Lawyer Raymundo Larrain briefly explains how to cash in on your property, releasing the pent-up equity. This is attained on selling the bare ownership of your property and retaining a usufruct right.

You can review here our client’s testimonials.

Article copyrighted © 2022. Plagiarism will be criminally prosecuted. 

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Abogados
8th of July 2022

Introduction

It has become apparent that we have fallen on hard times. The ongoing war in Europe (which threatens contagion to neighbouring countries), the unbridled two-digit inflation, tax hike, hike in petrol, hike in electricity & gas, the ongoing Covid-19 restrictions, and more all add up to our woes!

But none fair harder than those in their twilight years. They are hands down the most affected collective with all that is going on.

Many senior citizens struggle to get by on low pensions given the unrestrained rise of prices (two-digit inflation!). All they know is that after a life of hard work and sacrifices they can afford every month fewer things on the same fixed income (pension).

But precisely, because of their age, they can turn this round to their advantage. Seniors are likely sitting on properties which value has gone up substantially over the previous years. Property prices in Spain have appreciated for eleven consecutive months, hitting all-time highs in some cities, such as Madrid. Property sales are at the highest numbers since 2007.

Moreover, in a high inflationary context, money experts strongly advise investors to buy property (tangible assets) to hedge themselves against rising inflation, so their property values are bound to increase even further over the next years, interest rate fluctuations notwithstanding.

What’s the point of living in a 500k property if you can’t treat yourself to fancy restaurants, from time to time, or even book some luxury holiday abroad? Or maybe you need to release equity to finance an expensive medical treatment for your loved ones.

It is my experience that elders often live in a permanent disconnection between what their properties are valued at and their spartan lifestyles, often struggling silently to get on by on low pensions. In this month’s article, I shed light on a legal method that reconciles both, allowing seniors to take full advantage of their real estate, opening their locked wealth by allowing them the freedom to enjoy life as they deserve in their twilight years, without struggling every month to make ends meet.

Unbeknownst to them, there is legal a way to tap into their build up wealth without needing to sell their property, much less leave their home!

This is known as selling the ‘bare ownership’ to an investor whilst retaining a ‘life usufruct’ on the property. This is a legal procedure witnessed by a notary. In simple terms, bare ownership grants ownership of a property but does not grant possession.

PROS

• The seller is allowed to remain in the property for as long as they live. In other words, the seller retains the possession. This, for senior citizens, is a huge plus as they will not have to renounce to their lifestyle or surrender the keys of their house for the remainder of their lives.
• The seller immediately accesses a large pool of money which they can use as they see fit: for medical expenses, lavish holidays, fancy restaurants, or simply as a well-deserved improvement to their lifestyle in their twilight years.
• The seller no longer needs to trouble himself with paying property taxes or community charges, it now falls on the investor to pay for them all.
• The owner avoids enduring all the associated hassle, stress and aggravation of a standard property sale but reaps all its benefits!
• You will only need to pay electricity and water bills.
• The seller can in fact rent out the property, or part of it (i.e. rooms), and pocket the money!
• The seller can in fact also sell his usufruct right, if needed be, to raise even more money!
• This procedure allows you to supplement and bolster a meagre state pension.

CONS

• You will receive slightly less money than its market value.
• If the seller has children, they will receive less by way of inheritance.

Requirements:

1. Are you 65 years old, or older?
2. Have you attained a Spanish residency permit?
3. Are you tax resident in Spain? Have you filed Spanish tax returns previously?
4. Is your property worth 150,000 euros, or more?
5. Is your property classified as urban (not rustic land)
6. Have you been empadronado in your Spanish property over the previous three years?

Conclusion

Selling the bare ownership is a (very) smart way of cashing in on the accumulated wealth of your property without relinquishing your lifestyle. Because in truth, you won’t notice any difference other than sitting on a large pile of money! You will still live in the same property for the remainder of your life.

This procedure is ideal for senior citizens who are asset rich, but cash poor.

For a seller, it’s a win-win as you get to keep your property (whilst you live) and you also have access to a large pile of cash with which you can do as you please.

For an investor, it is a win-win as they get to buy a property below the market value (BMV) and also do not pay inheritance tax or plusvalia tax on receiving the possession of the property in the future.

If you have grown tired of struggling financially every month, and wish to put an end to your endless nightmare, just give us a buzz. Our friendly staff will guide you through the procedure.

We can advise and represent you, to secure it, and sign the notary deed. Your only concern going forward will be what to do with so much money in your bank; it will be up to you!

Larraín Nesbitt Lawyers, small on fees, BIG on service.

Larraín Nesbitt Lawyers is a law firm specialized in conveyance, taxation, inheritance, residency, and litigation. We will be very pleased to discuss your matter with you. You can contact us by e-mail at info@larrainnesbitt.com, by telephone on (+34) 952 19 22 88 or by completing our contact form to book an appointment.

Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. VOV.

2.022 © Raymundo Larraín Nesbitt. All Rights Reserved.

Are you struggling with money issues in Spain? Do you find yourself being short of cash every month? Solicitor Raymundo Larraín gives us ten tips to cope when the going gets tough. Interested? Read on.

Marbella-based Larraín Nesbitt Abogados (LNA) has over 17 years’ taxation & conveyancing experience at your service. We offer a wide range of 50 legal and corporate services. Our team of native English-speaking lawyers and economists have a long track record successfully assisting expats all over Spain.

You can review here our client’s testimonials.

Article copyrighted © 2011, and 2020. Plagiarism will be criminally prosecuted.

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Abogados
8^th of September 2020

Introduction

As I’ve been hammering over the last four months, the advent of the Covid-19 outbreak has brought upon the country a financial hardship unseen in over 84 years, since the fratricidal Spanish Civil War. Spain’s economy is one of the worst hit in the world, and as I contend in this article, the underlying reason for this is it’s unhealthy overreliance on tourism.

A reflection of this devastating blow is Spain’s high unemployment rate, which ‘officially’ stands at 15.6%, but in practice could easily double this amount if you factor in the 4.7 mn unemployed who haven’t worked over the last 7 months as they are under ERTEs (‘temporary’ paid leave). In Spain, ‘temporary’ is code for permanent.

Politicians have cozily relied for decades on the tourism & hospitality industry - Spain’s golden goose - which pulls in over 200 billion euros every year. An industry ingeniously set up in the 60’s by General Franco in tandem with his brilliant Tourism Minister, Mr. Manuel Fraga Iribarne. Embarrassingly, six decades on, tourism is an anomaly that accounts directly for over 12% of Spain’s GDP, by far the number one contributor, and indirectly by at least a further six points, or more. No modern economy should have almost 1/5 of its GDP contingent on any one activity as this entails huge risks, such as the ones we are now witnessing. This overarching influence must be tempered. Moreover, out of all the countries that make the OECD, Spain is hands down the most reliant on tourism.

Successive generations of politicians have systematically failed to address the elephant in the room, with their attention all-consumed in petty domestic power struggles. Spanish politicians are obsessively engrossed by the country’s past and devote little energy to the nation’s future. They should have diversified the Spanish economy long ago to make it competitive, so we are not over-reliant on tourism. This is a gross dereliction of duty that needs to be addressed to bring balance to our economy. Covid-19 has been like the tide receding revealing the ugly weakness of the Spanish economy; the naked truth is that the Spanish economy has a crippling dependence on tourism. Before the virus took us by storm, Spain was the second largest tourist destination in the world, with 84 million tourists visiting us every year, trailing only behind France. If you take the U.S. as an example, which ranks number three in the world as a tourist destination, tourism only accounts for 2.7% of the U.S.’s economy. Compare this to Spain, which is almost seven times more! It’s ludicrous.

Social distancing has killed one of our major strengths and has thrown the economy into disarray, more so than in any other developed country in the world, precisely because of this overreliance which has now proved to be Spain’s Achilles’ heel. Although Spanish politicians are always quick to blame one another, it is what it is; they are all to blame. Our political class lost long ago the golden opportunity to devise a consensual grand long term strategy to modernize and diversify the Spanish economy, with education standing at its forefront, making it stronger and more resilient to any backlash, including global virus outbreaks. Because of their neglect, young generations and even our elders, will now suffer greatly from the laid back attitude of our irresponsible political class which now shamefully relies on European handouts.

I’m of the opinion that any financial help from the Union should be closely monitored to the last euro-cent, to ensure taxpayer’s money is wisely spent on whatever our socio-communist authorities actually claim it is being spent on.

With all this in mind, I have been publishing a series of articles, since May, to hopefully help ease the pain for the expat community based in Spain. This article rounds up the different strategies laid out in previous articles to mitigate the challenging financial ordeal we are now up against.

Ten tips for struggling families

1. Fraction your payment of local taxes. Because of the Covid-19 outbreak, many families' finances are underwater. Regional tax offices now allow struggling owners to spread out payment over long periods of time, accepting to settle it in instalments. Contact us for more information on this tax service.
2. Request your landlord a rental reduction. Particularly in commercial premises, tenants are asking more and more for payment facilities or reductions in monthly payments. Landlords often would rather come to an understanding with a good tenant than let them go and see the whole place boarded up for years.
3. Swap your mortgage loan to interest-only (“carencia”). Lenders are open to renegotiate the mortgage terms to avoid you defaulting on a loan. Don’t be afraid to pick the phone and speak to them. This can be arranged whilst the property is put up for sale or just to weather off the storm meanwhile. Spanish lenders will gran it for a year or two at most.
4. Extend mortgage repayments an additional number of years. The last thing Spanish lenders want now is for you to default on your mortgage loan. They are being very accommodating and open to renegotiating with borrowers the payment terms, extending them. The drawback is that on doing so the amount of interests you pay are rolled up. The drawback is that on the long run this means you will end up paying far more to gain some breathing room at present. It’s really an option only for those left with no other really. The Government is now allowing this change free of charge to struggling mortgage borrowers providing they are resident, and the property is their main home (permanent abode). Borrowers will not pay for Notary or Land Registry fees on following it.
5. Lifetime loan. Is a special type of home equity loan available only to senior residents. It allows owners to release equity from their homes converting it into cash by way of placing a charge against their property (which acts as collateral). The loan does not have to be repaid during the homeowner’s lifetime. More on this in our article: Lifetime loans explained – 8th August 2020.
6. Sell the property as a distressed asset (fire sale).If you have already run through the numbers, and you are convinced that you will no longer be able to service your mortgage, rather than defaulting and being repossessed, you should seriously consider selling the property as a distressed asset. The catch again is that the property should not be in negative equity. The more it is, the least likelihood there will be anyone interested in it as they in turn are regarding the purchase as an investment and the numbers need to stack up to make it worthwhile for them. More on this in our article: Buying distressed property in Spain – 8th August 2011
7. Apply for debt-consolidation.There are scores of financial companies offering this service. Basically, what they do is group together all your existing debts with different lenders (ranging from credit card debt to personal loans) and concentrate them all in the hands of only one lender who then extends the loan repayments in time. The immediate consequence this has is that your monthly repayments are sharply reduced making them far more affordable. However, the drawback once again is that, on extending the financial commitments over time, you will be paying far more interest on the long run.
8. Dissolution of joint property ownership. Falling on hard times may drive a wedge between couples, families and friends making cohabitation a challenging prospect. A DJPO allows joint owners to re-arrange their share on a property in a tax-efficient manner enabling the outgoing joint owner to transfer his share to an existing co-owner legally waiving the extreme Property Transfer Tax and paying in lieu only 1.5% Stamp Duty, or less. This procedure’s highlight is that it saves property buyers over 86% in property transfer tax. A DJPO is suitable in a divorce or separation, re-arranging inheritances, or re-arranging property holdings between family and friends. More details in our article: Dissolution of Joint Property Ownership in Spain – 8th of June 2020.
9. Dación en pago (handing back the keys). This option should only be considered as last resort when all other options are exhausted. This is handing the back the keys to a lender and signing a deed at the Notary whereby the lender commits not to chase you for the outstanding debt. In exchange, a lender fully discharges your mortgage liability. You will not be pursued abroad in your home country on the shortfall. Two things are required, the property must not have slipped into negative equity and your lender must not have instigated a repossession procedure. Should the property be in negative equity (you owe more than what the property is worth) a lender will be reluctant to agree to a “dación en pago de deuda” because the collateral will have no equity left. Please read our article: Dacion en pago explained – handing back the keys – 8th July 2020.
10. Filing for personal bankruptcy in Spain.This procedure is expensive albeit it allows those who can afford it to buy considerable time (years) with which to re-negotiate their financial commitments and even reduce the amount owed (up to 30%). A judicially-appointed administrator will be tasked to oversee and manage your day-to-day financial affairs in the interim. Meaning you lose control over all your assets needing to request permission to manage your affairs. I would only recommend this option in exceptional cases as it will turn you into a lifetime financial pariah. This is not an option for most people. More on this in our article: Personal Bankrutpcy in Spain: Second Opportunity Law – 8th September 2015.

