Blog / News

Andalusia to slash Inheritance tax for inheritances under 1 million euros

Raymundo Larraín Nesbitt, September, 21. 2017

By Raymundo Larraín Nesbitt
Lawyer – Abogado
21st of September 2017

 

Senior Andalusian politicians agreed last night to significantly reduce Spanish Inheritance Tax (IHT) in the autonomous region of Andalusia. This landmark tax reform is without a shadow of a doubt the most important tax milestone in the autonomous region of Andalusia in the last 35 years (since its inception in 1982). 

The change will mean 95% of inheritors in Andalusia will no longer need to pay inheritance tax on inheriting assets from their parents or spouse which is a welcome respite. These fiscal changes are in addition to those approved last year which I already reviewed in my article Inheritance Tax Novelties in Andalusia. FAQ on IHT.

This bold move allows Andalusia to finally jump onto the band wagon of other autonomous regions in Spain which are applying reductions on IHT to such an extent which in practice translates to almost suppressing it i.e. Madrid, Basque Country, La Rioja, Navarre, Catalonia, Valencia, Balearic, Canary Islands and now Andalusia as well.

As I had pointed out in previous articles of mine relating to Spanish Inheritance Tax, there was an ongoing trend throughout Spain over the last decade to supress or greatly reduce inheritance tax to the point of negating it. Andalusia finally joined the trend yesterday. Better late than never. Notwithstanding yesterday’s agreement, there are still political forces vying to completely abolish it (Partido Popular).

Mrs Susana Diaz (PSOE) and Juan Marin (Ciudadanos) agreed that as from the first of January 2018 these changes would come into effect. No law has been enacted yet with these changes.

To benefit from these new tax allowances, taxpayers must be EEA/EU-residents.

In a nutshell, the changes are:

Spanish Inheritance Tax

  • Inheritances equal to or below €1,000,000 will go untaxed (per inheritor).
  • Pre-existing wealth nil rate band of inheritor raised to €1,000,000.

 

Gift Tax

  • Gifts between parents and children of up to €1,000,000 will also go untaxed provided certain criteria is met (gift for the purpose of job creation or to set up a company). Exact details to be specified by further regulation.

 

Who benefits?

  • Natural and adopted children.
  • Spouse.

 

Conclusion

On average, every day 19 inheritors turn down their inheritances in Andalusia in order to avoid paying steep inheritance taxes. Following this new regulation, this will no longer be the case. 95% of taxpayers will benefit from this change as from next year.

The Autonomous region of Madrid had attracted last year alone the residence of over 2,000 HNWI (with average estates of 9mn) escaping other less lenient inheritance tax regions such as Andalusia. This new measure was also necessary to avoid wealthy individuals bailing out to other communities in Spain with the consequent loss of wealth and jobs this resulted in.

For once, I’m happy to commend politicians on adopting a sensible tax measure that benefits so many and contributes towards dynamising the Andalusian economy. Kudos to them!

 

Legal services Larraín Nesbitt Lawyers can offer you

Making a Spanish will
Transfer of Estate to Heirs (Inheritance Tax)
Death Certificate
Land Registry Search (Nota Simple)


Inheritance-related articles

New EU Regulation to be Passed on Succession and Wills –18th May 2010
Non-residents: Six Advantages of Making a Will in Spain – 8th August 2012
Buying and Owning Spanish Property through Companies: Pros and Cons – 7th March 2014
Taxes on Selling Spanish Property – 8th December 2014
Spanish Wills and Probate Law in Light of European Regulation 650/2012 – 8th January 2015
Changes to Spain’s Inheritance and Gift Tax Law – 21st February 2015
Dispelling Spanish Inheritance Tax Myths – 8th August 2015
Spanish Inheritance Tax for Non-Residents (Part I) – 21st February 2016
Spanish Inheritance Tax for Non-Residents (Part II) – 8th March 2016
Inheritance Tax Novelties in Andalusia. FAQ on IHT – 8th September 2016
Which beneficiaries are hit worst by Spanish Inheritance Tax (IHT)? – 2nd June 2017
Non-Resident: Why you need to make a Spanish will – 24th June 2017
Non-resident: careful on making a will in Spain – 30th August 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.

2.017 © Raymundo Larraín Nesbitt. All rights reserved.

