A matter of degrees: icons, branding and a follow up on Santander’s stock of properties

 

 

navigator

This week let me talk about the new branding at the firm where I worked: DWF LLP.

For those who don’t know the firm, DWF LLP is a top 40 law firm with offices in Birmingham, Leeds, Liverpool, London, Manchester, Newcastle and Preston. The firm has grown considerably in recent years and such growth requires a proper branding.

The firm has now chosen a navigator concept, see above, to reflect how the firm combines excellent commercial guidance with a straightforward approachable style.  The firm looked into the best possible way to interpret this concept and came with this icon. It is inspired by the degree symbol and provides a visual link between the navigator concept and the circular “d” in our existing logo. It also reflects the added value of looking at things from every angle, taking a 360-degree approach and maintaining a clear focus in everything we do.

I don’t know what you think but I like the icon. It is innovative and it gives a clear message.

By the way, there has been some follow up to what I explained last week in my post. Santander’s initiative has now created some panick in the property market. There are some rumours that a massive discount in prices could force others to either match the prices or not get the properties sold. This could be quite bad for developers or other banks who cannot exceed certain margins in their properties. Things are moving quickly. Watch this space for more information. 

 

 

 

The future of the Spanish property market

A year ago I was asked to write an article for The Manchester Law Society Messenger on the situation of the Spanish property market. In that article, I explained that the situation was pretty grim with property prices due to fall and more building companies and developers to bite the dust. 

On 17th November, RR de Acuña & Asociados, a prestigious firm of property analysts, released its annual report which, as expected, continued to paint a worrying picture of the Spanish property market. According to the said firm of analysts, there is still a big difference in the property market between offer and demand. The current stock of properties in the market continues to be in the region of 1.5 million. This is extremely high compared to what the current demand requires.  If we consider that the annual demand in Spain is just for 240,000 to 280,000 properties, then is obvious that the current stock will need a minimum of 5 years to be absorbed.

The report confirms what most people already know: the Spanish property market will not show signs of recovery until at least 2015 and although some signs of recovery will be detected in certain areas by 2013, the general picture is that Spain’s property market as a whole will suffer a gradual fall with property prices falling a further 20% between now and 2015, reaching the values of 2003 and 2004.

With an unemployment rate of 20% and a credit crunch in line with most of continental Europe, Spain and, therefore, its property market will not recover until Europe recovers first, especially considering that Spain’s main economic engines are tourism, construction and the car industry, which largely depend on purchases from Europe.

Interestingly, the report also states that any person who wants to sell a property fairly quickly in Spain should reduce the price in 30%. Otherwise, that person will struggle to sell the property in a market saturated of properties as the Spanish one.

As forecasted in my previous article of a year ago, banks have become the new kings of the real estate market as they have been repossessing properties for the last 2 years and are now feeling the pressure to put those properties on the market and recover part of the losses crystallised with the repossession. Spanish developers will be unable to compete with the banks as the latter will offer their repossessed properties with a 100% finance in order to get rid of those properties and get better figures in their balances.

Bearing in mind the above, what should a British purchaser do? If someone is cash privileged, then there are plenty of opportunities out there. It would be better to avoid saturated coast resorts and look for properties in places with a strong demand from both locals and foreigners. Places like Barcelona, San Sebastian or Madrid can prove a wise investment if the price is right as they usually have a rental demand from locals and foreigners. However, many property owners in those areas have resisted making considerable reductions in prices and the British buyer will rarely see the same discounts that he or she could see in other areas of Spain. Those interested in buying a property in Spain need to bear in mind that Spain is a big country and the property market is not the same in every region. Although the majority of property prices will fall, expensive properties in privileged areas will hold their value better than the rest of the market so do not try to pull a 30% discount on every single property you fancy because you may end up upsetting the seller.

The only positive thing about this property crisis (if we can call it positive) is the selection process that is affecting most of the construction field. It is estimated that more than 40% of Spanish developers are in red numbers and should have filed for liquidation. Some of these developers are innocent victims of the times, but there are still a large number of developers that have not done their homework properly and its disappearance, although sad from an employment perspective for those employees working in those companies, will allow the sector to do its own natural selection process. Hopefully, those in the construction sector that resist the decline will avoid the excesses of the past and Spain will walk towards a more sustainable property market where the offer is not 5 times higher than the demand. But as we say in Spain ” el tiempo lo dirá” (time will tell).

