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We don’t need a lawyer since the bank will be doing a check on the Title as they will do the mortgage

Raymundo Larraín Nesbitt, August, 10. 2018

 

Larraín Nesbitt Lawyers has over 16 year’s conveyancing experience at your service. Our team of native English-speaking lawyers and economists have a long track record successfully assisting expats acquiring property all over Spain, including Madrid and Barcelona.

Blog post copyrighted © 2018. Plagiarism will be criminally prosecuted.

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Lawyers
10th of August 2018

 

If I were paid a pound every time I’ve heard this line from someone, I would be a multi-millionaire by now. Now that offplan property has kickstarted again, I am witnessing more and more repeat mistakes from last property’s boom that led whole families to lose their life’s savings.

Some buyers are duped into thinking that only because a lender is involved in their purchase, they are going to run a full due diligence on the Title to make sure it is clean and above board – crass mistake! This is one of the points I raised in my article: Buying Property in Spain – 10 Reasons to Hire a Lawyer.

This serious error of judgement, made by countless buyers who are purposely misled by parties not interested in there being a ‘pesky’ lawyer involved, may lead you to lose ALL your money/savings.

If this were true, we wouldn’t have dozens of thousands of offplan buyers from the previous property boom litigating at courts to claw back their life savings on buying off-plan property. Just read any expat newspaper to pick up on the glossy ads promising you to recover your offplan deposits. I can almost assure you that in 100% of these cases a bank was involved financing the conveyance.

If you think for one moment a Spanish bank (or a Notary Public) does the work of an independent lawyer, you need therapy. Banks are not going to check if there is a Building Licence issued, they are not going to bother to request Bank Guarantees securing all your stage payments (including the initial holding deposit), they are not going to ask for a Licence of First Occupation, they won’t do a snagging list, they are not going to disclose problems affecting the land, in some cases they don’t even check if the land is owned by the developer, they won’t bother to check if the house you are buying is the one you actually signed up for, they won’t check if the size of the property or its characteristics and materials are the actual ones you paid for etc.

Banks and Notaries each have their own role, and that does not include acting as your own personal attorney safeguarding your legal interests – that is not their role. Don't delude yourself into thinking these professionals replace a lawyer's job, because they don't.

If you think lawyers are expensive, just wait until you start dealing with lenders unrepresented – good luck with that.

Bottom line, if you are buying property in Spain, whether offplan or resale, you should retain the services of a competent law firm to help you safely wade through the minefield. My advice is that you must hire a lawyer on buying property, regardless if it is Larraín Nesbitt Lawyers, or any other lawyer of your choosing. You will thank me later.

 

We offer the most competitive fees in the market.

Conveyancing – Buying from €995

We are specialized in conveyancing

 

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

Larraín Nesbitt Lawyers is a law firm specialized in conveyancing, inheritance, taxation 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.

 

Legal services Larraín Nesbitt Lawyers can offer you

 

Buying property related articles

Buying Resale Property in Spain – 21st February 2013
Buying Off-Plan Property in Spain – 8th of June 2013
How to Buy Property in Spain Safely – 10th October 2014
House Hunting in Spain – Interview with The New York Times. June 2015
Resurgent Spain: Málaga Sees Strong Sales – Interview with Mansion Global (The Wall Street Journal). December 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
8 Tips on Buying Off-Plan in Spain – 8th June 2018

 

Please note the information provided in this blog post 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.

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What is IBI Tax?

Raymundo Larraín Nesbitt, July, 30. 2018

Blog post explaining the importance of IBI tax and the consequences of non-payment.

Blog post copyrighted © 2018. Plagiarism will be criminally prosecuted.

 

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Lawyers
30th of July 2018

Introduction

Unbeknownst to most non-resident property owners, on buying property in Spain, you become liable to pay IBI tax on the following year. No one will give you the heads up on it, so it is up to you to find out how much you owe and comply with the Tax Authorities. This is Spain’s equivalent of the UK’s Council Tax.