In conclusion

Spanish young generations are the key to diversify our economy and avoid such repeat scenarios unfolding ever again. Our political class would do well to take cue from leading world super-powers, such as China and the US, and go out of their way to lay the foundations of a great higher education over the next 50 years. This would be achieved by heavily investing in devoted teachers, schools, academic institutions, and building modern facilities. By setting up lavish euro-billion endowments for top-performing universities in the image of reputed Ivy League institutions, enabling all types of tax incentives to attract capitalization, foster R&D, incentivize integrated business campus with budding small caps within universities (i.e. Malaga’s Technology Hub, which is a success story, having created thousands of highly qualified, well-paid jobs), by creating truly generous scholarships for bright students (not the paltry ones we have), so as to nurture a strong, modern, meritocratic secular education. This undertaking requires vision, commitment, and long term planning.

Real statesmen are selfless and do, at all times, what is best for their people regardless of the unpopularity or electoral cost. They commit themselves to a long-term vision and focus on what really matters for the country, with their hearts set in the nation's future prosperity. Career politicians, by contrast, make decisions on the hoof based on short-term opinion polls and are self-serving.

Politicians have no business in meddling and controlling companies, especially career politicians who have never worked in their life and have always lived (very) comfortably off the state. It is not politicians’ job to run companies and create jobs, the private sector does this, and does it very well. Career politicians should step back, limiting themselves to create the right tax & legal framework for private companies and entrepreneurs to step forward and thrive, through low taxation and the removal of red tape. They should ensure academic institutions are (very) well-funded, with devoted teachers being paid top dollar (not the meagre wages they have), with thousands of truly generous scholarships enabled for gifted or hard-working children from underprivileged backgrounds.

The young men and women who attain this top education, given half a chance, would earn their spurs creating companies, jobs, and a host of new industries that now seem but a distant dream to us. This in turn would attract investments and generate wealth on a large scale. There can be no strong economy without diversification, and the key to this is a well-educated youth. Every year Spanish politicians bubbly plough billions of euros of taxpayer’s money into shady ideologically-friendly NGOs lead by unqualified chums who wouldn’t be fit to run a hot dog stand. Spain spends an eye-watering 122bn euros every year on 'subsidies'. That's 25% of its annual budget.

Where does all this money go? Why is no one held accountable for this gross misuse of public funds?

There is no efficient allocation of resources. If this squandered money were instead be put to good practical use for society’s benefit, vastly improving our educational system over the long run, allowing children from humble disadvantaged social backgrounds to access well-funded, top-tier universities, things would look very differently indeed. As an example, the Complutense university in Madrid, which tutors 86,000 students is clearly underfunded with a pitiful budget of only 600 million euros a year! By contrast, Harvard university has an endowment of over 41 billion USD and hosts 22,000 privileged students. Yes, one is public, and the other private, but you get my drift. Spain woefully does not commit enough financial resources to higher education, only the bare minimum, and it shows. Embarrassingly, albeit unsurprisingly, Spain has no university ranking amongst the world’s top two hundred. This is unacceptable no matter how you look at it.

For a country that purportedly ranks as the 13^th most important economy in the world, by rapport to its GDP, this is a serious imbalance that needs to be addressed at a political level - by all parties - to ensure equality and meritocracy. This academic imbalance spills over into Spain’s imbalanced economy which in turn translates into over 30% unemployment rate. Meanwhile, our career politicians self-approved this year a lavish increase of their public stipends. God forbid they endure financial hardship in these trying times.

Perhaps our self-complacent career politicians should talk less and do more, taking example from real statesmen and more advanced economies, for the good of the people.

If you think education is expensive, try ignorance.

“An investment in knowledge pays the best interest.” – Benjamin Franklin

Benjamin Franklin (1706 – 1790). Founding Father of the United States of America. Exceptionally gifted statesman, scientist, inventor, accomplished diplomat, writer, humourist, printer, postmaster, and political theorist. Even politician in his spare time; nobody is perfect.

Larraín Nesbitt Abogados, small on fees, big on service

LNA is a law firm specialized in conveyancing, taxation, residency, inheritance, and litigation. We will be very pleased to discuss your matter with you. You can contact us by e-mail at info@larrainnesbitt.com, by telephone on (+34) 952 19 22 88 or by completing our contact form. 

Related articles

• Lifetime Loans or Reverse Mortgages in Spain Explained – 21st February 2011
• Spanish Mortgage Loans: Beware of Abusive Clauses – 8th January 2012
• Spanish Mortgage Loans: An Overview – 21st February 2012
• Mortgage Collar Clauses Revisited (‘Cláusulas Suelo’) – 8th December 2013
• Bank Repossessions in Spain – 21st February 2014
• Bad Debtor’s List (‘Fichero de Morosos’) – 8th April 2014
• Spanish Creditors Pursuing Debts Abroad – 8th May 2014
• Dación en Pago Explained or How to Hand Back the Keys – 8th December 2013
• Dissolution of Joint Property Ownership in Spain – 8th June 2020
• Dacion en pago explained – handing back the keys – 8th July 2020
• Lifetime loans explained – 8th August 2020
• 8 tips when money is tight in Spain – 8th September 2020

Article also published at Spanish Propert Insight: 10 money-saving tips if you have to tighten your belt in Spain

Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. VOV.

2.011, and 2.020 © Raymundo Larraín Nesbitt. All Rights Reserved.

Are you a senior citizen struggling with liquidity problems in Spain? Did you know there is a special legal procedure to free up equity from your home and easily obtain money from lenders? Solicitor Raymundo Larraín explains to us what a Lifetime Loan is and how you too can profit from its multiple benefits. Interested? Read on.

Marbella-based Larraín Nesbitt Abogados (LNA) has over 17 years’ taxation & conveyancing experience at your service. We offer a wide range of 50 legal and corporate services. Our team of native English-speaking lawyers and economists have a long track record successfully assisting expats all over Spain.

You can review here our client’s testimonials.

Article copyrighted © 2011, and 2020. Plagiarism will be criminally prosecuted.

Today’s article is dear to me, as it was the first one I published in Spanish Property Insight, under my own name, a decade ago. At the time, I was living and working in the United Kingdom.

Original article from the 21st February 2011

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Abogados
8^th of August 2020

Introduction

Back in 2006, I was one of the first lawyers in Spain to formally introduce Lifetime Loans (LTL, for short) from the hands of a New Zealander institutional lender. This is a very niche financial service that few lenders have on offer. Because it is a service aimed only at residents, unlike other lenders, they do not need to communicate or speak in English, much less in other languages. Which is where we come in.

In the aftermath of the Covid-19 pandemic, families continue to struggle to make ends meet and face their mortgage payments.

LTL is one of our proposed solutions to release equity from your home in Spain. This option appeals to senior expats resident in Spain. It offers them the opportunity to release cash from their homes whilst still being able to live in them for the remainder of their lives.

At a time when finance is tight (understatement), a LTL allows asset-rich but cash-poor senior borrowers to unlock the store of wealth they sit on without any impact to their lives. Well, other than being paid a substantial amount of money that is!

A LTL is a niche financial service. Please contact our company directly if you’re interested, and want to know more.

Definition

A Lifetime Loan is a special type of home equity loan for senior residents. It allows owners to release equity from their homes converting it into cash by placing a charge against their property (which acts as collateral). The loan does not have to be repaid during the homeowner’s lifetime.

Specifics

The borrower retains full ownership of the home and can actually continue living in it until they, or their surviving partner, passes away. Once this takes place, the loan (plus accrued interests) must be settled by either selling the property or else by the appointed heirs who will repay it in full. The loan can be taken either as lump sum or periodically in instalments at the borrower’s choice. The older you are, the larger the amount of money you can qualify for as it follows a sliding scale.

At no time will the borrower owe more than what the collateral (the house) is worth even if the resulting debt is higher. Meaning that at the time of passing away, it suffices to either hand over the property to the lender or else to pay to settle the debt for good. The afore has huge legal significance as it implies that, unlike a standard Spanish mortgage loan, with a Lifetime Loan you cannot be pursued for negative equity. In other words, the valuation of the property for the purpose of requesting this loan facility is the capped threshold you can expect to owe a lender on signing on the dotted line. This brings much relief to borrowers.

Who qualifies for a Lifetime Loan?

1. Be resident in Spain.
2. Be 65 years old, or over.
3. The property must be your main home (not a holiday home).

How’s the loan paid?

1. In lump sum, all in one go.
2. In monthly instalments.
3. A combination of the two above.

Payout chart

The following is a chart to give you an idea on what you can reasonably expect to be paid out. It follows a sliding scale, so the older you are, and the more your property is worth, the higher the payout. In the below chart I only show the payout either as a lump sum or in monthly instalments, but you could also choose a combination of the two if this accommodates you more.

Pros

• You get to decide how and when you want the loan paid out. You are in control.
• The loan does not need to be repaid during your lifetime, only after you pass away. You have peace of mind.
• You may continue to live in your home for the remainder of your lifetime unmolested. You are independent.
• Attaining this loan does not impact your lifestyle in any way other than improving it. You deserve it.
• You get to decide how and when to spend the loan, no strings attached. You have freedom.

Are there any restrictions on what can be done with the loan?

None. You are free to use the loan as you see fit. For example, some borrowers use it to pay for improvements on their homes, others to travel around the world, and others to finance expensive medical treatments.

In conclusion

One of the main drawbacks of living in a democracy is that retirement nowadays is akin to playing a rigged soccer match with the Government, in which it keeps moving the goalposts! It is foreseeable governments will jump at the chance to use the Covid-19 pandemic as a plausible excuse to push back retirement age by several years – again. Some people would rather play it safe and not take chances with their life savings on applying for a LTL. A LFTL gives you peace of mind and financial stability because no matter how choppy the waters are up ahead, you always get paid on time. It nicely supplements any pension cover you may already have affording you in your twilight years quality of life and choice.

A Lifetime Loan is a great option that can help you, and your partner, attain a tidy amount of extra income to help you push (very) comfortably past the finish line every month. Attaining a LTL does not change your lifestyle in any way, well, other than greatly improving it!

At LNA, we help clients to secure a LTL anywhere in Spain, discharge an existing mortgage liability, and sign it on your behalf at a notary for a very competitive fee. This is a very niche financial service that very few lenders have on offer, and we know them all. We have over 14 years’ experience signing them. Give us a buzz and find what the fuss is all about.

Larraín Nesbitt Abogados, small on fees, big on service.

“Democracy is the worst form of Government except for all those other forms that have been tried from time to time.” – Winston Churchill

Sir Winston Leonard Spencer-Churchill (1874 – 1965). Born into a privileged aristocratic family,  he was an eminent British career officer, artist, historian, delicious eccentric, and laureate writer – awarded the Nobel Prize in Literature in 1953 “for his mastery of historical and biographical description as well as for brilliant oratory in defending exalted human values.” With dogged single-minded determination, he defied alone and managed to stave off, the tyrannical Nazi wave in WWII, unwaveringly assisted by our American cousins, which threatened to swallow whole the United Kingdom as it had already overrun most of Europe. He resolutely led the country out of its darkest hour, restored Europe’s freedom, and laid the groundwork for peace and prosperity which all future generations have come to enjoy since and taken for granted, or so it would seem. As a keen-eyed historian, in line with fellow Founding Fathers Schuman and Monnet, he was quick to grasp and understand the importance of a united Europe to avoid repeat past mistakes which had resulted in two world wars that ravaged the continent. Consequently, he became a staunch defender of the idea of creating a single supranational political and economic entity which reconciled old foes and would act as a guarantor of peace & prosperity in the continent (in his own words, a “United States of Europe”); in time, this European fellowship would be known to us as the European Union. Churchill was instrumental, and the key driving force, behind the creation of the Council of Europe, a forerunner of what is now the European Union. He is credited as one of eleven Founding Fathers of the Union. Churchill incarnated like no other the best of British values. A child of the House of Commons, he was a proud servant of the State, never its master. A true statesman that would always put ahead of any consideration the best interests of our people, by tearing down divisive walls and fostering at every opportunity union.