This article has been published in The Manchester Law Society Messenger in February 2011

Struggling Britons seek ways to offload Spanish holiday homes

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Higher mortgage interest rates in the Eurozone, a fall in the value of the pound and the effects of the recession mean that many Britons who have bought holiday homes in Spain are now struggling to meet their monthly repayments.

Our firm has seen a rise in the number of people seeking help to renegotiate their Spanish mortgages or advice on alternative options.

The increase in mortgage interest rates from 2.5 to 5 per cent in Spain and the weaker pound have both increased the cost of mortgage repayments. However, buyers who allow their homes to be repossessed could face consequences in the future.

Under Spanish law a borrower is liable with his own personal assets for any mortgage signed in Spain. Where a home is repossessed by the bank and sold and the value is not enough to cover the outstanding mortgage, interest and costs, then the bank will be entitled to claim against the borrower for the shortfall. In the case of UK residents this could mean the lender issuing proceedings in the UK. 

The borrower could also be put on a register of bad debtors and be blacklisted in Spain for six years. This may not worry UK residents who decide to leave Spain. However Spanish lenders are fully aware of the importance of credit ratings in the UK and are now exploring ways to pass on information to UK databases.

Some are looking into signing reciprocity agreements under which they can share information with companies in different countries. Ultimately UK residents who default in Spain may find their credit history affected back in the UK. A decision by the European Court of Justice on 23 November 2006, which clarified the circumstances in which financial institutions may exchange this type of information, has brought this scenario a step closer to reality.

Options for homeowners in financial difficulties include renting out the property, extending the mortgage term or remortgaging, or ‘dación en pago’ in which the property is transferred to the bank in lieu of the outstanding mortgage.

Whatever the situation, handing in the keys and simply walking away is one of the worst things you can do. It’s worth exploring the options as a rash decision could come back to haunt you at a later date.

Court threat for Brits who back out of ‘home in the sun’ deals

Real-estate_devBritons who have had second thoughts about buying holiday homes in Spain are being pursued in the Spanish courts by the developers – despite a clause in their contract allowing them to back out of the deal.

Our firm is acting for a number of British buyers who have been threatened with legal action. Hard-pressed Spanish developers who have been left with a stock of unsold properties on their hands are now trying to take court action to override the terms of their contracts and force buyers to complete the sale.

During the property boom, Spanish developers were so confident of selling their homes that they included a clause in the contract allowing purchasers to pull out provided they forfeited their deposit. In fact, having a sale fall through was good news for developers – the property would usually be sold to the next person in the queue and they received an extra lump sum.

Given the current economic climate, the weak pound and the oversupply of properties in certain areas of Spain, some British buyers who had invested in a property off-plan have had second thoughts and resigned themselves to losing their deposit. However, now the property market has collapsed, developers have changed their strategy. Some are trying to use a clause in Spanish law to allow them to override the terms of their contracts and force purchasers to complete.

The developers claim that section 1124 of the Spanish Civil Code gives them the right to choose between enforcing the obligations under a contract or allowing it to be terminated – in this case, letting buyers back out and pay the penalty. It is difficult to predict the tone the Spanish courts will take until the first judgments start to come through.

The individual circumstances of each case need to be considered – such as whether there has been any breach of contract from the developer, for example late completion, and whether the purchaser is a private individual or an investor – someone buying more than three properties.

The developers’ approach contradicts the contracts they signed only a few years ago and is against the principles of contractual obligations. Some are even threatening purchasers with legal action in the UK, but omitting to say that they cannot do this until a final judgment has been obtained in Spain. At the current pace of Spanish justice and allowing for an appeal, this could take two to four years, by which time the developer could have gone into administration. It would also be very costly for them to pursue cases outside of Spain.

I do not want to imply that all threats from developers should be considered a bluff and that completion should be rejected at all cost. Each case is different. In some cases there will be insufficient legal grounds to fight the case and it may be better to complete and in others, to dispute any claims. Anyone in this situation should consult a qualified Spanish lawyer who can advise on the best course of action.