The idea of writing this blog post has come about on filing taxes for expats, specifically holiday letting income tax. We have realized there is a huge number of foreign owners who remain completely unaware of the existence of IBI tax and the grievous consequences of its non-payment.

IBI tax is of crucial importance because it has associated a valuation for tax purposes of your home (known as ‘valor catastral’) which is used as the benchmark to calculate all your property-related taxes.

In other words, if you don’t have IBI tax set up, you cannot pay Non-Resident Imputed Income Tax nor Non-Resident Income Tax on your quarterly holiday lettings. Although this may sound good on paper, it really isn’t.

Not paying IBI is a huge bummer from a taxation point of view. But far more importantly, it leaves the door ajar for your town hall to impound your property and sell it through a public auction. You will only be served notice of this procedure on your Spanish home address. So, chances are that if you live abroad, you will only find out when you come over to Spain - which will already be too late.

Bottom line, setting up IBI tax and paying it on time, is of paramount importance and it just cannot be stressed enough; unless of course you fancy losing your property to the local Authorities...

Definition

The Impuesto sobre Bienes Inmuebles (IBI, for short) is a tax that applies to both residents and non-residents. In some parts of Spain, it is known as SUMA.

This is a local tax levied by the town hall where your property is located. It is paid once a year (normally due in August through to November). It is equivalent to the UK’s Council Tax. It varies from one town hall to the next. It is based on the rateable value of your property (0.4 – 1.1% of cadastral value per annum); for cheap properties it can be as low as a few euros (think rural land) whereas posh pads, in sought-after prime locations such as Marbella, may command several thousand euros/year.

Sample IBI tax invoice

Just follow the link supplied: sample IBI invoice

When is it due?

Town halls are empowered to rule on this, so it varies. Normally, it is payable once a year, typically from August through to September.

Importance

  • IBI tax is used as benchmark to calculate all property-related taxes.
  • On selling, a buyer’s lawyer will demand copies of the IBI invoices for the previous 4 years.

 

(Dire) consequences of not setting up IBI tax payment

  • It may lead to your property being seized and sold off in a public auction. Spanish town halls, beleaguered by dropping revenue, are becoming increasingly adept at pursuing aggressively this local tax post-credit-crunch; particularly for high-end property.
  • It is not possible to file and pay NRIT and NRIIT taxes, as it requires for its calculation IBI tax. This in turn will attract fines, delay interests and surcharges against your Spanish property.
  • On selling, a buyer’s lawyer will practice a huge retention to safeguard against any unpaid IBI tax. Moreover, it may even jeopardize the sale of your property as an administrative procedure may be under way to repossess your property.
  • If you are non-resident and selling, buyers must withhold 3% of the sales proceeds by law. As a seller, you will forfeit this 3% sales tax rebate (plus legal interests) to which you may be entitled to.

 

Conclusion

Non-payment of IBI tax is the stupidest fastest way to lose ownership of your Spanish property.

If you haven’t been paying this local tax, you should contact Larraín Nesbitt Lawyers ASAP to get it set up and start paying it. We strongly recommend you set it up as a direct debit against your Spanish bank account.

Non-payment of IBI tax may lead your town hall to impound your property and sell it off in a public auction. Do not expect to be refunded part of the auction proceeds: If you can’t sell it, you can always auction it.

For your own sake, double check and ensure you are paying IBI tax.

 

We offer the most competitive fees in the market.

Setting up IBI tax from €400

We are specialized in taxation

 

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

Larraín Nesbitt Lawyers is a law firm specialized in taxation, conveyancing, 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.

 

Legal & Tax services Larraín Nesbitt Lawyers can offer you

 

Taxation-related articles

 

Please note the information provided in this blog post 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.

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If you can’t sell it, you can always auction it

Raymundo Larraín Nesbitt, July, 21. 2018

Admonitory blog post on the perils of Spanish public auctions.

Blog post copyrighted © 2018. Plagiarism will be criminally prosecuted.