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Buying in a Community of Owners – outstanding debts

Raymundo Larraín Nesbitt, September, 20. 2017

By Raymundo Larraín Nesbitt
Lawyer – Abogado
21st of September 2017

 

Did you know that on buying in what is known as a community of owners (residential development) you could be held liable for the previous owner’s debts?

In Spain, a property is held liable for the debts of the current year plus the previous three years. So, whomever becomes the new owner 'inherits' the debt. Some community of owners, particularly those dotting the costas with lush tropical gardens and 24 hours concierge service, have steep maintenance fees; the arrears over time can be quite substantial.

For example, Mr Jones buys into a development in October 2017 without a lawyer and, unbeknownst to him, the seller is in arrears since 2013. After completion, Mr Jones moves into his new property and as a ‘welcome pack’ receives a nasty letter from the community Administrator threatening legal action as his property owes the community €21,000 (years 2014 through to 2017). The seller is a non-resident and already fled Spain (with the sales proceeds)!

If Mr Jones refuses to pay the debt, the community will approve in a General Assembly to instigate legal proceedings against him, placing a charge against his new property for the debt plus all the associated procedural expenses (easily a further €10,000 in legal fees). If he still does not pay, the community may auction off his property to recover the debt. Properties in Spain can be publicly auctioned off for small debts of only a couple thousand euros.

This is but one of many checks that a conveyancing lawyer will do on your behalf. If you are buying property in Spain, do it safely, hire an experienced law firm such as ours to safeguard your interests.

Conveyancing in Spain from €995 plus VAT

 

Legal services Larraín Nesbitt Lawyers can offer you

 

Buying in Spain 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.

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Dissolution of Joint Property Ownership

Raymundo Larraín Nesbitt, September, 7. 2017

By Raymundo Larraín Nesbitt
Lawyer – Abogado
8th of September 2017

 

Are you fed up with your partner? Did you know there is a special procedure in Spain to terminate property co-ownership which can save you up to 80% in taxes? Interested? Read on.

Most property owners are unaware there is a legal way that can be followed in Spain to re-arrange property holdings which can save co-owners a considerable amount in taxes. On buying resale property in Spain, a buyer is normally liable for Property Transfer Tax or ITP (which ranges between 7% to 10% depending on the region in Spain where the property is located). However, on following what is known as a “Dissolution of Joint Property Ownership” (DJPO, for short) a buyer only attracts 1.5% Stamp Duty.

Signing a deed of Dissolution of Joint Property Ownership allows joint owners to re-arrange their share on a property in a tax-efficient manner as it enables the outgoing joint owner to transfer his share to an existing co-owner legally waiving the extreme Property Transfer Tax and paying in lieu 1.5% Stamp Duty on the full property value. This results in average tax savings of up to 86%!

 

This service is suitable:

  • In a divorce or separation.
  • Re-arranging inheritances.
  • Re-arranging property holdings between family and friends.

 

DJPO Requirements

  • Both buyer and vendor need to be pre-existing owners of the property.
  • If there is an outstanding mortgage on the property, a lender’s permission may be required to release the outgoing borrower/owner from his commitment.

 

Associated Taxes and Fees

 

Buyer

  • Liable for 1.5% Stamp Duty on the full property value (not only on the outgoing share).
  • Lawyer’s fees.
  • Notary fees.
  • Land Registry fees.

 

Vendor

  • Capital gains tax on the outgoing share.
  • Lawyer’s fees.

 

If the vendor is non-resident, a 3% retention is practiced on the outgoing share.

CGT payable:

  • 19% EU/EEA-residents
  • 24% non-EU/EEA-residents

 

Example: Married couple own a property in joint names. One of them wishes to terminate the situation and sell his share to his ex-partner.

Property is worth €300,000. Husband only pays 1.5% on the full property value or €4,500 in lieu of 8% Property Transfer Tax. This amounts to a tax reduction of over 80%!

Legal fees: From €995 euros, plus VAT.

 

Legal service Larraín Nesbitt Lawyers can offer you

 

NOTE: this blog post is copyrighted © 2007. Plagiarism will be criminally prosecuted.

DJPO 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.

2007, 2011 and 2.017 © Raymundo Larraín Nesbitt. All rights reserved.

