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.


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

New proposals for a new era







Some months ago, the Socialist Prime Minister, Mr Rodriguez-Zapatero (or Zapatero as he is commonly known in Spain) decided to call elections for the 20th November. Since then, both main candidates, Alfredo Pérez Rubalcaba for the Socialist Party and Mariano Rajoy for the Popular Party struggled to convince the Spanish voters that their proposals were the right ones for the economic crisis. The truth is that the fight has been lopsided since day 1 and the result was already decided moths ago. The consequences of the economic crisis, specially the dreadful unemployment figures, made Rubalcaba’s triumph almost impossible. In the end, Rajoy obtained absolute majority of votes and he has now “carte blanche” to implement his proposals.   

The problem is that Spain needs more than proposals. The economic situation has resulted in social unrest. The threat of a national bankruptcy frightens the Spaniards. A bail-out will not only mean new public cuts but also real problems for the Euro-zone’s stability.

The new government has at least three economic challenges:

            -There are approx 5 millions of unemployed in Spain. The unemployment rate in youngsters is the highest in the developed world.

            -Financial problems are huge: Public debt is high, international investors increase the pressure over markets, the banking sector is reluctant to grant loans, and the stock exchange fluctuates between quietness and depression.

           – Structural reforms are needed. To improve the competitiveness of Spanish companies, fight against tax evasion, avoid convoluted bureaucracy and make the labour market more dynamic.  

The challenge is enormous. I would not want to be in Mr Rajoy’s shoes right now but part of the future of Spain relies on him and his party. Will he able to succeed where others have failed? Time will tell.

This article has been written in colaboration with Manuel Baena Pedrosa, Spanish lawyer


Spanish property market feels the pain


As a Spanish property lawyer based in Manchester, the first thing I am asked when I am introduced to people is: How is the Spanish property market doing?

The words “Spanish” and “property lawyer” appear to have a sudden effect on the other person and they start to interrogate me on the subject. This is something I now accept just as anyone from New Zealand is used to being asked if he has had a relative appear in Lord of the Rings! However, at the same time it has made me an avid follower of the Spanish property market, not only because of my profession but also because I want to be able to brief anyone who asks me the same question.

As many know, the situation in Spain is far from ideal. Experts reckon that there are approximately 1.5 million properties for sale including re-sale, off-plan, new build and bank repossessions. Bearing in mind that annual demand is around 220,000, it is clear that the market will require six or seven years to recover. This is one of the conclusions of a report from property analysts RR de Acuña & Asociados, which in my opinion reflects pretty well the current state of the market.

Beatriz Corredor, the Spanish housing minister, recently stated that property prices will continue to fall although she believes they are close to the bottom. She has recommended developers rent their properties until the market recovers, especially since Spain has one of the lowest ratios of rentals in Europe as the Spanish believe renting is a waste of money.

The oversupply is bad news for sellers but more positive for those fortunate cash-rich buyers who are looking for bargains as there are clearly a lot of opportunities, with both developers and banks offering up to 40 per cent discounts.

Banesto bank, for instance, recently launched 1,200 properties with discounts of as much as 40 per cent and with up to 90 per cent finance on loan values for up to 40 years. Other banks are following this example.

Whether these prices are still inflated or not is another question. Some claim banks have been holding back their star properties and what has been released so far is only the unwanted stock. Regardless of whether this is true, there is no doubt that some properties come with very attractive finance deals which would be almost impossible to get if buying directly from a developer or the seller.

At the same time, the future looks grim for developers. Many of these, including big names such as Martinsa-Fadesa, Aifos and Tremon, are in administration and more will bite the dust in the next two years when construction activity, which is still at very high levels, takes a nosedive. As for property prices, opinions are divided. The majority think prices will continue to fall although there are optimists – usually politicians or developers – who reckon that the worst is over.

I would conclude with the predictions by RR de Acuña & Asociados, which is that prices will drop by over 9 per cent in 2010 and over 4 per cent in 2011, representing a total fall of 25 per cent since 2007. Not a promising picture for developers, but it will offer opportunities for patient investors as bargains will flood the market.

This article was published in The Manchester Law Society Messenger in December 2009.