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Lawyers
21st of July 2018

 

Crass mistake. Indulging in the idea that if you can’t sell your home, you can always auction it off is a recipe for disaster. If you think for one moment a lender will pay you the locked equity buried in your home, you need therapy. I’ve already had two people making this grievous mistake over the last six months. I thought it was worthwhile writing a short blog post to warn other borrowers.

For illustration purposes, I am going to take a real-life example. Mrs Osiris has a second home, a Spanish property with a real market value of €400,000. She is resident in the United Kingdom. She has a loan for €130,000. Her tenants stopped paying the rent over the last three months which she used to offset her monthly repayments. As a result, she has fallen into arrears with her lender. Unable to sell her property, she decides it best for her lender to repossess and auction it off. She is under the (false) impresssion she will be paid off the balance of the equity post-auction (at least €200,000 in her mind).

 

The Trials of Osiris

 

Mrs Osiris is blissfully unaware of the intricacies on how Spanish law works and unbeknownst to her she is in for a rude awakening.

  1. The first mistake she makes is that she (wrongly) assumes that the starting value for the auction of her home equates to the market value (€400,000). I have already explained in previous articles and blog posts that lenders set an auction value in every Mortgage deed. They command their own bank valuations, which are already well-below the market value. The appraisal comes up as €320,000 (or 20% below the real market value). Lenders - ex Art. 682 LEC – can then set a value, strictly for auction purposes, in the Mortgage deed which can be up to 75% of the appraisal report. So, as a recap, this property that had a market value of €400,000 is valued 20% below the RMV and then suffers a further 25% reduction leaving it as a starting auction value of €240,000. More on this here: Bank valuations vs. market value

        The starting value for auction purposes set in Mrs Osiris’ Mortgage deed is: €240,000.

  1. The second mistake she makes is that she forgets to deduct all the associated costs, fees and legal interests of a repossession procedure, which easily are in the region of €50,000.
  2. Her third mistake is that she is unaware on the ‘perverse’ auction mechanics. More on this here: Bank Repossessions in Spain. On the first round usually no one bids. So, on the second round – by law – the value drops to 50% because this was her second overseas home (not her place of permanent abode).

Drop of the gavel

After the auction is over, the lender has adjudicated itself Mrs Osiris’ home for only 50% of the initial auction value, that is 50% * €240,000 = €120,000.

But as you recall, Mrs Osiris owed her lender €130,000 as principal of the loan plus a further €50,000 in associated repossession expenses. Total debt = €180,000.

As you can see, there is a shortfall of €60,000.

Meaning she shockingly STILL owes money post-repossession despite having a ‘buffer’ of 200k equity locked in her property!

Lenders don’t lose money, and if they do, taxpayers are always there to bail them out.

Reality check

Mrs Osiris was expecting a fat cheque of €200,000 in the post from her lender...

All she gets is a nasty letter reminding her that she still owes €60,000 post-repossession which interests are mounting up exponentially over time…

Image result for trials of osiris moon of osiris

Of cinders and regrets

Never make false assumptions on Spanish legal matters – you will regret it.

If you think a lawyer’s advice is expensive, just wait until you start dealing with a lender unrepresented…

Had Mrs Osiris spoken with a lawyer, she could have avoided the above nightmare scenario altogether walking away scot free with at least €100,000 in her pocket. She should have sought legal council when her tenants first started falling into arrears.

She is now being chased for the ‘shortfall’ post-auction. She is being blacklisted in Experian, and other credit-rating agencies, which will seriously hamper her borrowing ability going forward in the UK or elsewhere. Her doctrine of passing is a harsh lesson in life and a stark warning to other borrowers.

"Dura lex, sed lex."

Roman civil law maxim meaning that, however regrettable the outcome of a legal matter, the law must be upheld.

 

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

Larraín Nesbitt Lawyers is a law firm specialized in taxation, conveyancing, 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 & tax services Larraín Nesbitt Lawyers offers you:

 

Mortgage-related articles


Please note the information provided in this blog post 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.