 

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No win no fee: not always a good idea

Raymundo Larraín Nesbitt, September, 3. 2017

By Raymundo Larraín Nesbitt
Lawyer – Abogado
3rd of September 2017

 

 

No win no fee: not always a bright idea

 

Perhaps you have been assailed lately by enticing radio wedges softly cooing into your ear, or maybe you have felt drawn by tantalizing ads in glossy magazines, luring you into a new exciting world of promises of wealth and glory at (apparently) no risk to you with these four magic words: “no win no fee.”

Tempting as this may sound, there are in fact serious risks for a client if the agreement with a law firm is not worded properly. As can be read today in The Sunday Times, a woman was made homeless by her own law firm after she owed them £1m following a no win no fee case.

I had already admonished would-be litigants in my 2016 article Off-Plan Guarantees and Supreme Court Rulings – Payback Time on the consequences of failing a no win no fee case in Spain.

Most people that enter into these agreements with lawyers do so blindly without fully grasping what they are actually agreeing to. They wrongly assume that the worst case scenario entails losing their case and the money they are entitled to but at least, as self-consolation, they find solace thinking they won’t have to pay any legal bills. Wrong!!!

Instigating legal proceedings racks up huge legal fees and someone, sooner or later, will have to foot the bill. Make sure that when the lights go off, and the musical chairs swing to an end, you are not the chump!

 

Pitfalls of conditional fee agreements (no win no fee)

  • If your relationship with the law firm breaks down you may be forced to cover charges and expenses.
  • On winning, a law firm will claim its pre-agreed success fee. Some law firms charge a steep fee, so you may want to have in writing exactly how much they are entitled to on winning.
  • Should you lose, you may still be held liable to cover costs despite not owing fees to your lawyers i.e. court runner’s fees, witness reports, special reports etc.
  • On losing, the judge may rule that you must pay for ALL the other party’s costs, including their solicitor’s fees, their court runner’s fees, reports, expenses etc. Knowing lender’s lawyers, their fees plus expenses will likely be very steep (tens of thousands).
  • Delay interests are accrued on top of the owed amounts, mounting exponentially over time on non-payment or on filing counter claims.

 

Conclusion

No win no fee agreements represent a good opportunity for some litigants to foray into the litigation arena which would otherwise be barred to them for lack of funds; however, one should urge caution. Plaintiffs should be made clearly aware that litigation is a double-edged sword that is not exempt from risk, far from it. Some companies are not fully disclosing to their clients the associated risks they are assuming on accepting conditional fee agreements should they happen to lose their case. Obviously, the higher the odds of success, the less risk that is assumed but there is always an inherent risk because ultimately the outcome of rulings hinges on a judge's whim which I dare say may be somewhat fickle at times. Litigation is not an exact science with guaranteed outcomes because we move in-between shades of grey.

If you decide to brave into a new world, following a no win no fee, make sure you read the fine print and that all the above points I mention are fully covered to your satisfaction.

If not, you may find yourself losing and the other party will place a charge against your property for a substantial amount of money which may lead eventually to losing your property because of non-payment.

Or in the worst case, you may find yourself being made derelict by the very swanky law firm you hired so confidently on a no win no fee such as the one featured in the newspaper article.

All that glitters is not gold.” – Aesop.

Ancient Greek fabulist or story teller.

 

Legal services Larraín Nesbitt Lawyers can offer you

 

Litigation-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.

2.017 © Raymundo Larraín Nesbitt. All rights reserved.

 

 

 

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Non-resident: careful on making a will in Spain

Raymundo Larraín Nesbitt, August, 30. 2017

By Raymundo Larraín Nesbitt
Lawyer – Abogado
30th of August 2017

 

I was recently approached by a distressed English family who had a problem with their ‘Spanish’ will.

The deceased lady had made a Spanish will in 2003, witnessed by a Spanish Notary Public, leaving all her Spanish assets to a close relative. A decade later they had a fallout, and she decided best to make a new will, leaving the assets to someone else.

The logical thing would have been to pop over to the Spanish Notary Public and grant a new Spanish will (it takes at most half an hour). Unfortunately, the lady decided to follow advise from an English solicitor who supplied her the wording for a UK will to be signed in Spain with a Spanish witness.

The lady signed this English will and passed away shortly after.