Simply put, he’s likely the finest British politician ever to grace 10 Downing Street.

Larraín Nesbitt Lawyers is a law firm specialized in inheritance, conveyancing, taxation and litigation. We will be very pleased to discuss your matter with you. You can contact us by e-mail at info@larrainnesbitt.com, by telephone on (+34) 952 19 22 88 or by completing our contact form.

Legal service Larraín Nesbitt Abogados offers you

• Lifetime Loan

LTL related articles

• Lifetime Loans or Reverse Mortgages in Spain Explained – 21st February 2011
• Advice to Struggling Mortgage Borrowers in Spain – 8th March 2011
• Spanish Mortgage Loans: Beware of Abusive Clauses – 8th January 2012
• Spanish Mortgage Loans: An Overview – 21st February 2012
• Mortgage Collar Clauses Revisited (Cláusulas Suelo) – 8th December 2013
• Dación en Pago Explained or How to Hand Back the Keys – 8th December 2013
• Bank Repossessions in Spain – 21st February 2014
• Bad Debtor’s List (Fichero de Morosos) – 8th April 2014
• Spanish Creditors Pursuing Debts Abroad – 8th May 2014
• Dissolution of Joint Property Ownership in Spain – 8th June 2020
• Dacion en pago explained – handing back the keys – 8th July 2020
• Lifetime loans explained – 8th August 2020

Article originally published at Spanish Property Insight: Lifetime Loans Explained

Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. VOV.

2.011, and 2.020 © Raymundo Larraín Nesbitt. All Rights Reserved.

Are you struggling with your mortgage payments? Did you know there is a special legal procedure in Spain to hand back the keys to your lender, without attracting any penalties? Solicitor Raymundo Larraín explains to us how to formally surrender the keys to your lender securing your assets abroad and without attracting any taxes. Interested? Read on.

Marbella-based Larraín Nesbitt Abogados (LNA) has over 17 years' taxation & conveyancing experience at your service. We offer a wide range of 50 legal and corporate services. Our team of native English-speaking lawyers and economists have a long track record successfully assisting expats all over Spain.

You can review here our client’s testimonials.

Article copyrighted © 2008, 2010, 2013, and 2020. Plagiarism will be criminally prosecuted.

Original article from the 21st November 2008

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Abogados
8^th of July 2020

Introduction

In the aftermath of the Covid-19 pandemic, families struggle to make ends meet and face their mortgage payments.

Given the tough financial situation we are in, the most challenging since The Great Depression, it is foreseeable scores of borrowers will fall into arrears over the next months. In this month's article, we focus on one of the proposed legal solutions for individuals who are struggling with debt in Spain. There are several other options you should consider first, and we will cover them in detail in next month's article. As advised, today's solution should only be regarded as your last option, as it entails surrendering your home keys to your lender and walking away from it all.

For all those who’ve slipped into mortgage arrears in Spain, or are likely to, and are thinking of handing back the keys as a solution, there’s a formal legal procedure to do it known as dación en pago (‘datio pro soluto’). Article 140 of Spain’s Mortgage Act allows a borrower to cancel a lenders’ debt by handing in exchange the encumbered asset.

This solution of last resort puts an end to many borrowers’ waking nightmare, as the mortgage debt mounts up exponentially over time eventually becoming unbearable.

You simply cannot hand back the keys to a lender.

It needs to be done following a formally established procedure known as ‘dacion en pago’, witnessed by a notary public. If you simply leave the keys on the counter, you are defaulting on a mortgage loan, which has serious legal & financial repercussions, as explained below.

Your lender will be forced to follow a full-blown bank repossession, which attracts a great deal of expenses for them. What many borrowers fail to realize, is that the loan debt is not finished on handing back the keys. When a bank repossesses you, the value of the property can be for half, or less, of the appraisal value post-auction. Meaning, even after being repossessed you still owe your lender money. Your lender will chase you against your assets for the shortfall, even abroad.

Your lender will also blacklist you with all major credit-rating agencies, which will seriously hamper your borrowing ability in the future in your home country, or elsewhere. It will gravely affect your credit score, to the point that companies will refuse to issue you credit or debit cards, and you will even be barred from applying for membership from selected retailers i.e. gyms, clubs, golf clubs, commercial centres, etc.

A dacion puts an end to this nightmare, ringfencing your assets.

Definition

In plain English, ‘dación en pago’ (or dation in payment) means handing back the keys to a lender at a notary, and in exchange a lender discharges in full the mortgage liability not holding a borrower liable in the future. They will renounce pursuing the debt in your home country, or elsewhere, against any other assets you may hold.

Why hand back the keys? Unlimited personal liability

The reason on why struggling borrowers follow a dación is because on being repossessed in Spain, if a property slips into negative equity (meaning you owe more money than what the property is worth), a lender will pursue the borrower for the difference (art. 579 LEC), even abroad, in your home country.

Following article 1911 of the Spanish Civil Code, a mortgage borrower’s liability is personal and unlimited with all his assets, both now and in the future. In other words, the debt goes personally against the borrower on the balance owed to a Spanish lender. The property itself, the collateral, is accessory and was only guaranteeing the bank loan, which is the principal. Meaning a lender will legally pursue a borrower on the shortfall post-repossession.

A dación is particularly interesting for those holding property, whether in Spain or abroad. What a mortgage borrower seeks on following a dación is to set a legal firewall that will avoid a lender jeopardising the remainder of his assets. It is basically ringfencing the family’s financial assets by (legally) drawing a line on the sand. If you hold no assets, then you may wish to skip this article altogether.

Many defaulting borrowers realize with shock and horror only post-auction, that in despite of a lender having repossessed their Spanish property, they are still being chased in their home country for the outstanding debt. As they owe, in addition to the mortgage loan shortfall, the bank repossession’s associated expenses, lawyer’s fees, court agent’s fees and on top the mortgage default compound interest. The default compound interest on average is over 20% p.a. which only adds more pain on the long run as the overall debt builds exponentially over time.

That is why many defaulting borrowers, in lieu of being repossessed and face all the above dire legal and financial consequences, would rather sell the non-performing mortgage loan as a distressed asset (fire sale) or else simply follow a dación procedure if they are unable to find a buyer in time to avoid repossession proceedings.

Bottom line, a repossession in Spain is something borrowers should avoid at all costs, and a dacion does just that.

Requirements

1. No-negative-equity rule: the property should not be in negative equity. As a rule-of-thumb I would personally advise the buffer of equity to amount to at least 20% of the property value for it to be successfully accepted. The higher the positive equity buffer, the more likely a lender is to accommodate the idea of a dación.
2. No repossession procedure underway: it is critical a lender has not instigated repossession proceedings against the property.

Dacion en pago procedure

The outline on how it works is as follows:

• Borrower must be up to date with mortgage repayments, community fees, and local taxes.
• Borrower proposes his lender a dacion en pago
• Lender requires a property reappraisal. Borrower pays for this (approximately €350).
• If on average the new valuation of a property covers the outstanding mortgage loan, plus 12% of the associated legal expenses, the lender accepts to take the possession of the property, cancelling your debt and waiving any legal action against your assets.
• Your lawyer, in tandem with the lender, drafts a special deed to be witnessed by a notary public. The deed is signed at a notary, and the borrower formally surrenders the keys in this act, leaving the property clear of furniture and tenants.
• The property will now be lodged under the lender’s name.

Expenses involved

A dación en pago works similar to a conveyance procedure only that instead of getting paid in exchange of signing your property away, you are fully discharged of the mortgage liability being allowed to walk away scot-free from the problem - without any legal repercussions.

• 6 to 11% Property Transfer Tax (ITP) contingent on the autonomous region of Spain where the property is located
• Plusvalía tax
• Lawyer’s fees
• Notary fees
• Land Registry fees
• Gestoría fees (may not apply)

Ideally all the above expenses should be negotiated by your lawyer to be borne by the lender (except the lawyer’s fees). A lender, on becoming the new owner, will contribute towards the community fees just like any other member in a Community of Owners. That is the reason why there must be sufficient equity in the property to offset, not only the associated completion expenses and taxes, but also the ongoing community maintenance costs and property taxes until a lender manages to sell on the property. Banks are not real estate agencies and do not cherish having large stocks of unsold properties on their books; that is not their core business.

Signing the notary deed and frequent mistakes

You can either sign a dation in payment personally or else instruct a lawyer to sign it on your behalf through a power of attorney.

However, I just cannot stress enough the importance of instructing your own lawyer. He will verify the debt with your lender is fully discharged on you signing the deed relinquishing ownership, besides acting as a translator (mandatory). Besides, your lawyer will negotiate with the lender on your behalf who pays for the expenses, as some lenders notoriously make borrowers pay for some (or all) the associated expenses if unrepresented.

I have witnessed several cases in which borrowers - acting without a lawyer - were purposely tricked into signing before a Notary what they thought was a dación, but was in fact only an assignment of rights and assets (datio pro solvendo) which does NOT extinguish the debt.

The practical implication of this is that the mortgage liability is not fully discharged, remaining very much outstanding. Meaning lenders can – and will – pursue the borrower abroad for the outstanding debt, which mounts up exponentially over time. It is standard practice these debts are sold in block to local debt-collection agencies for a fraction of the book value. E.g. a Spanish lender sells hundreds of defaulted loans to a local UK company who will then (aggressively) chase you in England on the arrears, plus interests, and expenses against your main home and assets.

Another glaring mistake people often make is that they rely on Spanish notaries or lenders to act as their own private lawyers. Some borrowers are lulled into a false sense of security thinking that only because a Spanish notary or bank is involved that everything will be above board and they will look after their rights – crass error. A notary is not there to give you legal advice, as he acts impartially to either side. Their main role is to witness the deed and ensure taxes are paid to the state (they are after all civil servants working for the government). Don’t rely on a notary to act as your own personal solicitor, because he won’t.

You must instruct your own legal counsel to safeguard your interests.

Pro-tips:

1. A dacion fully discharges your mortgage liability, bringing (legal) closure to the matter.
2. A dacion en pago avoids jeopardizing your assets in your home country; you will not be chased abroad on the shortfall plus expenses.
3. Following a dacion avoids being blacklisted by major credit-rating agencies, such as EXPERIAN, ASNEF, RAI etc.

Dación en Pago – Conclusion

A dación en pago is a win-win for both parties.

A borrower is free at last having managed to stave off the problem by successfully securing his assets, whether in Spain or abroad, from a lender or any law firm or debt-collection agency hired to pursue the outstanding debt.

A lender on the other hand will now own the property outright and will have successfully waived a lengthy, protracted and expensive court procedure (bank repossession) without having to set aside the mandatory provisions before the Bank of Spain to make up for this dubious loan which affects its liquidity ratio. A repossession procedure lasts 2 years minimum and may easily entail for the bank expenses running up to 20% of the properties’ value. These provisions set aside by lenders are being looked upon closely by credit-rating agencies post-credit-crunch as they hinder their borrowing ability and ultimately dent their share value.

In short, a dacion offers a way out for all those who’ve lost hope.

If you are struggling with debt, and feel the weight of the world upon your shoulders, give us a buzz. Our friendly staff will have a chat with you and guide you on the different options available to you. At LNA, we can represent you handing back the keys for a very competitive fee, regardless of your property’s location in Spain, we act nationwide. We have 17 years’ experience signing them, ask us free of compromise.

Larraín Nesbitt Abogados, small on fees, big on service.

“A sad soul can kill you quicker, far quicker, than a germ.” – John Steinbeck

John Ernst Steinbeck Jr. (1902 – 1968). Was an American author who won the 1962 Nobel Prize in Literature "for his realistic and imaginative writings, combining as they do sympathetic humour and keen social perception." He is regarded as "a giant of American letters," and many of his works are considered classics of Western Literature. Amongst his vast works, the Pulitzer Prize-winning The Grapes of Wrath and Of Mice and Men stand head and shoulders above the rest and are considered masterpieces of modern US Literature. In these books he poured his soul to depict the class struggles of tenant farmers and migrants, often neglected by society, and the financial hardship they were forced to endure brought upon by The Great Depression.