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Holiday lettings: Landlords must report to the Police all guests aged 16 or over

Raymundo Larraín Nesbitt, July, 12. 2018

Blog post copyrighted © 2018. Plagiarism will be criminally prosecuted.

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Lawyers
16th of July 2018

 

As a general rule, all holiday lettings in Spain must report to the Police all guests aged 16 or over.

Following Spain’s unpopular ‘Gag’ Law, landlords must fill in a registration form on entry of their guests. This registration form must be then sent to the Police or Guardia Civil for every guest  aged 16 years old or older within the next 24 hours of the accommodation following Security Laws from 2003 (Orden INT/1922/2003, de 3 de julio, sobre libros-registro) and from 2015. Registration forms must be stored by landlords for a period of up to three years for the inspection of the Security Forces.

You can either do this yourself (good luck with that) or else hire a company to do it for you.

Landlord, have you checked out this mobile app to make your life easier? Check-in Scan.

You are welcome.

 

Larraín Nesbitt Lawyers offers a 24-hour registration Tourist licence service exclusive to the region of Andalusia: Registration of Holiday Homes (Andalusia). We will set you up and make it very easy for you to start renting out legally in a jiffy.

 

Why choose us?

Larraín Nesbitt Lawyers has over 16 years’ experience filing taxes for expatriates. 

We can reduce your landlord tax bill by a minimum of 40% - or money-back guarantee!

We will save you more money on taxes than what you spend on hiring us.

 

Holiday Rental Accounting Service (HRAS) from only €100/tax quarter

We are specialized in taxation

 

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

Larraín Nesbitt Lawyers is a law firm specialized in taxation, conveyancing, 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 & tax services available from Larraín Nesbitt Lawyers:

 

Holiday letting-related articles


Please note the information provided in this blog post 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.

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Eight Tips on Buying Off-Plan in Spain

Raymundo Larraín Nesbitt, July, 1. 2018

Blog post copyrighted © 2010, 2018. Plagiarism will be criminally prosecuted.

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Lawyers
1st of July 2018

 

The sales season is upon us.

Whether you are looking to buy as an investment or for pleasure, now is the right time to dip back into the Spanish market. Low prices and cheap mortgages won't last forever.

  • Property prices in Spain (confirmed sales) jumped by almost 10% in the 1Q 2018.
  • The overall number of house sales increased 23% year-on-year in January 2018.
  • The construction sector in Spain has increased 6% year-on-year on the 1Q 2018. This explosive surge in growth is unprecedented since the year 2001.

 

Brick is back. Can you afford to miss out on your dream home?

 

8 Tips on Buying Off-Plan in Spain

 

  1. Hire a qualified registered lawyer (Abogado)

Don’t be in a rush to hand over your money without having hired an independent lawyer first; do not allow yourself to be pressurized by intermediaries. Rash decisions often turn out to be expensive mistakes in life.

Our law firm has over 16 year’s conveyancing experience at your service. You can read further here: Buying Property in Spain – 10 reasons to hire a Lawyer

  1. Plot of land under a developer’s name

One should never buy an off-plan unit in a land that is still not registered under the developer’s name. There are far too many associated risks to take a gamble with your hard-earned money.

  1. Building Licence

This is by far the biggest mistake that a buyer can possibly make. Many problems could easily be staved off on following it. The Building Licence will ensure that the building is above board and the property is not being built in green belt land, for example.

  1. Bank Guarantees

A bank guarantee is of critical importance, acting as a safety net securing all your stage payments, should the developer fail to complete your property.

  1. Licence of First Occupation

A Licence of First Occupancy is a certificate issued by a town hall that confirms that a newly-built property fully complies with all planning and building regulations and is ready to be used as a dwelling.

In general, I advise you not to complete without a Licence of First Occupation.

  1. NIE number

A NIE number is a Fiscal Identification Number for foreigners and is required, among other things, to buy property in Spain.

You can attain a NIE Number through us in only 3 days.