The reason I was contacted by the family, was because they were having trouble with the Spanish Land Registry and Notary Publics. They refused to accept the English will as valid (which was unnotarized) and claimed the only valid will was the Spanish one from 2003.

Unfortunately, after examining the matter, I concurred with my Spanish colleagues. Had this English will been signed and witnessed in the United Kingdom it would have likely been accepted as valid in Spain and would have overruled the prior Spanish one from 2003. Unfortunately, as it was signed in Spain and witnessed only by the lady’s Spanish chambermaid (who did not know how to read or write in Spanish, much less in English!) she was deemed unsuitable as a reliable witness.

What we can learn from this case is that non-residents should take the appropriate legal advice from local qualified lawyers who are best suited to inform you on your rights in Spain.

Conclusion

Ideally, non-residents should make two wills; one in their home country ruling on their national assets and a second Spanish will which will rule exclusively on their Spanish estate.

Preparing a Spanish will – exclusive to your Spanish assets – will save your heirs considerable time, money and hassle at a time of bereavement. It will greatly streamline the succession procedure in Spain without attracting fines, surcharges and delay interests for late payment of inheritance tax.

If you want to delve further on how inheritance tax works in Spain, I have collated my articles below which cover the Spanish succession procedure from different angles.

Our law firm offers making a Spanish will legal service at a very competitive fee. Ask us, we don't bite!

Wills' service from €120 (plus VAT)

 

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.

2.017 © Raymundo Larraín Nesbitt. All rights reserved.

 

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Holiday-home lettings: Do NOT register with Andalusia's Tourism Registry unless you are fully compliant

Raymundo Larraín Nesbitt, July, 21. 2017

Lawyer Raymond Nesbitt admonishes on the legal consequences (read substantial fines) of self-registering your holiday-home letting before the ATR without being fully compliant.

By Raymundo Larraín Nesbitt
Lawyer – Abogado
21st of July 2017

 

More and more I’m receiving complaints from landlords with holiday rentals in the region of Andalusia who have self-registered before Andalusia’s Tourism Registry (ATR) without being fully compliant. Most of them are going to be landed with stiff fines as I explain below. This has prompted me to write a gentle reminder to all landlords on the legal consequences of registering a property that is not fully compliant in the region of Andalusia.

Three weeks ago, the II Congress of Tourism of the Costa del Sol was held at Marbella. In this congress, the head of the ATR made it clear that when you register your holiday rental in Andalusia you are held responsible and liable for your own self-declaration. It works similar to self-certified mortgages; the person that makes the statement becomes personally liable and will be held accountable of the form he fills in as he declares he is fully compliant on enrolling his property (which frequently is not the case!). The ATRs Director confirmed they had already fined 60 properties in Malaga province alone and hundreds more were in the pipeline on failing to register the properties because they were not fully compliant.

A typical example of this (real case) is a landlord who has not attained a Licence of First Occupation (or equivalent document) for his property but does not want to miss out on the summer letting season. So, what he does is to register 'provisionally' his property on the ATR in the hope of attaining a LFO further down the line (months or even a year after). Put simply, there is no ‘provisional’ registration; or you are in or you are out, period. There is no in-between.

Unbeknownst to landlords, the first thing the ATR checks is if a property has been issued with a LFO by its town hall. The landlord will be fined because, under his own personal responsibility, he declared to be fully compliant when it was simply not the case. He will be landed a fine of minimum €2,000 for this. To give a better idea of what enrolling before the ATR entails, it´s like walking up to a police station and self-admitting to a felony yet acting surprised when punishment is administered! It is basically the same case.

Bottom line, do NOT register your property as a holiday rental before Andalusia’s Tourism Registry unless you fully meet all the law’s requirements (foremost having a LFO) – otherwise you risk being fined!

More details on registration requirements in my blog post: Holiday Rentals in Andalusia Made Easy.

If you are uncertain on whether you fulfil the requirements, contact us free of compromise.

Our law firm offers full registration services of holiday rentals for a flat fee of €120.

We also offer a comprehensive Holiday Letting Accounting Service.

 

Legal services Larraín Nesbitt Lawyers offer you

 

Holiday-home 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.

2.017 © Raymundo Larraín Nesbitt. All rights reserved.