Legal service Larraín Nesbitt Abogados offers you

• Dación en Pago (handing back the keys to a lender)

Related articles and blog posts

• Dacion en Pago Procedure – 21st November 2008
• Dación en Pago: Finally, a Borrowers’ Right – 8th March 2012
• Dacion en Pago or “Handing back the Keys” – 8th December 2013
• Dacion en pago explained (handing back the keys) – 8th July 2020

Article also published in Spanish Property Insight: Dacion en pago explained - handing back the keys.

Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. VOV.

2.008, 2.010, 2.013, and 2.020 © Raymundo Larraín Nesbitt. All Rights Reserved.

Lawyer Raymundo Larraín spills the beans on how to become a successful Buy-To-Let landlord in Spain.

Marbella-based Larrain Nesbitt Lawyers has over 16 year’s taxation & conveyancing experience at your service. Our team of native English-speaking lawyers and economists have a long track record successfully assisting expats all over Spain. You can review here our client’s testimonials.

The following finance article has been summarised to avoid unnecessary tax technicalities. Before committing and making any type of investment, you should first seek professional tax & legal advice on your matter – see disclaimer below.

Article copyrighted © 2019. Plagiarism will be criminally prosecuted.

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Lawyers
8th of November 2019

Introduction

We have closed in October the accounts for Q3 2019, and it has been – yet again – a record-breaking tax quarter. The cracking numbers we’ve seen from BTL landlords have prompted us to write a short finance article on the matter.

Several factors have contributed towards this ongoing Buy-To-Let boom, to name but a few:

• Spain became in 2017 the world’s second tourist destination. Let those words sink in. This has created a huge demand for tourist accommodation to house the over 83 million tourists Spain receives every year (and growing). The hospitality market simply struggles to keep up with the strong demand.
• Irruption in the market of new big players. AirBnb, HomeAway etc all these huge holiday platforms have created for the first time ever the opportunity to harness the huge tourist demand and widen the offer range at competitive prices. Effectively they have single-handedly moved the goals posts, allowing small-time investors to offer their Spanish properties to an unprecedented worldwide audience. For the first time ever, small investors may now give their properties great marketing exposure, in equal footing to large hotel groups.
• A sluggish sales market has helped to steer investments towards the ever-growing, and far more profitable, buy-to-lets.
• New gargantuan changes in tax laws. Several European Court of Justice key rulings have paved the way to huge tax savings for expat landlords. So much so, that non-resident landlords have seen their tax bills drop by an average of 70%, or more, which directly impacts the bottom line making their real estate investment far more rewarding. This is unprecedented, as before non-residents were barred from deducting any expenses, taxes and fees.
• New changes in long term rental laws. Spain clumsily approved in April 2019 new rental laws which have given huge entitlements to long term tenants, among many other changes detrimental to landlords. As a result of these sloppy measures, landlords have pulled out en masse from long term lets, offering instead their properties as short-term holiday accommodation which are decidedly more lucrative and have far less associated legal restrictions.
• Political instability in competing tourist destinations. This translates into tourists looking for safe havens, like Spain, to spend their holidays in.
• Rental yields have soared by two digits year-on-year over the last three years. As a result of the imbalance in supply, landlords find themselves in a privileged position being able to command higher rental yields year on year to meet an ever-growing demand.
• Climate change. The global warming has caused the tourist rental season to draw out to months which were previously unsuitable for short term accommodation, allowing overall more rental days with good weather.

When you factor in all the above, you come to realize why the tourist rental industry is booming in Spain. This short article goes on to explain how you too can profit and ride the tourist rental wave.

8 tips to rent like a pro

1. Location, location, location. Any article on real estate worth its salt usually starts with this timeless saying. A worn out trope no doubt, but that doesn’t make it any less true and it is hands down the first tip that is often forgotten or neglected by most. Property prices can increase or decrease, but nothing impacts more on them than location. A great location helps you to cap off the storm greatly cutting down on your losses in a cycle downturn. Conversely, in a property boom, well-located real estate greatly capitalizes from it, soaring at a much higher rate than the average. When you invest in BTL, you need to choose a location which has a great touristic affluence. You simply can’t go wrong with international household names such as Madrid, Marbella, Mallorca, and Barcelona.
2. Inland vs coastal. Both are on high demand but for very different reasons. The discerning city crowd, with refined tastes, are after the glitz and bling of a cosmopolitan lifestyle and are drawn to museums, restaurants, cultural events and all the flashy spoils a big city has to offer. On the other hand, the beach crowd is after raw fun, sun & beach, mojitos and disconnecting for a while. You must decide which group you want to appeal to and hone your marketing towards it. Both are proving to be great business options. Inland property (large cities aside) tend to fall more on the rural wayside. Whereas coastal resorts (and large cities) are clearly aligned with urban properties. To sum it up, in general, flat out you should choose urban over rural for buy-to-lets in my humble opinion. That said, if you have a strong predisposition towards nature and wildlife preservation and want to offer this healthy experience to your guests, then by all means go rural (inland). Spain has thousands of unspoilt scenery waiting for you, and your guests, to discover and get lost in their beauty.
3. Affordability vs maintenance. Budgeting carefully is a key element of any successful conveyance procedure. Yes, you may afford to buy a swanky property in a great location, but can you afford its steep maintenance? Only buy a property you are absolutely confident you can afford to maintain over the mid to long run. Buy-to-let properties intrinsically should not be very expensive. I advise the property you acquire should be centric, small, with good communications, within walking distance of all amenities and the sea (on coastal resorts). If you do your research properly, you can even use at times the rental income generated to repay the mortgage and any additional expenses.
4. Tourist Licence. Several regions in Spain have devolved competencies on this matter, passing their own regional laws (holiday rental licences in Spain, region-by-region). Some of these laws are very stringent i.e. Balearic Islands. Spain’s Supreme Court has recently ratified and defined the scope of regional competencies on holiday rentals. You would do well to acquaint yourself with the regional regulation where you plan to buy a property in. You must comply with all the requirements set out in the regional law and attain a Tourist Licence, where necessary. You really do not want to invest several hundred thousand euros in a property only to find out you are banned by your local town hall from offering it as holiday accommodation!
5. Licence of First Occupation. A staple requirement to apply for a Tourist Licence throughout every region in Spain is to have attained what is known as a Licence of First Occupation. This is an unconditional requirement which marks the difference between being able to let your property legally, or not. Humongous fines are levied on landlords who fail to prove their property has attained a LFO from their town hall.
6. Community of owner’s bylaws. If you buy into a gated community or building, chances are high you will become part of what is known as a community of owners. New laws passed on March 2019 have empowered communities of owners across Spain to outright ban, or restrict, holiday rentals. You really do not want to invest several hundred thousand euros in a property only to find out later on you are banned by your community to offer it as holiday accommodation!
7. Rental management companies. This is a make-or-break. Some shoddy companies and individuals, that fly under the tax radar, refuse to hand over VAT invoices for any of their services (for which they charge thousands!). This translates into their clients unbeknownly picking up huge tax bills. Other more professionally-run rental management companies have no qualms to supply clients with proper VAT invoices, so that the landlord’s lawyers may deduct them, dramatically reducing a landlord’s tax bill (on average by 70%, or more). Make no mistake, landlords end up picking the tax bill of those suppliers who refuse point blank to declare and pay VAT. Bottom line, go legal and demand VAT invoices from suppliers; you will be able to offset huge amounts of expenses from your landlord tax bill. Don’t subsidize tax dodgers out of your own pocket!
8. Taxation - Lawyers. A competent company, like Larrain Nesbitt Lawyers with over 16 years’ experience, will be able to legally knock off 70%, or more, from your landlord tax bill. Our company does this routinely for all our tax clients. Did you know there is a huge list of property-related expenses, taxes, fees etc which are all tax-deductible and can vastly mitigate your landlord tax bill? Not to mention that lawyer’s fees can also be offset from any tax you need to pay on renting out... Ask us for our holiday rental accounting service (HRAS).

Conclusion

In Spain, the average annual rental yield equates to 5% of a property’s value. Given how rental yields have soared year-on-year by two digits across the board over the past 3 years, this is quite substantial. The afore does not even factor in capital appreciation, which has increased in general by one digit and by two digits in large cities. When you combine both the power of soaring rental yields and capital appreciation, you conclude that real estate is a safe investment that is yielding a two-digit return per annum YOY, with little to no risk. BTL is ideal as a safe retirement plan, as opposed to investing your hard-earned pension with legions of mainstream overrated ‘professional’ hedge fund managers, who rake in millions a year, and return between 36p and 83p for every £1 invested by their customers.

At a time of historic ultra-low interest rates (which, incidentally, is a wondrous opportunity to request a buy-to-let mortgage) this is simply smashing; it doesn’t take a MBA to profit from it, only a level-headed investor that puts some work and time into lettings.

Buy-To-Let is akin to running your own business. If you want to succeed, you must learn to delegate. When you examine some of the world’s most successful CEO’s, it dawns on you that the key to success is finding the right people for the right roles and delegating on them. You cannot hope to do everything yourself or you will be driven insane.

Instruct a seasoned lawyer (conveyancing & taxation), hire a competent rental management agency, and market your property using a renowned property portal. All three working in tandem with you will drive your rental business to success. And profit from it all as millions of landlords already do!

"If you pick the right people and give them the opportunity to spread their wings and put compensation as a carrier behind it you almost don't have to manage them.” – Jack Welch

John Francis "Jack" Welch Jr. (1935). From a humble background of deeply religious Irish immigrants, he made money as a youth working as a newspaper delivery boy and shoe salesman. He captained his high school hockey team and would go on to study chemical engineering. He would rise to become a legendary US business executive, author of several best-selling books on management, and ex-CEO of General Electric (at the time, the world's largest and most powerful company). Through a series of clever acquisitions in emerging markets, and by (polemically) streamlining the company, Mr Welch multiplied GE’s market cap by a stunning 38. Over the course of two decades, under his competent stewardship, he steadily grew the company from $12bn to a whopping 450 billion dollars of capitalization. Upon retirement, he received the largest severance payment in recorded history ($417mn). He is now retired with an estimated personal fortune of $1bn and never misses mass on Sunday's.

He married a lawyer; nobody's perfect.

Larraín Nesbitt Lawyers, small on fees, big on service.

Larraín Nesbitt Lawyers is a law firm specialized in conveyancing, taxation, inheritance and litigation. We will be very pleased to discuss your matter with you. You can contact us by e-mail at info@larrainnesbitt.com, by telephone on 952 19 22 88 or by completing our contact form to book an appointment.

Tax & legal services available from Larraín Nesbitt Lawyers

• Conveyancing in Spain – Buying
• Conveyancing in Spain – Selling
• Holiday Rental Accounting Service (HRAS)
• Registration of Holiday Homes (Andalusia)
• Rentals (contract drafting)
• Rentals (advising on pre-existing lease agreements)

Holiday rental-related articles

• Renting in Spain: Top Ten Mistakes – 8th of June 2011
• Let-to-Buy in Spain: The Smart Choice – 8th of April 2012
• Letting in Spain: The Safe Way – 10th of October 2012
• New Measures to Bolster Spain’s Ailing Rental Market – 8th of July 2013
• Tenant Eviction in Spain – 8th of June 2014
• Holiday Rental Laws in Spain – 8th of March 2015
• Urban Rental Law in Spain – Spain’s Tenancy Act – 8th May 2016
• Renting in Spain – Landlord’s Taxation – 8th of January 2017
• Holiday Home Taxation in Spain – 8th of July 2017
• Seasonal lets: an alternative to holiday home rentals – 8th of October 2017
• 7 illegal clauses in Spanish rental contracts – 8th January 2018
• Distinction between long-term and seasonal contracts – 21^st February 2018
• Save 70% on your landlord tax bill – 8^th March 2019
• Spain's new rental laws in 2019 – 8^th March 2019
• 8 Tips for Buy-To-Let Success in Spain – 21^st October 2019

Article also published at Spanish Property Insight: 8 Tips for Buy-To-Let Success in Spain

Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal or finance advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. VOV.