  1. Snagging list

Before you complete on a newly-built property you should always do a snagging list of the property. You can either draw up a snagging list yourself or else appoint one of the many reputable companies that may carry it out on your behalf.

  1. Post-completion: dealing with property taxes, utilities, community fees & other

Once you have acquired your new Spanish property, you will have to face all the associated running expenses. Make sure you have carefully budgeted for this to avoid unpleasant surprises!

We offer the most competitive fees in the market.

Conveyancing – Buying from €995

We are specialized in conveyancing

 

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

Larraín Nesbitt Lawyers is a law firm specialized in conveyancing, inheritance, taxation 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.

 

Legal services Larraín Nesbitt Lawyers can offer you

 

Off-plan-related articles

Buying Off-Plan Property in Spain – 8th of June 2013
House Hunting in Spain – Interview with The New York Times. June 2015
Resurgent Spain: Málaga Sees Strong Sales – Interview with Mansion Global (The Wall Street Journal). December 2015
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
8 Tips on Buying Off-Plan in Spain – 8th June 2018

Please note the information provided in this blog post 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.

2.010, 2.018 © Raymundo Larraín Nesbitt. All rights reserved.

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Holiday lettings: with or without VAT?

Raymundo Larraín Nesbitt, June, 21. 2018

The following blog post has been summarised to avoid unnecessary tax technicalities. The quoted tax rates are subject to change from one year to the next. The advice given is of a general nature and should not be construed as tailored tax advice. Seek professional legal advice on your matter – see disclaimer below.

Blog post copyrighted © 2018. Plagiarism will be criminally prosecuted.

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Lawyers
21st of June 2018

 

As a general rule, holiday homes do not invoice with VAT in Spain.

However, if you offer any of the following services listed below, your rental may be regarded by the Spanish Tax Office as assimilated to offering hotel accommodation:

  • Concierge service.
  • Daily changing of bed linen.
  • Daily changing of bath towels.
  • Daily cleaning of property/room.
  • Room service (food and beverage), catering.
  • Bed & Breakfast.
  • Other ancillary hotel services such as: daily press, laundry cleaning, luggage storage service, accommodation booking (holiday reservation).
  • Other.

 

In which case you would need to invoice your guests with VAT, which would greatly impact the profit margin of your letting business increasing its accounting costs. Our advice is to avoid offering any of the above ‘hotel’ services.

 

Why choose us?

Larraín Nesbitt Lawyers has over 15 years’ experience filing taxes for expatriates. 

We can reduce your landlord tax bill by a minimumof 40% - or money back guarantee!

We will save you more money on taxes than what you spend on hiring us.

 

Holiday Rental Accounting Service (HRAS) from only €100/tax quarter

We are specialized in taxation

 

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

Larraín Nesbitt Lawyers is a law firm specialized in taxation, conveyancing, 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.

 

Tax services Larraín Nesbitt Lawyers can offer you

 

Rental-related articles


Please note the information provided in this blog post 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.

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Mortgages: fixed or variable rate?

Raymundo Larraín Nesbitt, June, 11. 2018

Blog post copyrighted © 2018. Plagiarism will be criminally prosecuted.

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Lawyers
11th of June 2018

 

This question is hardly a good pick-up line – please don’t embarrass yourself, or me, trying it out – you will likely get slapped! However, you will surely be asking it yourself if you need a mortgage to finance your new bolthole under the sun.

With the recovery of the property market, more buyers will be asking themselves this question over the next years.

This blog post is going to explain why – at this particular moment in time – fixed rate is the superior option and why you should opt for it.

 

Fixed-rate mortgages

Pros

  • Security. You know exactly how much you will be paying every month. Interest rates are at their lowest point historically in the Eurozone. The only way is up now. If you pick a variable interest rate, you are going to be paying more and more every month which is going to add to your stress levels and mess up with your budget. Interest rates reached 5% in the peak. So paying, for example, a 2% fixed interest now is reasonable.
  • Cheap. Fixed rates are at their nadir. The moment interest rates rise again in the near future, fixed rates will also rise in tandem. You won’t see again for a long time the great offers that are now available on the mortgage market.
  • Shielded. Market volatility won’t affect you. You are going to pay the same fixed quota every month over the next 20 years regardless of Brexit, Italexit, Russian political meddling, Korean nuke boy, Trump's tantrums and whatnot.