 

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The importance of legal representation on signing legal documents before a Notary Public

Raymundo Larraín Nesbitt, July, 14. 2017

Lawyer Raymond Nesbitt explains the importance of being represented by your own lawyer on signing any legal document before a Notary Public.

By Raymundo Larraín Nesbitt
Lawyer – Abogado
14th of July 2017

 

A recent case published in Diario Sur in English illustrates the importance of being assisted by your own lawyer on signing legal documents before a Notary Public. An elderly couple, with a villa in Marbella, was seeking a fast loan of €25,000 to finance medical treatment.

The couple approached a group that advertised locally and were cajoled into drafting a document and have it witnessed by a Spanish Notary Public. The foreign couple were goaded to believe, and wrongly assumed, that the Notary Public, being a lawyer himself, would act impartially and would warn them in case there was some odd clause in the contract. They did not believe retaining a lawyer was necessary.

The couple were forced to return to their home country to take care of one of the partners who was ill. Upon their return to Marbella some time later they discovered their villa had its electrical supply cut off. On further investigation, it transpired the property no longer belonged to them, it belonged to a company.

What this couple had in fact done at the Notary was to sign their property over in a Deed to a company as a share capital increase of said company. In return, they had been given shares of the company. So basically, they had undersold a luxury villa in Marbella to a company in exchange of 25k! A tall price to pay for a small loan.

Had this couple been represented by their own lawyer, he would have immediately picked up on the fraud and refused to allow them to sign the Deed. But because the couple thought they knew better, and confident that the Notary would act on their behalf, they signed over their Spanish property for a fraction of its real market price. Cases like this are not rare and happen frequently.

What lessons can be gleaned from the couple’s misfortune?

  • A Notary Public is a public servant whose role is to ensure legalities are observed and that payment of taxes will be carried out to the State. His role is to be neutral and does NOT advise the parties, much less in their own language, nor translates documents. Do not rely on a Notary Public to act as your own private lawyer because that is not his role.
  • A lawyer, solicitor in Spanish, is a qualified agent that acts and defends his client’s interests. Skimping on lawyer’s fees is ill-fated as the only worse off will always be the client.
  • You must be wary of signing any type of legal documents at a Notary Public without being represented by your own lawyer. Beware of those who advocate that hiring lawyers is an unnecessary expense. Think for a moment what vested interest they may have in their being no lawyers involved.

 

Legal services Larraín Nesbitt Lawyers can offer you

 

Loans 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.

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Holiday Rentals in Andalusia Made Easy

Raymundo Larraín Nesbitt, July, 3. 2017

Lawyer Raymond Nesbitt explains the legal requirements of holiday rentals in Andalusia. The idea behind this blog post is to give a simplified version of his in-depth article with all the minutiae: Holiday Rental Laws in Andalusia (Decree 28/2016).

By Raymundo Larraín Nesbitt
Lawyer – Abogado
3rd of July 2017

 

 

Holiday Rentals in Andalusia Made Easy

 

Holiday rentals in Spain are experiencing an unprecedented explosive growth, nothing short of a new property boom.

So much so, that holiday rental asking prices are reportedly soaring by two digits year-on-year as highlighted by recent headlines in Spanish Property Insight and other media outlets:

 

Rental prices smash boom-time records in six regional capitals led by Barcelona

Front-line beach rental prices up 10pc in a year

Rental asking prices rising fast say portals

 

As a result, drawn by this new rental frenzy, more and more buy-to-let landlords wishing to capitalise on their Spanish properties are jumping into the fray letting them out short-term to tourists.

If you are interested in registering your holiday rental or hiring our Holiday Rental Accounting Service for your holiday rental business, please contact us.

More information on holiday rental taxation: Holiday Rental Home Taxation in Spain.

 

Andalusia

The Spanish region of Andalusia passed its own holiday rental law last year. It is known as Decree 28/2016. More details in my article: Holiday Rental Laws in Andalusia (Decree 28/2016).

Almost every region in Spain has its own law on holiday rentals. For a full region-by-region list check my article: Holiday Rental Laws in Spain.

Holiday Rental Excluded Properties

  • Properties which are lent to friends or family without an exchange of money (free).
  • Properties rented to the same individual for over two months.
  • Rural properties.
  • Properties within tourist apartment complexes (Apartamentos Turísticos).