2.019 © Raymundo Larraín Nesbitt. All Rights Reserved.

Lawyer Raymundo Larraín explains the difference between both concepts as they are often confused by non-residents. He also ventures the start of a new expansionist super cycle in some areas of Spain.

Article copyrighted © 2018. Plagiarism will be criminally prosecuted

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Lawyers
8^th of April 2018

Introduction

The Spanish property market has been a roller coaster over the last decade. From the dizzying heights of 2007 to the gut-wrenching lows of 2011. Over the last 15 years bank valuations have compounded this erratic behaviour exacerbating it. When property values were high, lenders overvalued properties by a long shot; when property values fell, lenders undercut property values even well-below their current market value.

I have been prompted to write this article on the back of low bank valuations which have nearly botched a series of conveyances I have been recently involved with as demand for Spanish property remains unabated. If you are an industry insider, you may want to skip this article altogether because it would be like teaching granny to suck eggs. This article is aimed to be read by neophytes who are largely unaware of how things work in Spain. I thought it would be a good idea to shed light on two points as I keep having to explain them to clients.

Firstly, to dispel a common blunder between non-residents that Spanish bank valuations are a true reflection of a property’s market value at any given time, which is simply untrue.

Secondly, why bank valuations seem to be always so out of touch with reality never seeming to match the real market value.

1. Bank valuations are NOT a reflection of a property’s market value

One of the first things I was taught in Economics 101 at university, is that the price of a good is always determined by the intersection of demand and supply at any given moment. In other words, prices of goods and services fluctuate over time in line with demand and supply.

A property that was worth one and a half million euros at the peak of the market, can now go for €900,000. But it may have fallen as low as €700,000. So, what is its real price? Is it 1.5m, 900k or 700k? The ‘real’ price is what someone else is willing to pay a vendor at any given moment. If you can find someone willing to pay 1.5m, that is its current market value.

Bank valuations however do not reflect real market values. They are devised for a mortgage loan application and often are calculated for the purposes of an auction value (in the event of a bank repossession).

A common occurrence is for a foreigner to agree to buy a property for say €500,000, apply for a mortgage loan and then be upset to find out his lender values the property at ‘only’ €400,000. The buyer feels cheated at the €100,000 shortfall and becomes angry with the vendor, estate agent and even with the lawyer!

Bottom line, Spanish bank valuations are NOT a reliable assessment of a property’s current market value. 

2. Why are bank valuations so out-of-sync with the market value?

Lenders, believe it or not, have their own vested interests which at times (read frequently) are misaligned with a borrower’s interests. Lender’s valuations serve a purpose: the bank’s purpose, not yours.

• Why were properties overvalued during the property bubble haze? In the early two thousands the then Chairman of the US Fed, Mr Alan Greenspan, flooded the financial market with cheap credit on slashing interest rates. This prompted a credit bubble of gargantuan proportions which led to a house of falling cards with which we are all too familiar. Back in the day, it was in the best interests of lenders to overvalue properties well-above the accepted market price so that borrowers borrowed as much money as possible (read up to their eyeballs) to over-indebt themselves. This (reckless) credit policy led banks to profit from huge gains in the short-term (at the expense of the mid to long-term growth). Basically, anyone with a pulse qualified for a mortgage loan. In my opinion self-certified mortgages exemplified like no other this ‘irrational exuberance’ (credit furore) at the start of the new millennia.
• Why are properties so undervalued now in 2018? Lenders suffered great losses post 2008 leading to hundreds going under. Many were forced to request state-backed loans to prop up zombie balance sheets. The Spanish government bailed out several banks but imposed harsh repayment terms in exchange. The slow and painful readjustment of the banking sector - which still endures a decade on - led to merges and acquisitions, tighter credit regulations and also to laying off dozens of thousands of bank employees and forced early retirements. As a result of this state-imposed downsizing, lenders are now ultra-conservative on their lending criteria and value properties prudently (read undervalue them significantly). The interest of lenders now, a decade on, is the opposite; to only lend money restrictively to creditworthy customers which actually have the ability to fully repay mortgage-backed loans. This goes on to explain why lenders nowadays purposely (under) value properties well-below the current market value, because they wish to spread the loan risk and force would-be borrowers to pay a larger percentage of the property’s value out of their own pocket. In the event of a default, a bank wouldn’t lose as much.

Conclusion

Buyers should not be shocked if their chosen lender values the property they are buying 25 - 35% below the agreed asking price. Bank valuations are simply a reflection of a lender’s credit policy, nothing more; which currently is ultra-conservative in the aftermath of the banking collapse of 2008 (The Great Recession).

What really matters on buying is that the property you are purchasing can be resold later on for a higher price. That is what should concern you foremost. Asking rental prices and capital appreciation underpin any sound financial investment. Spain's real estate market seems to be staging a comeback in full swing on both accounts according to the latest macroeconomic figures.

Asking rental prices are soaring by two digits year-on-year as reported by experts. The exact figure remains contentious, as some prestigious media, like El Pais daily, quote a 21% annual increase whilst others, such as El Mundo daily, estimate the national average rental increase to be at 10.2%. In any case, minutiae aside, the consensus is clear and unanimous that we are witnessing a whopping two-digit rental growth in asking rental prices year-on-year. Nothing short of a new rental bubble. I analyse this new lease frenzy in my article Holiday Home Taxation in Spain.

Capital appreciation is quickly catching up with the above figures. After having reached all-time lows in 2011, properties in Spain are gradually picking up the pace seven years on (abetted by historic ultra-low interest rates which translate into cheap mortgages). Although Spain’s real estate market remains largely fragmented in a two-speed recovery, with some areas steaming ahead whilst others sluggishly trail behind, there is a reported one-digit year-on-year gain across the board. And even stunning two-digit capital appreciation year-on-year in selected areas with prime beachfront locations as well as in large Spanish cities such as Madrid (17%), Palma de Mallorca (14.7%) and Barcelona (11%); source TINSA. Some bold economists and rating agencies (Fitch) are even predicting the start of a new property bubble…

The average rental yield in Spain can be expected at 5% pa (dependent on location). If to that you also add the potential of capital appreciation, Spanish real estate is poised for combined two-digit gains over the next years easily trumping alternative investments and paltry fixed returns in a context of historic ultra-low interest rates.

If one thing remains constant in Spain’s ever-changing property market is that it is cyclical (roller coaster metaphor). Hard data suggests we are geared towards a new expansionist super cycle.

Can you afford to miss out?

Buying property in Spain? Our law firm has over 15 years' experience dealing in conveyance transactions nationwide. Deal only with native English-speaking lawyers and economists, we will be very pleased to discuss your matter with you.

The thrust of my whole article can be neatly summed up in the wise words of a great American writer.

“A banker is a fellow who lends you his umbrella when the sun is shining and wants it back the minute it begins to rain.” – Mark Twain.

American writer, humourist, entrepreneur, publisher, and lecturer. Among his novels are The Adventures of Tom Sawyer (1876) and its sequel, the Adventures of Huckleberry Finn (1885).

Larraín Nesbitt Lawyers, small on fees, big on service.

Larraín Nesbitt Lawyers is a law firm specialized in conveyance, taxation, inheritance and litigation.  You can contact us by e-mail at info@larrainnesbitt.com, by telephone on (+34) 952 19 22 88 or by completing our contact form.

Article originally published at Spanish Property Insight: Bank valuations vs. market value

Legal services Larraín Nesbitt Lawyers can offer you

• Conveyancing – Buying 
• Conveyancing – Selling 
• Non-Resident Income Tax (Fiscal Representation) 
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Conveyancing-related articles

• House Hunting in Spain – Interview with The New York Times. June 2015
• Buying Property in Spain from a Private Seller (Resale Property) – 21st of February 2017
• Buying Property in Spain from a Developer (Off-Plan Property) – 8th March 2017
• How to inspect an off-plan property overseas – Q&A with The Sunday Times. July 2017
• Buying Property in Spain – 10 Reasons to Hire a Lawyer – 8th November 2016
• Non-Resident Taxes in Spain – 8th December 2015
• Non-Resident Income Tax – 8th December 2017
• Bank valuations vs. market value – 8^th April 2018

Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. VOV.

2.018 © Raymundo Larraín Nesbitt. All rights reserved.

By Raymundo Larraín Nesbitt
Lawyer – Abogado
8^th of September 2015

Introduction

In 2003 law 22/2003, Ley Concursal or Insolvency Law, was passed which updated Spain’s outdated insolvency procedure. The previous laws, which were intended as ‘temporary’ were from 1885 and 1922. The timing of the law couldn’t have been better as shortly after its approval Spain’s economy would take a severe downturn driving thousands of companies into insolvency.

This new law has undergone over two dozen amendments in such a short span of time. Some of these have been major to assist it to adapt to reality as the law was not working as intended. In theory the mission statement of this law is to save companies that file for creditor protection helping them to exit receivership and trade again normally.

In practice it works out very differently. Whereas, for example, in the US 95% of companies that file for creditor protection manage to come on top within a three-year period, in Spain 95% of companies end up being liquidated within the same time frame. In Spain filing for creditor protection is almost a guaranteed corporate death sentence. This trend must be reversed.

Despite this well-meaning law the shortcomings are clear. The major culprit of Spanish companies going under, once they have filed for protection, are the privileged credits held by the Tax Office and the Social Security. These single-handedly strangle financially ailing companies forcing them into administration. It is clear to my mind that the iron grasp held by both institutions must be released if struggling companies are to continue trading successfully. Companies create wealth, jobs, services and products not to mention they contribute paying taxes. It is in Society’s best interest to protect and save them where possible. The failings of this law should be addressed by lawmakers assisted by professionals on the ground. 90% of Spanish companies are SMEs and find themselves unable to endure repayment of these privileged creditors should they file for insolvency.

Amidst these changes was February’s Royal Decree 1/2015 popularly dubbed as ‘Second Opportunity Law’. This law focuses on private individuals, not companies, filing for creditor protection (bankruptcy). The change was spurred in a conference of lawyers when a speaker pointed out that struggling borrowers in Spain echoed Sisyphus’ myth. Like the myth, some individuals face the daunting prospect of facing a mounting debt, with rolled-up interest, creating a ceaseless debt spiral of which there is no escape. The intention of this law was to put an end to the gridlock by cleaning the slate and allowing borrowers to restart anew. Or at least so goes the theory.

In practice however there are serious repercussions which borrowers ought to ponder which may even dissuade them from taking this route; at least until the law is amended.

Second Opportunity Law

The conditions to benefit from it are laid out in Art. 178 bis of Spain’s Insolvency Act. To file for (personal) bankruptcy one must do so before a Mercantile court in Spain. The procedure will be overseen by a Mercantile judge. A private individual must meet the following requirements:

1. Physical person.
2. Must have filed previously an insolvency procedure. The procedure concludes outstanding debts & liabilities outstrip assets.
3. The insolvency procedure must have concluded the borrower is not guilty or at fault. They must be borrowers in good faith. Good faith is the leitmotif that pervades throughout the Second Opportunity Law. Creditors will clutch at any crevice to overturn this principle and portray a borrower in a different light so as to disqualify him for this creditor protection.
4. The borrower must not have been convicted by a court ruling of a catalogue of economic related crimes within the previous ten years.
5. The borrower must have tried reaching an out-of-court settlement with its lender, creditors.

Options

Two options fan out at a borrower’s choice.

1.- Option A

The borrower pays the credits against the mass as well as all privileged credits. Those regarded as privileged are lenders (i.e. mortgages), Tax Office and Social Security. Note that privileged credits must be repaid in full regardless.

The upside is that ordinary credits, those held by family members or friends, only have to repaid up to 25%. The remaining 75% is condoned legally.

2.- Option B

The borrower submits himself ‘voluntarily’ to a draconian five-year repayment plan which takes into account the individual’s income and debt amount; it is a tailored plan.

• The first requirement is that the borrower proactively assisted in finding a solution.
• The borrower must not have attained this privilege previously.
• The borrower must have actively sought job placements (and be able to prove it).
• The borrower’s name will be lodged in a public insolvency registry for the next five years.
• The borrower must continue to pay alimony, where applicable.
• The borrower must continue to pay privileged creditors, as listed in the point above.