Cons

  • Fixed rates are higher in the short-term than variable ones.
  • Variable rates would allow you to repay the loan earlier.
  • You pay more interests at the start.

 

How can our law firm assist you?

Our law firm has over 15 year’s conveyancing experience. Speak to us, we will be very pleased to discuss your matter with you and give you impartial advice. We offer the most competitive fees in the market.

Conveyancing – Buying from €995

We are specialized in conveyancing

 

 

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

Larraín Nesbitt Lawyers is a law firm specialized in conveyancing, inheritance, taxation 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.

 

Legal services Larraín Nesbitt Lawyers can offer you

 

Mortgage-related articles


Please note the information provided in this blog post 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.

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My (off-plan) builder says I don’t need Bank Guarantees. Is this safe?

Raymundo Larraín Nesbitt, May, 30. 2018

Admonitory blog post on the importance of bank guarantees on buying off-plan property.

Blog post copyrighted © 2018. Plagiarism will be criminally prosecuted.

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Lawyers
30th of May 2018

 

In short, no.

So why is your developer telling you this fib? Because he’s likely pulling a fast one on you.

In Spain, if you become a self-developer (autopromotor) you don’t need to apply for bank guarantees because YOU are the developer.

I had already warned about this cunning ploy a decade ago in my 2008 article Bank Guarantees in Spain under the heading “Bank Guarantees on Self-Built Properties.” Now that we see once more a massive resurgence in offplan, this ‘trick’ is being used all over again.

Becoming a self-developer effectively neatly circumvents Spanish Consumer Law obligations developers have of issuing a buyer with bank guarantees at their own expense. Bank Guarantees which secure ALL your stage payments. In other words, the developer (builder) offers you this option to avoid huge costs and legal responsibilities. The moment you become a self-developer you are no longer protected by Spain’s Consumer Laws as you are automatically deemed a grizzled veteran. In plain English, you lose significant consumer entitlements - no bueno.

Smart cookies that offer you to become a self-developer will tell you that the land on which the house is to be built upon (which you own) is your best guarantee. Er, no thanks. Playing Russian roulette is probably a safer option.

If you are a layman on how the construction business works, let alone in Spain, this option is not for you. Self-building your own property in Spain is only an option to be followed by those dauntless who have deep pockets (can afford losses) and have the know-how. It is categorically not an option for your average Tom, Dick and Harry gambling with their life savings to save a fast buck. Be smart, don’t cut corners in Spain unless you are affluent and know exactly what you are doing.

Project Manager vs. Builder

Even shrewder cookies will offer you to take on a dual role; acting as both PM and builders. Needless to say, this is neither acceptable nor safe. It’s like putting a fox in charge of the hen house.

If you are mad resolute you want to become a self-developer, make sure you appoint a PM that is totally independent and unrelated to the builder. That way you will ensure he will do his job policing the builder’s work.

If you want to add a further layer of protection, place a lawyer and an architect on top on an overseeing role.

Ten-year warranty: did you know?

Did you know that as a self-developer one of your (many) responsibilities is to attain a ten-year warranty which is fairly expensive?

Did you know you can’t sell on your newly built house for the next ten years unless you have attained said 10-year warranty?

Did you know that to attain this warranty it follows a laborious procedure which requires independent inspections at every phase of the construction procedure?

In other words, it can't be tacked on at the end of works.

How can our law firm assist you?

Our law firm has over 15 year’s conveyancing experience. Speak to us, we will be very pleased to discuss your matter with you and give you impartial advice. We offer the most competitive fees in the market.

Conveyancing – Buying from €995

We are specialized in conveyancing

 

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

Larraín Nesbitt Lawyers is a law firm specialized in conveyancing, inheritance, taxation 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.