 

Requirement List

  • The property must have attained a Licence of First Occupation.
  • Rooms must be ventilated and have blinds or shutters to obscure them when necessary.
  • Be furnished and equipped with appliances ready for their immediate use.
  • Air conditioning unit affixed in every bedroom, including living room (for properties let between May to September).
  • Heater must be made available in every bedroom, including living room (for properties let between October to April).
  • First aid kit.
  • Tourist information including services and amenities in the surrounding area.
  • Complaints book.
  • Mandatory cleaning service at the start and end of every new lodging.
  • Clean bed linen at the start of every new lodging.
  • 24-hour contact number for complaints or queries.
  • Instructions for the use of household and kitchen appliances.
  • Inform lodgers on the use of communal areas, pet regulations, smoking restrictions.

 

Mandatory Registration before Andalusia’s Tourism Registry (ATR)

If you are going to rent out your property as a holiday rental in Andalusia it is mandatory you first register it before the ATR.

Our law firm offers full registration for a flat fee of €120.

More information on this legal service here: Registration of Holiday Rental Homes.

 

Non-compliance: Fines and Sanctions

Humongous fines ranging from €2,000 up to €150,000 are levied on non-compliance with this new law.

Over sixty properties have already been fined, hundreds more in the pipeline.

Don´t let it happen to you, contact us.

 

Legal services Larraín Nesbitt Lawyers offer you

 

Holiday 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.

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Community of Owners in Madrid to ban Holiday Rentals

Raymundo Larraín Nesbitt, June, 29. 2017

 

 

Lawyer Raymond Nesbitt explains the changes in legislation of holiday rentals in the autonomous region of Madrid.

 By Raymundo Larraín Nesbitt
Lawyer – Abogado
29th of June 2017

 

Holiday rentals in Spain are experiencing an explosive growth boom. So much so, that holiday rentals are reportedly soaring by two digits as highlighted by many recent headlines in Spanish Property Insight and other news media:

Rental prices smash boom-time records in six regional capitals led by Barcelona

Front-line beach rental prices up 10pc in a year

Rental asking prices rising fast say portals

 

Is this growth sustainable?

Certainly not.

Underlying reasons of this new trend

This phenomenon, mirroring what has happened already elsewhere in the world, can be explained partly by Spain’s credit restriction which is forcing many would-be-buyers into renting in lieu of buying a property outright. This was unheard of pre-recession as Spaniards traditionally buy property instead of renting it as they see rental as wasted money. This was one of the consequences I pointed out would happen in my article from 2013 New Measures to Bolster Spain’s Ailing Rental Market.

Additionally, and more importantly, the explosive surge of rental portals has fuelled this unstoppable advance. The fact that many regions in Spain have been caught on the wrong foot as they are still coming to grips with this new reality.  Meaning these regions are simply not fining unregistered landlords. Moreover, not to mention the vast majority of rental income is going undeclared to the Spanish Tax Office. Only these two reasons alone account for the dramatic spur in rental growth we are witnessing throughout Spain.

Madrid

In the space of only one year Madrid has doubled its capacity of holiday rentals, from 10,000 to 20,000. To the point there are an estimated non-registered 17,000 rentals which are deemed illegal by the local Authorities.

Madrid, unlike Barcelona, has taken a soft stance against this explosive proliferation of holiday rentals. Barcelona on the other hand has over 40 inspectors patrolling the streets and trawling through internet rental portals to uncover illegal lets. This goes on to explain why only 40% of Barcelona’s holiday lets are illegal as opposed to 85% in the region of Madrid.

Consequences of an unchecked growth

As a result of this huge demand, rental prices have skyrocketed in some parts of Spain increasing by more than two digits year-on-year. This has affected the local market which have seen how long-term rentals were morphed into short-term lets as they were much more profitable for a landlord.

This has brought about less property available for locals and a generalised increase of rental prices as a result of the shortage in stock. The law of supply and demand at its best. Aggrieved locals have demanded the region take immediate action against this new trend.

One of the new consequences of this backlash was announced yesterday as the region of Madrid will amend its holiday rental law from 2014 allowing Community of Property Owners to outlaw holiday home rentals going forward. Although this may sound like a tough measure, the truth is that as I care to explain in my article on Community of Owners, to amend the Master Deed of a community, unanimity is required. In other words, everyone in the community has to cast the same vote to ban holiday rentals.