The result is that after the five years have elapsed all ordinary and subordinate outstanding debt will be cancelled.

However, debts owed to privileged creditors will remain outstanding in full:

• Mortgage debt (lenders).
• Unpaid taxes plus interests (Tax Office).
• Unpaid wages (Social Security).

Repeal

Both options can be jeopardized by a borrower on any of the following:

• Breach of any requirement. The observation of all and any requirements is stringent.
• Non-payment within the repayment time frame of any amount. This automatically invalidates the good faith requirement.
• Discovery by the court of concealed assets or non-disclosed sources of income i.e. working off-the-books when on the dole.
• Significant improvement of financial situation i.e. beneficiary of an inheritance.

Conclusion

Debt-laden borrowers may want to think twice before taking this route.

Despite the hype I have read in the press, hailing this new law as the perfect solution to many’s ongoing financial tribulations, the truth is far from it.

The key point is that the debts which are written off are those classified as ordinary or subordinate; which normally belong to friends and relatives. Meaning that those who trust and love you more are the ones that will bear the brunt for you.

In sharp contrast, privileged creditor’s debts (lenders, Tax Office, Social Security) remain as is. Not a cent will be condoned and will have to be repaid in full. This is what’s misunderstood at large.

In other words, to save your own financial situation you will be alienating yourself from those that love and care for you the most. Besides, on following this route your personal details will be listed at the Civil Registry for any to see. And these are not erased. You will become a financial pariah which consequences will last throughout your lifetime in Spain. Lenders will be highly reluctant to lend you money again, whether as a personal loan or to start a new business. So much for ‘second opportunity’.

Which is why in my opinion, and that of others more qualified than myself, filing for personal bankruptcy in Spain should be taken only as last resort when all other venues have been exhausted. In fact, only 1.65% of bankrupt people chose this path in so far this year (one in fifty).

Some privileged creditors (read lenders) are walking away scot-free when in many cases they were the culprits on creating this situation in the first place by offering recklessly loans to borrowers that clearly did not meet the minimum requirements in the heyday of the property boom. They directly contributed to the current situation and should be held co-responsible, sharing in the losses of their own making. Accountability shines for its absence.

For those that have reached a nadir in their financial situation, and seek a second opportunity, you may want to think twice before taking this option. Whilst I am a firm believer in giving people a second chance in life, you may want to sit this one out; at least until the law is amended and lenders bear too the consequences of the folly of the roaring 2000s.

“La elección no depende solo de la voluntad, sino de la posibilidad.” – Spain’s Supreme Court.

Loosely translated as: “Choice doesn’t hinge solely on one’s own will, albeit on opportunity.”

Acknowledgements

I am especially indebted to Ms Catalina Cadenas de Gea, Judicial Secretary of Málaga’s Mercantile Court Number Two, for her invaluable input on writing this article. Gracias.

Larraín Nesbitt Lawyers, small on fees, big on service.

Larraín Nesbitt Lawyers is a law firm specialized in litigation, conveyancing, taxation and inheritance. We will be very pleased to discuss your matter with you. You can contact us by e-mail at info@larrainnesbitt.com, by telephone on (+34) 952 19 22 88 or by completing our contact form.

Related articles

• Lifetime Loans or Reverse Mortgages in Spain Explained – 21st February 2011
• Advice to Struggling Mortgage Borrowers in Spain – 8th March 2011
• Spanish Mortgage Loans: Beware of Abusive Clauses – 8th January 2012
• Spanish Mortgage Loans: An Overview – 21st February 2012
• Mortgage Collar Clauses Revisited (‘Cláusulas Suelo’) – 8th December 2013
• Bank Repossessions in Spain– 21st February 2014
• Bad Debtor’s List (‘Fichero de Morosos’) – 8th April 2014
• Spanish Creditors Pursuing Debts Abroad – 8th May 2014
• Dación en Pago Explained or How to hand Back the Keys – 8th December 2014
• Limiting Liability in Spain – 8th November 2015
• Personal Bankrutpcy in Spain: Second Opportunity Law – 8th September 2015

Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. VOV.

2.015 © Raymundo Larraín Nesbitt. All rights reserved.

By Raymundo Larraín Nesbitt
Lawyer – Abogado
8^th of April 2014

Introduction

Spain has ‘technically’ exited its seven year recession. However, the financial aftermath continues to look grim for most of the population (with the exception of our political class, of course). As a consequence, over 100,000 people are added each month to Spain’s dreaded bad debtor’s lists.

This article explains how you may be included in one of them (even unbeknownst to yourself!), the severe financial consequences this has (in Spain) and how to remove yourself from a black list.

What is a Bad Debtor’s List?

In Spain companies will include you on non-payment in a bad creditor’s list such as EXPERIAN, ASNEF or RAI which has dire consequences as it adversely affects your credit score and by extension hampers your future borrowing ability.

You may think that the people who are normally included in debtor’s black lists are in most cases professional non-payers or maybe families hit by the brunt of Spain’s financial downturn. However you would be surprised to learn there are multiple cases reported in which a person with a spotless credit track record is included out of spite by a company as a result of a legitimate dispute over a questionable invoice. At other times it may fall down to something as clumsy as a careless oversight on paying a service.

Examples:

• Your telephone company charges you €800 for roaming fees on a five-day trip to Egypt. Your mobile was switched off all the time. You refuse to pay until they give you an explanation. The mobile company declines explaining and blacklists you immediately.
• Your electric supplier increases your bimonthly invoice by 20% without providing a justified reason. You refuse to pay and are blacklisted as a result.
• You fail to close properly a Spanish bank account, or forget to top it up regularly, and slip into the red. The bank will blacklist you after a couple of months. Lenders take legal action for non-payment spanning between 3 to six months after the first arrears.

Consequences of being included in a Bad Debtor’s List

These consequences are financial and will severely hinder your borrowing ability in Spain, or elsewhere, in the near future. On being included in a black list you may be turned down on some or all the following:

1. Personal loan
2. Business loan
3. Mortgage loan
4. Consumer loan e.g. cards from major high street retailers that allow you fractioned or deferred payment over the next months. Kiss goodbye to your “El Corte Inglés” card.
5. Credit card application
6. Barred membership by selected retailers i.e. gyms, video clubs, golf clubs

Amount of the Debt

There is no minimum amount. Less than €100 warrants you being blacklisted.

Duration of the Inclusion in a Debtor’s List

The duration normally spans six years. After said time your details should automatically be removed by the registry.

What happens if I am not notified of my inclusion in a Bad Creditor’s List?

This is an entitlement. Failure to comply by the registry gives you good legal grounds to request a cancellation and a full withdrawal from the debtor’s registry. In practice this may be more difficult than I make it sound and you may need a lawyer to assist you.

Removal of a Debtor’s Registry

Paying off your debt will not have you automatically removed from a debtor’s registry. You must proactively pursue your own removal or else appoint someone qualified to do it on your behalf i.e. a lawyer. The whole procedure will only be carried out in Spanish language.

The Four Steps to remove oneself from a Bad Debtor’s Registry in Spain

1. Pay off the outstanding debt which triggered your inclusion in the debtor’s list in the first place. Keep evidence substantiating the debt is fully settled (receipt, bank transfer, correspondence with the creditor etc.)
2. Contact (in Spanish) the registry which have you black listed. Request a cancellation request form (“solicitud de cancelación”, in Spanish).
3. Complete the form in Spanish supplying the registry with all the necessary evidence that unequivocally demonstrates the debt is now settled. You will have to send all by registered post (“burofax”) along with a copy of your passport / DNI (national ID card). The register will contact your creditor to confirm the debt has been settled to their satisfaction (there may be interests accrued or penalties that also need to be paid besides the principal itself).
4. Once a registry has concluded their own internal investigation they should remove you within the next 30 days.

Conclusion Bad Debtor’s List (“Listado de Morosos”)

Spain’s ongoing delicate financial situation pushes families to the brink. The inclusion in a debtor’s black list may not be an issue if you are non-resident in Spain but becomes a serious matter for those holding resident status as it will seriously hamper their borrowing ability as well as being an overall nuisance in their day-to-day life.

I strongly recommend you to avoid an inclusion in such lists. And if you do happen to get included, a lawyer – for a reasonable fee – can help you to clear your good name by cutting through the red tape and language barrier in an expedient manner.

“I spent a lot of money on booze, birds and fast cars. The rest I just squandered” – George Best.

Northern Irish professional footballer. Winner of the European Cup with the Manchester United in 1968.

Larraín Nesbitt Lawyers, small on fees, big on service.

Larraín Nesbitt Lawyers is a law firm specialized in conveyancing, taxation, inheritance, and litigation. We will be very pleased to discuss your matter with you. You can contact us by e-mail at info@larrainnesbitt.com, by telephone on (+34) 952 19 22 88 or by completing our contact form.

Legal services Larraín Nesbitt Lawyers can offer you

• Debt Recovery
• Recognition and Execution of Foreign Court Rulings
• Land Registry Search (Nota Simple)
• Company Registry Search

Related articles

• Lifetime Loans or Reverse Mortgages in Spain Explained – 21st February 2011
• Advice to Struggling Mortgage Borrowers in Spain – 8th March 2011
• Spanish Mortgage Loans: Beware of Abusive Clauses – 8th January 2012
• Spanish Mortgage Loans: An Overview – 21st February 2012
• Mortgage Collar Clauses Revisited (‘Cláusulas Suelo’) – 8th December 2013
• Bank Repossessions in Spain – 21st February 2014
• Bad Debtor’s List (‘Fichero de Morosos’) – 8th April 2014
• Spanish Creditors Pursuing Debts Abroad – 8th May 2014
• Dación en Pago Explained or How to Hand Back the Keys – 8th December 2014

Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. VOV.

2.014 © Raymundo Larraín Nesbitt. All rights reserved.

Spain’s property meltdown offers once-in-a-cycle investing opportunities through bank repossessions. The following beefed-up article from 2007 offers a complete legal overview.

By Raymundo Larraín Nesbitt
Lawyer – Abogado
21st of February 2014

Original article from 21st September 2.007

Introduction

The amount of home repossessions in Spain has soared to unprecedented levels according to the latest figures of the Bank of Spain. Conservative sources estimate the figure in well over 250,000 repossessions since the real estate market collapsed in 2007. The real number may actually be higher. This tidal wave has in turn spawned and exacerbated other phenomena such a new breed of middle-class squatters in Spain.

The Government, in denial mode, claims it has been overwhelmed and even caught off guard on the wake of recent social events. I beg to differ. Any industry insider would have told you at the time a sharp rise in repossessions was taken for granted for all the reasons collated below.

Underlying Causes of the Bank Repossession Crisis in Spain

The causes underpinning this surge in home repossessions are mainly related to the economic ‘recession’ Spain wades seven years on:

1. High levels of unemployment reminiscent of the Great Depression (an eye-watering 28% and counting) leading to widespread mortgage delinquencies. That is six million people unemployed. 1.8mn families in Spain have all their members unemployed. National youth unemployment (under 25-year-olds) is a staggering 55% and in some communities exceeds well over 60%. This quadruples the world’s average and doubles the European rate. These statistics, a human drama hiding behind each one, eerily echo harsh times straight out of a novel by John Steinbeck. Source: INE (National Institute for Statistics).

2. Aggressive reform in Labour laws which made dismissals less cumbersome and onerous overall. Spanish politicians pursue a ruthless internal devaluation at any cost to regain international competitiveness which translates into severe wage cuts. Less monthly disposable income edge Spanish families closer to the brink.

3. Unparalleled levels of lax lending. Bordering non-existent in the case of Spanish savings banks (‘cajas de ahorros’). Basically anyone with a pulse qualified for a mortgage loan.

4. Irresponsible property overvaluation led by bank-appointed appraisal companies.

5. Reckless over-indebtedness. Families should never spend more than 30% of their disposable income on servicing a mortgage loan.

6. Rising inflation. Traditionally offset by leading monetary institutions by increasing the price of money; that is by increasing the applicable interest rates.

7. Euribor rate poised to increase. It is used as a benchmark index in over 95% of variable interest Spanish mortgage loans reaching an all-time high in 2008. This means mortgage borrowers face the grim prospect of increased monthly repayments.