 

Legal services Larraín Nesbitt Lawyers can offer you

 

Off-plan-related articles

Buying Off-Plan Property in Spain – 8th of June 2013
House Hunting in Spain – Interview with The New York Times. June 2015
Resurgent Spain: Málaga Sees Strong Sales – Interview with Mansion Global (The Wall Street Journal). December 2015
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


Please note the information provided in this blog post 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.

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Landlord, careful with tenant’s subletting on your property!

Raymundo Larraín Nesbitt, May, 21. 2018

Admonitory blog post on the abusive misuse of long-term rentals.

Blog post copyrighted © 2018. Plagiarism will be criminally prosecuted.

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Lawyers
21st of May 2018

 

 

 

                                                                                                                                                Sly tenant gleeing on all the money he's going to cream off you.

 

Now that the good weather has made a comeback, the rental season in Spain kicks off. Many landlords will be busy these days signing lease agreements on their Spanish properties. Unless you have been living under a rock for the last two years, the holiday rental business in Spain is booming (two-digits growth p.a.).

I though it would be a good idea to write a short blog post on the serious risks of renting out your property long-term and have your tenant subletting it as short-term unbeknownst to you.

Many unsuspecting landlords are falling prey to sneaky tenants who are subletting the property as short-term accommodation making a killing. It is estimated that on average a tenant can make 60% over and above a long-term rental. So obviously there is quite the incentive to flaunt the rules and do it, as it is win-win for them. They cream off the rental money and have zero risk on doing it, as any penalty is footed by the landlord as I explain next.

Who is ultimately responsible for this misbehaviour?

As I cared to explain in a previous blog post (How (not) to bypass regional Holiday Home Laws in Spain) the responsibility falls squarely on the property owner. Some cheeky landlords are renting out their luxury pads in prime beach locations as ‘fake’ long-term rentals to foreign companies in the full knowledge that these are busy marketing and subletting the property offering it as holiday rental accommodation without having attained the mandatory Tourist licence. What these landlords do not know however, is that if they get caught this may attract humongous fines which the property owner will be liable for, not the exploiting company, who is too busy counting the banknotes that roll in. For them, it’s a win-win.

Yet in most cases, landlords are oblivious to this foul practice and are blissfully unaware of what their enterprising tenant has been up to with their property. If the tourist Authorities catch wind of your tenant’s holiday rental business, any fines levied will go against your property, and you, as the owner, will be liable for them. Ignorance will not be accepted as an excuse.

The taxman knows

The Spanish Tax Office has reached an agreement with different property portals (i.e. AirBnb) to be supplied with the full details of tenants, check-in dates, agreed lease price etc in an attempt to combat tax evasion. Any non-resident landlord who hasn’t declared and paid tax on their rental income to the Spanish taxman is going to receive a nasty letter later on this year. You should be smart and pre-empt this scenario unfolding on regularizing your undeclared rental income.

Three telltale signs your ‘long-term’ tenant is stitching you up

  • You keep receiving complaints from your Community of Owners over the ‘abusive’ use of your property i.e. excessive noise, loud music.
  • The person/s who open your property door are strangers and are not those mentioned in your long-term lease agreement.
  • Too many different people shuffle in and out of your property at all times of day and night.

 

What can you do if you suspect your tenant is cheating on you?

  • Query the property’s concierge for any suspicious activity relating to your property.
  • Try searching for your property in popular mainstream property portals such as HomeAway, AirBnb etc
  • Hire a private detective to monitor (illegal) property use.

 

How can our law firm support you?

Lawyers can word into long-term contracts clauses that forbid this illegal use of property. In addition, they can assist you on removing the obnoxious tenant who is making a profit on your property at your own expense (tenant eviction service).

 

Our law firm offers a bespoke tax service, for a very competitive fee, which is tailored for holiday rentals (Holiday Rentals Accounting Service). We can reduce your landlord tax bill by a minimum of 40% - or your money back! We will save you more money than what you spend on hiring us. It pays off to be legal.