Naturally, If I am a landlord looking to make a killing during the summertime rental season, I will vote against such a measure. So unless Spain's Horizontal Property Act is amended to accept a majority vote, this announcement made yesterday, which caused such a media commotion, will fall flat on its face and it´s a classic case of much ado about nothing. Because it will not affect one iota holiday rentals, nada.

This much-publicised new measure lacks fangs and will prove a futile exercise if it’s not accompanied by more robust actions to contain the new holiday rental tide - excuse me - more like a tsunami.

 

Legal services Larraín Nesbitt Lawyers can offer you

 

Holiday 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.

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Non-Resident: Why you need to make a Spanish will

Raymundo Larraín Nesbitt, June, 24. 2017

Lawyer Raymond Nesbitt explains the advantages, general and specific, for non-residents on making a Spanish will.

By Raymundo Larraín Nesbitt
Lawyer – Abogado
24th of June 2017

 

 

 

Introduction

If you own property in Spain you should make a will covering it. One of the first questions I normally get asked is if a will witnessed in the United Kingdom or in the Republic of Ireland is valid for assets located in Spain. The straight answer is yes, they are perfectly valid in Spain.

However, despite them being legal, it does not make them practical. Far from it, foreign wills are most impractical as they take far too long to get executed in Spain, normally exceeding the timeframe given by the Tax Office (six months) to file and pay Spanish inheritance tax (IHT). Because they take so long, the timeline to file inheritance tax is surpassed which attracts steep surcharges (of up to 20% of the taxable base) plus delay interests and penalties besides all the unnecessary expenses. All this aggravation, wasted money and hassle could have easily been avoided on following my advice and making a Spanish will in Spain exclusive to your Spanish assets.

There are strong reasons on why qualified Spanish experts, such as lawyers, economists and tax advisers advise non-residents to make a second will exclusive to your Spanish assets.

In this blog post, I will be listing briefly the general advantages of making a Spanish will besides the specific advantages of executing a Spanish will as opposed to executing an English or Irish will.

 

1. General Advantages: Making a Spanish will as a Non-Resident.

 

  • A Spanish will is exclusive to your assets located in Spain (it does not affect any other assets or wills in your home country).
  • Drawing up a Spanish will may help your heirs mitigate their tax bill (see specific advantages below).
  • Drawing up a Spanish will save your heirs time-consuming and expensive legal issues.
  • Spanish wills are stored safely at no extra charge.
  • Spanish wills drawn up before a Notary public (Open wills) add security.
  • The content of a Spanish will is governed by your own national laws. Bequeath your assets to whomever you please avoiding pesky Spanish forced heirship rules.

 

 

2. Specific Advantages: Making a Spanish will Streamlines the Spanish Succession Procedure saving Time, Money and Hassle.

 

  • Avoids fines for late payment on filing IHT.
  • Avoids surcharges for late payment of IHT.
  • Avoids delay or penalty interests for late payment of IHT.
  • Avoids paying for two sets of legal fees (when only one needs to be paid).
  • Avoids paying for unnecessary expensive sworn translations.
  • Avoids your heirs wasting unnecessary time following redundant legal procedures which could have easily been avoided altogether.
  • Avoids pursuing legalization of foreign documents to make them executable in Spain (i.e. Seal of Hague Convention).
  • Avoids your heirs extra hassle at a time of bereavement.

 

Conclusion

Ideally, non-residents should make two wills; one in their home country ruling on their national assets and a second Spanish will which will rule exclusively on their Spanish estate.

As explained above, preparing a Spanish will – exclusive to your Spanish assets – will save your heirs considerable time, money and hassle at a time of bereavement. It will greatly streamline the succession procedure in Spain without attracting fines, surcharges and delay interests for late payment of inheritance tax.

If you want to delve further on how inheritance tax works in Spain, I have collated my articles below which cover the succession procedure from different angles.

Our law firm offers making a Spanish will legal service at a very competitive fee. Ask us.

Wills' service from €120 (plus VAT)

 

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.

2.017 © Raymundo Larraín Nesbitt. All rights reserved.

 

 

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