8. Relentless fall in property prices (on average 50% across the board) have discouraged potential purchasers, who postpone buying expecting even steeper discounts further down the line. Asset depreciation likewise affects existing property owners who find it hard to borrow against their properties unlocking equity through equity release schemes or life-time loans in Spain.

9. Severe credit shortage. The lowest on record on a fifty-year period aggravated by creeping interest rates and Spain’s uncertain financial health. In addition, bad credit for banks stands at a stunning 13%. The former helps to explain, amid other reasons I won‘t delve into, why Spanish lenders are reluctant to lend (unless at exorbitant borrowing costs which act as a deterrent grinding the market into a standstill). Credit is the real estate market’s lifeblood. If this is sapped away it creates huge imbalances. This effectively translates into scores of struggling borrowers being unable to offload a glut of properties in fire sales as keen would-be buyers are themselves turned down by tight-fisted lenders on applying for mortgage loans in a vicious gridlock that eventually drives the former to being repossessed. Mortgage borrowing costs in Spain are now at an all-time high. Cash is king.

10. Additionally, and specifically in the case of non-residents, the strengthening of the Euro against other currencies such as the Sterling Pound or the US Dollar makes it harder for these currency holders to face their monthly mortgage repayments in Euros.

Definition of Negative Equity

A significant fall in property value translates into borrowers no longer being interested in servicing their mortgages as they have run into what’s known as ‘negative equity’ (they owe a lender more than what the property is worth).

How Can One Run into Negative Equity?

This takes place when the asset, or collateral, guaranteeing a mortgage loan is worth less than the loan amount itself.

Although this may seem difficult at first, the truth is that running into negative equity is surprisingly easy in Spain. In the following sections I explain how one attains negative equity:

i) steep drop in property price
ii) post-auction (repo) property

The reason why in nine out of ten public auctions in Spain no-one bids, besides the ongoing credit-crunch, is precisely negative equity. That is what’s keeping professional bidders at bay in such properties. Not all bank repos are a bargain, some are tripe; beware the hype. One should cherry pick them carefully assisted by a professional worth his salt (reputable estate agent, seasoned lawyer, expert investor).

I. Sharp Drop in Spanish Property Prices

The bank, on deciding if they will grant you a loan, will command an appraisal of the property on issuing a Binding Offer (‘oferta vinculante’). The property will act as collateral of the loan. If the value is unrealistic and is above the current market value of the property, should there be a fall in house prices, then a property may be worth less than the loan it is guaranteeing. This is the current scenario.

All mortgage contracts in Spain have a clause by which if the value of the property falls below 20% of the appraisal value the bank may request at their own discretion additional collateral to offset the financial shortage. In practice banks seldom opt to enforce it but they could legally.

In the event a lender seizes a property, it can auction it off publicly.

II. Public Auctions Mean a Further Drop in Property Price

As the influx of repossessed properties increases in the near future banks will eventually be forced to go through a public auction. In these auctions, should no-one bid, a lender is legally entitled to seize the property for 60% of its appraisal value. This has been recently increased by Law 1/2013 as before it was 50% which left the borrower in an even more precarious state.

Additionally, as I explain in detail further below, the extent of the liability is unlimited and personal. Meaning the lender will actually pursue the borrower for the outstanding unpaid amount (i.e. up to 40% plus associated repossession expenses).

This is precisely why overvaluing properties has turned out to be so harmful. Bloated appraisals have lead trustful borrowers to reel in shock as it dawns on them that the money fetched in a public auction falls well below the amount owed to their lender. On top of this you must also add the legal fees of the bank’s lawyers and the associated costs of a full-blown repossession procedure.

This is simply an injustice. As not only does a borrower stand to lose his property in an auction but must also withstand the additional aggravation of putting up with a lender that will relentlessly pursue him for the unpaid amount as the property value does not suffice to cover the loan amount plus mounting compound interests and associated repossession expenses. The debt will grow over time exponentially creating a debt spiral if left unchecked. This will turn many Spanish families into becoming lifetime financial pariahs; social outcasts with no hope of redemption.

Banks can legally pursue you abroad for a shortfall. Another matter is if it is worth their while.

Wait a Moment. I Have Already Paid X% of the Mortgage Capital During the Equivalent Period of Time!

Well, I’m afraid you haven’t! If your mortgage uses the French repayment method (as most of the mortgages granted in Spain do) then you will only have paid a small fraction of the mortgage capital upfront. The reason is that with the French system you pay interest-only during the early stages of a mortgage, as it gradually shifts to capital-only following a lineal sliding scale. This method is devised to allow that monthly payments terms remain fixed and equal throughout the duration of a mortgage.

To put it simply, during the first years of a mortgage you pay interest mostly. So if you default on the first years of a mortgage you practically have all the capital still outstanding to be paid off.

French method on the left, German on the right. Source: De Finanzas.

Extent of Liability

Following article 1911 of the Spanish Civil Code on signing a mortgage deed you will be held liable with all your current and future assets. This translates to unlimited personal liability. The debt goes personally against you, not against the property. The mortgage is only a guarantee subject to the financial loan with the property, or underlying asset, acting as collateral.

The above has huge legal implications which borrowers ought to fully understand before signing a Spanish mortgage deed. This means that if you default on servicing your Spanish mortgage, a lender may seize the property acting as collateral. If you fall into negative equity a lender is additionally entitled to pursue you abroad, even in your home country, for the shortfall. This may lead to a debt spiral – a very sticky situation.

Unlike in the UK and the US, most of the time handing back the keys to a lender will not stop them chasing you for the outstanding debt. This can only be achieved through a formal legal procedure known as ‘dación en pago’ which I care to explain further below.

Five Useful Tips to Avoid Repossession if you cannot Service your Mortgage

If you are struggling to meet your monthly mortgage repayments you should not wait until you have slipped into arrears to start negotiating with your lender. If you foresee falling into arrears, pre-empt the situation by requesting from your lender a debt restructure. After three months of mortgage arrears Spanish banks start to take legal action and initiate repossession proceedings.

Pre-repossession negotiations with a lender may include, but are not limited to, all the following:

1. Extend the mortgage repayments a number of years. The longer the duration, the less you stand to pay a month. The caveat is that you will end up paying considerably more in the long run due to the ‘magic’ of compound interest.
2. Reduce the interest rate or move on to an interest-only mortgage (‘carencia’) for a few years on the hope your economic circumstances will improve over time.
3. Apply for debt consolidation. This immediately reduces your monthly outgoings
4. Swap your mortgage to a new lender with less onerous conditions.
5. Attempt a property fire sale as a distressed asset (offering it at a steep discount).

If a borrower has unsuccessfully pursued any or all the above-listed debt restructuring options, he may consider handing over the keys to a lender only as an option of last resort. In doing this a borrower will avoid the dire consequences of a repossessions procedure; namely still being chased years after for a shortfall in the mortgage loan post-auction as outlined above. This is carried out following an ad hoc legal procedure, explained in the next section, rather than just allowing a lender to unilaterally repossess a property.

Do all properties end in a repossession?

Not all properties end in a public auction, especially in those few cases in which a borrower is not in negative equity. Those who have slipped into mortgage arrears may strike with their lenders an out-of-court-settlement which basically entails handing back the keys following a legal procedure. This is known as ‘dación en pago’ in Spanish.

This involves signing a deed at a Notary Public relinquishing ownership and in exchange a lender fully discharges a borrower of the remaining mortgage debt, not holding you liable in the future. The catch is that the property must not be in negative equity. This procedure is loosely modelled after article 140 of Spain’s Mortgage Act.

The whole point of following a dación would be to avoid repossession at all costs.

Sadly, as described in my updated article, ‘dación en pago finally a borrower’s right’, lenders no longer offer this option freely.

The Six Stages of a Bank Repossession

A repossession procedure generally follows in 6 steps:

1. The borrower falls into arrears – The borrower fails to service his mortgage repayments. Delay interests (‘intereses de mora’) accrue to cover penalties. The lender contacts the borrower and first attempts an out-of-court settlement.

2. In technical default – Three months from the first arrear (Law 1/2013). After 3 months in arrears a client’s file is passed onto the bank’s legal debt collection department which tries in a last-ditch effort to recover the debt. A lender will then initiate an Executive Procedure against the encumbered property filing it before a local ‘first court’ where the property is located. The bank is then forced to set aside a provision to offset the potential loss. This mandatory provision helps on to explain why lenders are open to negotiate before a default because these must be deposited before the Bank of Spain which undermines lenders’ liquidity ratios. Banks, with the ongoing current credit-crunch, will go to great lengths to avert this as it effectively hampers their own borrowing ability in the money markets. And credit is eventually shut to them leading to unpopular government bail outs.

3. Foreclosure and notary intervention – Depending on the chances of a debt recovery, 15 to 20 days after the technical default. A registered letter is sent by a Notary Public, with acknowledgement of receipt, informing a borrower that a repossession procedure is underway.

4. Repossession order – The court contacts the property owner to pencil a date for the trial. The judge notifies the borrower of impending repossession proceedings. The judge requests from the Land Registry a full report of charges and liens against the property. The value of the asset in the public auction can be either the one that is lodged at the Land Registry in the Mortgage deed or else the bank may command an updated appraisal. This updated appraisal will also be useful for the bank to decide on whether it is worthwhile or not to proceed with the repossession as this has high associated expenses. I must point out that a borrower may still successfully halt repossession at any time before the pencilled date for the auction so long as he pays the outstanding amount plus the full associated repossession expenses (easily over £8,000). These funds (outstanding monthly repayments with accrued delay interests plus the full associated repossession expenses) will have to be lodged both before the court that is ruling on the Executive Procedure before the date set for the auction. So time is of the essence.

5. The court sets a date for the public auction – Normally between 6 to 12 months after initiating the Executive Procedure. The judge sets the date of the auction. The value for auction purposes cannot fall below 75% of the appraisal value. However if no-one bids the gavel falls and a lender is legally entitled to seize the property for 60% of its appraisal value. The bank tries to recoup the outstanding loan debt instigating a public auction. However, post-repossession, after the property has been assigned to a winning bidder or to the lender; the amount fetched may not be high enough to cover the debt plus all the associated repossession expenses (i.e. because the borrower had run into negative equity). A lender will then be entitled to pursue the rest of the borrower’s assets, even if abroad, due to the personal and unlimited liability of a borrower ex art 1911 of the Spanish Civil Code. Should there be a guarantor on the mortgage deed the bank will chase their assets first it is easier to seize them. The property will now be lodged under the name of the new owner at the local Land Registry (normally the lender).

6. Eviction – In the event the now ex-owner still dwells in the property, after a period that normally spans six months, police officers will arrive at their door step with a locksmith and judicial bailiff to evict them by force, if necessary. There are a few instances in which delaying tactics may be employed albeit ultimately the outcome will be the same so it’s only buying time before the unavoidable.

Interested in Buying Repossession?

Repossessions offer great value for money. They are genuine unique investing opportunities as they have heavily built-in discounted prices for all the legal reasons explained above. Although repossessions offer the highest rewards to the undaunted they also have associated the highest risks. There is a clear correlation between risk and reward which a shrewd investor should ponder carefully in his decision-making before committing. The current market meltdown offers one-time buying opportunities that will likely take decades to be seen again. The timing is ideal for cash buyers who do not need to rely on a mortgage loan to acquire property. You will be spoilt for choice.

For more details read on my article on Buying Distressed Property in Spain which offers a detailed overview. It explains the different types of distressed asset classes, ranging from Non-Performing Mortgage Loans (pre-auction or key-ready properties) to Bank Repossessions (post-repossession properties) as well as the pros and cons of each. Repossessions are the real deal.

Spanish Bank Repossessions – Conclusion

Defaulting on a Spanish mortgage is a serious matter that may jeopardize your assets abroad as well as dealing a major blow to your credit rating score in your home country (hampering your future borrowing ability) as the debt will be against you personally and not against the asset itself.

Unlike in the UK, for example, in which we have a statute of limitations on debt after six years in Spain it works differently in practice. There is a statutory limitation of twenty-year years but it can be renewed at any given moment on the lender contacting a borrower to claim the principal plus compound interests accrued. Lawyers, acting on behalf of creditors, make sure to contact borrowers at regular intervals to avoid the limitation becoming firm. So in practice, never.