 

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

Larraín Nesbitt Lawyers is a law firm specialized in taxation, conveyancing, 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.

 

Tax services Larraín Nesbitt Lawyers can offer you

 

Rental-related articles


Please note the information provided in this blog post 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.

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Old Spanish wills made by (resident) British nationals are being declared void

Raymundo Larraín Nesbitt, May, 8. 2018

Blog post copyrighted © 2018. Plagiarism will be criminally prosecuted.

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Lawyers
8th of May 2018

 

As previously warned in other articles of mine (Spanish Wills and Probate Law in light of European Regulation 650/2012) new European Regulation has rendered some old Spanish wills void. Any Spanish will witnessed before the 17th of August 2015 should be revised by a Lawyer to ensure it is fully compliant.

In today’s blog post we examine how two old Spanish wills, made by British nationals and granted prior to the changes of 17-08-15, were declared void by Spain’s Dirección General de los Registros y del Notariado (DGRN, for short). The DGRN is the legal body tasked to oversee the roles of both Notaries and Land Registrars in Spain.

We tend to forget the human tragedies that hide behind these unfortunate situations. What the annulment of these wills has meant is to shatter the lives of women, surviving spouses, who out of no fault of their own, had their life’s torn apart following the deaths of their husbands. Unprotected women who placed their trust and financial well-being in the hands of their now defunct husbands, and who were already going through an ordeal of their own, were cut out of the Spanish wills made by their late husbands. The children disagreed with the content of the wills, challenged them – and won.

This nightmare scenario could have been easily avoided altogether by their husbands if these had made a new updated cast-iron Spanish will compliant with the terms of the new EU Regulation. This tragedy is going to repeat itself over and over again in the future with other surviving spouses on not heeding my advice; if you care for your significant other, ensure your Spanish will is compliant with the new set of laws.

  1. DGRN resolution of 14th June 2016

A British national, who had his habitual residency in Spain, dies in September 2015 (after the changes that came into effect on the 17th August 2015). He made a Spanish will in 2003. The man left three children and a wife. He decided to leave everything to his wife and cut out his three children.

His children contest the Spanish will. Long story short, the case reaches the DGRN and it rules that the Spanish will is void as it did not comply with the terms laid out by the new European Regulation 650/2012. As a result, his wife is cut out of the will and left penniless, whilst the three children inherit all his estate in equal shares.

  1. DGRN resolution of 3rd of July 2016

A British national, who had his habitual residency in Spain, dies in October 2015 (after the changes that came into effect on the 17th August 2015). He made a Spanish will in 2005. The man had two children and a wife. He decided to leave everything to his wife and named as substitute heirs, in the event of his wife’s death, his two children.

His children contest the Spanish will. Long story short, the case reaches the DGRN and it rules that the Spanish will is void as it did not comply with the terms laid out by the new European Regulation 650/2012. As a result, his wife is cut out of the will and left penniless, whilst the two children inherit all his estate in equal shares.

 

Conclusion

The stark warning I gave in my article's conclusion of January 2015 still holds true:

“Surviving spouses or partners are the ones who stand to lose most (or all) under this new Regulation unless you act now.”

Do not take chances with your loved ones’ well-being and plan ahead for your demise. Making a new Spanish will, that is fully compliant with the new European Regulation, is only €195 through us. This is a paltry amount compared to the dozens of thousands of euros your family stand to lose through litigation unless you act now; not to mention the additional grief and aggravation you will spare them at a time of bereavement.

It is in truth a small price to pay for peace of mind that will avoid a family being torn apart over money matters. Ensure your last will is respected and carried out the way you wanted it to be.

"Dura lex, sed lex."

 Roman civil law maxim meaning that, however regrettable the outcome of a legal matter, the law must be upheld.

 

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.

 

Legal services Larraín Nesbitt Lawyers can offer you

 

Inheritance-related articles

 

Please note the information provided in this blog post 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.

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