No way out?

Recently and as a result of the sum of several factors such as the unstoppable fall of the sales of properties and an increase in mortgage defaults, Spanish banks have accumulated more than 150,000 million euros in property assets. Assets which, incidentally, the banks do not want but the truth is that since October 2008, the amount of acquired houses by banks has not decreased, quite the opposite, it has continued to grow.

 
This is partly due to the so-called “dación en pago”, common and usual practice in Spain, which consists in giving the house or flat to the bank and canceling the mortgage debt or part of it, after the property has been valued. In some cases, the Dación en pago involves payment of the total mortgage debt (dati pro solute) and in others cases payment of part of the mortgage (dati pro solvendo).

However, the truth is that as result of excessive accumulation of assets by banks, the chances of banks accepting the “dación en pago” these days without an offer for sale for the property by a third party have declined.
 

 

Another strategy used by families in Spain to keep ahead and tackle debt is called “REUNIFICACIÓN DE DEUDAS”. It consists of clustering all sort of debts (including personal loans and mortgages) into a single mortgage, the monthly payments being refinanced and maturity dates being extended. This practice reduces the total monthly payments and restores the family’s or individual’s creditworthiness. The downside of this practice is that it would mean either re-mortgaging the property if there already was a mortgage in place or mortgaging the property if this was free of charges. For those without a property it would mean committing to a longer repayment plan with higher interests 

In my opinion the “dación en pago” and the “reunificación de deudas” are appropriate measures to keep afloat financially. In the case of the former, it would mean cancelling the mortgage and being able to start from scratch without debts. In the case of the latter, it would allow buying some time to make things work and hopefully be able to tackle the debt later on in a better position, mentally and financially.  These options prove much better than defaulting on debts, as this always implies legal consequences that stay with the debtor for years, whether this is bad creditor reports or the fear of being sued in Court.

Picture from www.freefoto.com   

 

Spanish Limited companies- New advantages

On the 3rd December 2010, the Spanish Parliament issued a new law that speeds and reduces the costs of setting up a Spanish Limited company.

 The aforementioned law was a response to the current climate in which the raising unemployment rate has forced many Spaniards to become self-employed.

Up until December 2010 the costs for setting up a simple Spanish Limited Company were astronomical. The timescales involved were also too long as it used to take more than a month to set up a limited company.  

 The new law shortens the timescales involved to a quite satisfactory level more in line with other European countries. For instance, on applying for a name for the company, the “Registro Mercantil” (Spanish equivalent of the Companies House) will have to issue the name within 24 hours, allowing the Notary Public who prepares the Deed of Incorporation to have the deed ready in the following 24 hours. Once the Deed of Incorporation has been signed, the “Registro Mercantil” will get the deed registered in the following 3 days. The above means that the timescale to set up a Spanish Limited company has been shortened from 30 plus to 5 days.

The cost of setting up the company has also been noticeably reduced. It used to be in the region of 800 € but now a Spanish Company can be set up for only 100 €.

 This is a clear advantage for entrepreneurs willing to set up their own company in Spain and this will incidentally help the currently damaged Spanish Economy as more business will be created. On the other hand, Notaries and Registrars from the Companies House are a little bit sceptical about whether these new measures will make any difference to the already tumbled Spanish Economy. I wonder whether these comments from Notaries and Registrars are genuine and honest comments or just a simple rant after seeing their fees cut dramatically. As we say in Spain “It does not rain for the taste of everyone” (No llueve a gusto de todos).

Charities, the EU and Spain- Tax differences

On the 10th February, the European Court of Justice issued an important Judgement in connection to the tax treatment to Charities within the UE in respect of Inheritance Tax. 

The Judgement is a response to the current variety of regulations within the Union in connection to Inheritance taxes and more particularly to Charities. In this specific case, a Belgian national appointed a German Charity as heir of her estate. Belgium laws grant attractive tax allowances to charities in respect of assets acquired via an inheritance but this only applies to charities domiciled in Belgium or in the deceased’s country of domicile. This treatment is clearly unfair and the aforementioned Judgment stated that the Belgian laws contravene article 63 of the Treaty of the Functioning of the European Union, as this implies a restriction to the free movement of capital within the state members.

This Judgment is extremely positive because it implies that European charities inheriting assets in another state member can benefit of the same allowances as the equivalent resident charity would do. However, this is of little help with my beloved country of origin. As some of you may know, Spain makes no allowances to Spanish charities when inheriting assets. On the other hand, UK Charities are usually Inheritance Tax exempt. This means that any UK charity inheriting assets in Spain will be tax exempt in the UK but will face an Inheritance tax bill in Spain.

In light of this, it may not prove convenient to leave in a will a Spanish asset to a UK charity because the latter will be charged quite heavily. Furthermore, there might be some legal problems to transfer the title over the asset as Spanish law does not recognise trusts and most UK charities are formed through a Trust.

As usual, proper legal guidance is advisable prior to leaving an asset in Spain to a UK charity through a will as there might be more legal and tax efficient ways to transfer the assets to the desired beneficiary.

About the “international wills” and other confusing type of wills

The World is getting smaller. There is no doubt about it. In this era of globalisation, we have seen British acquiring properties in other countries such as Spain, France, Italy, you name it. The British affair with sunny places is well known. Programs such as “A place in the sun” are a good example of it. However, not everyone has taken the necessary measures to deal with the assets they own abroad and to ensure that their loved ones are covered if something were to happen. I am talking obviously about the convenience of making a will.

Fortunately, not everyone has neglected this particular point as many have signed wills to cover their assets abroad. Some have even signed a peculiar type of will called “international will” which I personally find very confusing. This so called “international will” is presented to the testator as the panacea, the magic solution, the philosopher’s stone that will cover the entire testator’s worldwide estate.

I have seen a couple of these “international wills” and they have raised several alerts on me as they do not appear to comply with a specific jurisdiction and therefore are under the risk of being considered null. For instance, the wills I have seen were signed by English nationals and were supposed to deal with assets in Spain. However, the form of the wills was neither compliant with Spanish or English law. This could involve a potential nullity that will inevitably lead to intestacy as Spanish law states that it is possible to sign a foreign will as long as this complies with the formalities of the country where it’s signed. Unfortunately, the “international wills” I have seen do not comply with a specific jurisdiction and therefore the potential problems are numerous.

I might be wrong but my opinion is that if someone has signed one of those “international wills” then the person should seek legal advice as it may be the case that the will is not valid. He/she may still be on time to change the will and grant a proper will that will be recognised in the necessary countries.