If everything else fails, the only option left is to try to negotiate with your lender. Lenders are open to renegotiate the lending terms providing you are not in arrears with them. Even borrowers saddled with debt should try to speak with their lender to find a way out. Lenders are reluctant to add yet another repossession to their books and so are keen to be flexible and accommodating.

To close I would like to imagine that lenders in general, and borrowers in particular, have learnt from the harsh lessons and in future cycles will avoid overstretching their finances saddling themselves with debt. Guessing it’s too much to ask for.

“Never was so much owed by so many to so few” – Sir Winston Churchill.

Eminent British career officer, artist, historian, and laureate writer – awarded the Nobel prize in Literature in 1953. Was even known to dabble in politics in his spare time; nobody’s perfect.

Larraín Nesbitt Lawyers, small on fees, big on service.

Larraín Nesbitt Lawyers is a law firm specialized in inheritance, conveyancing, taxation and litigation. We will be very pleased to discuss your matter with you. You can contact us by e-mail at info@larrainnesbitt.com, by telephone on (+34) 952 19 22 88 or by completing our contact form.

Mortgage-related articles

• Lifetime Loans or Reverse Mortgages in Spain Explained – 21st February 2011
• Advice to Struggling Mortgage Borrowers in Spain – 8th March 2011
• Spanish Mortgage Loans: Beware of Abusive Clauses – 8th January 2012
• Spanish Mortgage Loans: An Overview – 21st February 2012
• Mortgage Collar Clauses Revisited (‘Cláusulas Suelo’) – 8th December 2013
• Bank Repossessions in Spain – 21st February 2014
• Bad Debtor’s List (‘Fichero de Morosos’) – 8th April 2014
• Spanish Creditors Pursuing Debts Abroad – 8th May 2014
• Dación en Pago Explained or How to Hand Back the Keys – 8th December 2014

Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. Voluntas omnia vincit.

2.007 and 2.013 © Raymundo Larraín Nesbitt. All rights reserved.

The purpose of this article is to raise public awareness on collar clauses as many struggling borrowers in Spain are still being abused by them in 2013 when Spain’s Supreme Court has ruled them out as null and void.

By Raymundo Larraín Nesbitt
Lawyer – Abogado
8th of December 2013

Introduction

I have been asked to revisit the subject of collar clauses (‘Cláusulas Suelo’, in Spanish) in light of Spain’s recent Supreme Court rulings. When I first wrote on the matter, back in 2009, there was no jurisprudence whatsoever. I felt at the time compelled to write and denounce these mortgage clauses publicly as I regarded them as abusive due to their one-sidedness in favour of lenders. They were an accident waiting to happen. So much so that in my article on 10 Common Abusive Clauses in Spanish Mortgage Loans I gave them the dubious honour of listing them in first place. I should have also added SWAP clauses to it.

Five years on, rulings against them are a daily occurrence that no longer makes the headlines. Spain’s Supreme Court has now established in 2013 a line of uniform jurisprudence on the matter declaring them null and void across the board as from the 9th of May 2013 onwards.

Abusive Clause: Definition

Spanish law requires two conditions are met for a clause to be flagged as abusive:

a) The clause must inflict harm on the consumer, whether financial or of some other nature. The consumer can either be a physical or legal person.
b) The clause must benefit the professional who’s drafted the contract within a business relation. This professional will be either a company or professional acting privately or publicly.

Only a judge can rule if a clause is deemed as abusive. In which case, the clause will be lodged in a special registry of abusive clauses.

Collar Clause: Definition

Is an arrangement in which the maximum limit (ceiling or cap) and/or the minimum limit (floor) in a loan is fixed.
In theory is a financial service that is tagged onto your loan whereby if the interest rate to which the loan is referred to (normally Euribor plus a spread) exceeds a capped amount you are charged only the capped amount (ceiling) saving yourself considerable money i.e. the official interest rate reaches 10% and your collar clause has a ‘ceiling’ set at 7%. You save yourself paying the difference (3%) on hiring this financial service.

Conversely should the interest rate fall too low you are likewise charged a capped amount (floor or ‘suelo’ in Spanish).

Collar clauses clearly fall in the category of an abusive clause for the reasons I explain below.

Insight into Collar Clauses

The idea of collar clauses on paper sounds all good and well.

In practice, they play out very differently. When lenders set out to mis-sell this financial service en masse in 2008 it was clear to anyone who followed the markets that the Euribor had peaked off in October 2008. Therefor benchmark interest rates indexed to loan agreements (chiefly Euribor for over 90% of variable interest mortgage loans) were bound to fall sharply in the ensuing months, not to increase. It is precisely at that moment in which lenders knew for a fact that interest rates would drop sharply that they set out to mis-sell a financial product that could only benefit a consumer if interest rates soared. Lenders and credit institutions merrily set off to mis-sell collar clauses to borrowers at large scaring them with apocalyptic double-digit scenarios. Mark Twain’s quote comes to mind: “A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain”.

Lenders took an unfair advantage over consumers through their superior financial know-how on knowing for a fact that the FED was leading a world-wide concerted strategy, in tandem with all key central banks including the ECB, to lower interest rates and pave the way out of the ongoing recession that started with the US’s subprimes in 2007. The likelihood of a return to double-digit rates was negligible; a chimera at best. Albeit trusting borrowers largely ignored this when they were flogged collar clauses as a panacea by lenders in 2008.

Lenders, on mis-selling this complex financial service to laymen, who were invariably not financially savvy, focussed the sales pitch on interest rates soaring and how much money a borrower saved on average on hiring them over the long-term. Fear always makes an attractive sales proposition.

Lenders were only too keen to conjure nightmarish visions of rising interest rates reminiscent of the eighties and nineties reminding borrowers that 10% interest rates were the historical average in Spain. Over-indebted borrowers, reeling in fear, were all too eager to rush on ahead and hire a collar clause like there was no tomorrow. In other cases these clauses were simply tagged onto mortgage loans unbeknownst to unsuspecting borrowers.

While it’s true that 10% is the historical average for interest rates in Spain this does not take into account the fact that Spain joined the Eurozone. This implied Spain losing its monetary policy in favour of the EU’s ECB. This brought as a result stable, low interest rates for the long-term. So a scenario of a 10% interest rate, so long as Spain remains within the protective mantle of the EU, is far-fetched and non-plausible. But few people care to think on such things, much less on hiring a financial service.

Lenders loaded the dice by drafting clauses where the collar clauses were set with a spread as high as 3 or 4% plus Euribor when the official interest rate was bound to plunge below one per cent (!). When interest rates (so very predictably) fell in the wake of the FED’s new Quantitative Easing monetary policy these clauses started kicking in. Borrowers simply failed to grasp how instead of paying less a month (as they had been repeatedly promised by lenders on flogging these collar clauses) were in fact now being requested to pay increasingly more!

My inbox as a result was deluged by aggravated borrowers over the ensuing months complaining on being overcharged by lenders. They were (mis)led to believe that dropping interest rates would translate to sharp cuts in their monthly repayments on hiring a collar clause. The harsh reality proved stubbornly the opposite. Not only did they not pay less, they ended up paying even more than they reasonably should have.

Additionally lenders worded loan agreements reserving themselves the right to revise and amend the applicable loan rate on a monthly basis (if it benefitted them) or else on an annual basis (it if benefitted the borrower). In other words lenders could swiftly react to any rate change that benefitted them (and so they did) as rates continually dropped to new lows whereas borrowers were only able to do it once a year, on average. As a result lenders were quick as a cheetah to amend applicable rates in loan agreements and slow as a tortoise if it benefitted a borrower. That’s fairly one-sided in my book.

Collar Clauses: Jurisprudence

Spain’s Supreme Court has only recently upheld in 2013, across multiple appeals raised by lenders, the nullity of such clauses i.e. STS 241/2013. The matter is no longer contentious as there is a string of like-minded rulings set by the highest court in the land which sets precedence over legal matters.

As a result Spanish lenders are (in theory) legally forced to remove collar clauses from their loan agreements. In practice, they are not so proactive and often would seem to adopt a complacent attitude overlooking such rulings.

Unlike in the UK, where lenders took an active stance mandatorily setting aside billions of pounds to compensate mis-selling PPI insurance covers, this is not likely to take place in Spain. Although UK lenders offer a (paltry) compensation, private claim companies can get you, on average, triple the amount you are initially offered. In the UK we have witnessed how PPI-claim companies have been setup with the sole purpose of claiming compensation on behalf of borrowers harassing prospective customers day and night with text messages.

Back in Spain, lenders are in no rush to compensate or remove such clauses. At no time are lenders going to volunteer offering borrowers any sort of compensation, unlike their UK counterparts. In practice lenders require that borrowers (or their appointed lawyers) claim proactively compensation and/or have collar clauses removed. Many borrowers, in my experience, were misinformed and remain blissfully unaware – even today – that their loan repayments are subject to a collar clause as they were tagged on by lenders unbeknownst to them as an ancillary non-requested financial service.

And this is precisely where lawyers come in to play; by stepping up to enforce the nullity in mortgage loan agreements or even claim compensation on behalf of customers, where applicable.

Are You a Victim of a Collar Clause?

If you think you may (still) be a victim of a collar clause you should not hesitate to contact your lawyer to revise your mortgage loan agreement. Several rulings declare these as null and void and you should at no time be overpaying as a result of them on monthly loan repayments.

You can of course attempt to cut out a lawyer saving yourself money by contacting a lender on your own, in Spanish of course. Any letters in any language other than Spanish will be binned, as it is logical.

In practice the route of cutting out a law professional seldom works as a borrower lacks the gravitas and leverage of a seasoned lawyer in the eyes of a lender to have a collar clause removed from your contract; much less to claim compensation.

You can arrange a free consultation with a lawyer to see if you are eligible. Once a lawyer determines you qualify (for collar clause removal and/or compensation) you may decide on whether it is worthwhile or not to hire them. You should look at the long-term on making a decision. It is foreseeable that the ECB will hold its interest rates low in the mid-term which in turn translates into the Euribor (not directly under the ECBs control) remaining low for a long period. Which means that you are going to be overpaying a lender for quite some time (years). A lawyer’s low fee amply justifies hiring him to have these cumbersome collar clauses removed. And if you are additionally eligible for compensation, all the better!

Spanish Mortgage Collar Clauses – Conclusion

It is a widespread financial product that was mis-sold by lenders at large in Spain. Unbeknownst to many borrowers, who are now struggling to make ends meet, they may be overpaying Spanish lenders on their monthly (mortgage) repayments when legally they should not. Moreover, they may be even entitled to compensation!

If you think you may be a victim of a collar clause you should contact your lawyer to have it removed from your loan agreement. The money you will save yourself on the long run (in a scenario of low interest rates) clearly offsets a lawyer’s fee. Always worth a shot.

If there is something in life we can safely rely on (besides death and taxes) is lenders’ relentless ‘creativity’ to come up with new exotic financial services to flog us. A sarcastic would write ‘greed’ in lieu of creativity. God forbid!

“Those who cannot remember the past are condemned to repeat it” – George Santayana.

Philosopher, essayist, poet and novelist

Larraín Nesbitt Lawyers, small on fees, big on service.

Larraín Nesbitt Lawyers is a law firm specialized in conveyancing, taxation, inheritance and litigation. We will be very pleased to discuss your matter with you. You can contact us by e-mail at info@larrainnesbitt.com, by telephone on (+34) 952 19 22 88 or by completing our contact form.

Related articles

• SWAP Clauses: Have You Been a Victim? – March 2010
• Lifetime Loans or Reverse Mortgages in Spain Explained – 21st February 2011
• Advice to Struggling Mortgage Borrowers in Spain – 8th March 2011
• Spanish Mortgage Loans: Beware of Abusive Clauses – 8th January 2012
• Spanish Mortgage Loans: An Overview – 21st February 2012
• Mortgage Collar Clauses Revisited (‘Cláusulas Suelo’) – 8th December 2013
• Bank Repossessions in Spain– 21st February 2014
• Bad Debtor’s List (‘Fichero de Morosos’) – 8th April 2014
• Spanish Creditors Pursuing Debts Abroad – 8th May 2014
• Dación en Pago Explained or How to Hand Back the Keys – 8th December 2014

Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. VOV.

2.013 © Raymundo Larraín Nesbitt. All rights reserved.