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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. Never allow a lender to have the last word, it's a blind perdition.

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 summoning the above nightmare scenario altogether walking away scot free with at least €77,700 in her pocket. She should have sought legal council when the messenger first notified her that her tenants had started to fall into arrears. Don't Bungie jump with your money, seek legal advice!

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 serves as a stark warning to other borrowers.

"Dura lex, sed lex."

Draconian Roman civil law scholar 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. No diamond ELO players were harmed on writing this article. 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:

  • You rent out to a company, which in turn sublets your property or is the end-user. Either way, VAT must be submitted every tax quarter besides also filing NRIT. So, two sets of taxes need to be submitted every tax quarter in this case.
  • 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), parking facility, valet service.
  • 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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Palma de Mallorca to ban holiday rentals and Airbnb to share landlord information with Spanish Tax Authorities

Raymundo Larraín Nesbitt, April, 26. 2018

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

 

 

 

 

 

 

                                                                                             

                                                                                                                                        

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Lawyers
25th of April 2018

Since the floodgates to devolved competencies were open by the government in 2013, which I heavily criticized at the time, the asking rental price in Palma de Mallorca has risen by over 40%. Moreover, over the last two years this trend has accelerated, and rental prices have hiked by two digits p.a. Clearly, this is unsustainable long term. The advent of huge American companies, such as AirBnB, clearly correlates the push in rental prices upwards.

Landlords, only too keen to jump onto the bandwagon, have pulled their properties from long term rentals morphing them into holiday rentals which are far more lucrative. This has created a huge shortage in the stock of available long-term rental properties for natives, driving prices further up in a pernicious spiral.

Whilst the problem remains serious, I strongly disagree with the blanket approach of forbidding holiday rentals. As I have cared to examine in previous articles of mine, this introduces malicious asymmetries in the market that compound problems furthermore.

As an example, as reported yesterday by El Pais daily, the Mallorca left-wing coalition (PSOE, Podemos and group Més per Mallorca) approved to ban holiday rentals in Palma city centre. The idea behind this is to protect natives so they have access to affordable long-term rentals as they were being priced out of the market by holiday rentals. Or at least, so goes the theory.

In practice, the irony is that a left-wing coalition has created a side effect making the rich, richer and the poor, poorer. This is because holiday rentals will still be allowed in chalets (detached villas), normally owned by affluent owners, whilst it will be outright banned in flats (normally owned by less well-off citizens). The automatic effect this ban has is to reduce the property value of properties located in the city centre whilst simultaneously increasing the value of detached villas which now have carte blanche to be let as holiday rentals.

This is precisely why in my previous article on the Balearics I warned that lopsided regional regulation had the risk of derailing the rules of a market economy on artificially stifling competition and driving prices up; which is not good news for consumers. My conclusion to my September article was that the Spanish government needs to pub stomp this by acting resolutely and rein in devolved competencies which would iron out all these pesky market distortions. The holiday rental market is becoming increasingly fragmented and confusing in Spain and needs to be urgently addressed nationwide from Madrid unifying in one legal body the holiday rental regulation.

Banning holiday rentals in city centres is not the answer; it has already been tried and tested in other large cities and failed (i.e. Berlin). Curtailing property rights is not the answer and is a frontal attack to private property which is enshrined in art. 33 of Spain’s Constitution. Politicians have no business restricting individual’s property rights, thank you very much. This faux pas by local politicians will adversely affect foreign investments in the Balearics at a time when the property market was roaring.

At times, I get the distinct impression politicians have an innate ability to disrupt the market and plunge us headlong into recessions. Surely, just my imagination…

 

AirBnB to pass all guest details over to the Spanish Tax Office

 

On a different note, as reported yesterday by financial newspaper CincoDias, AirBnB has signed an agreement with the Spanish Tax Office to disclose and pass them all the financial details of landlord’s guests. This is going to constitute a massive shakedown of undeclared holiday rentals (read tax dodgers). If you own property in Spain and you rent it out, whether long or short-term, you must declare your rental income and pay taxes in Spain.

The Spanish Tax Office is growing weary as billions of euros are going untaxed. The AEAT will be cracking down on this skulduggery going forward. Over 1,400 properties have already been fined by Authorities in the province of Malaga alone as they did not meet the holiday rental requirements set out by regional regulation.

We strongly advise all landlords (resident and non-resident) to declare and pay their rental income taxes in Spain.

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 on average by 40%, or more, landlord’s tax bills. We will save you more money than what you spend on hiring us. It pays off to be legal.

“Politics: the art of creating new problems where none existed.”

 

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

 

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. No delusional politician was harmed on writing this article. VOV.

2.018 © Raymundo Larraín Nesbitt. All rights reserved.

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Tax form 720

Raymundo Larraín Nesbitt, April, 20. 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. 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
20th of April 2018

 

This tax form is only for reporting purposes, you do not actually pay any tax on filing it. I have structured this blog post as a FAQ for ease of comprehension.

Who needs to declare?

Spanish residents who own overseas assets over €50,000.

E.g. Mr and Mrs Smith live in Mijas Costa all year round. They own two houses in England, have open bank accounts in the UK and receive UK-based pensions. They consider themselves non-residents in Spain and only pay taxes in the UK.

Mr and Mrs Smith are in fact tax resident in Spain and need to file each a tax form 720.

Again, and for the avoidance of doubt, if you are non-resident in Spain you do NOT need to file this tax form.

Who is considered tax resident in Spain?

The Spanish Tax Office applies the following criteria:

  • You spend more than 183 days in a calendar year in Spanish territory.
  • Your centre of financial interests is located in Spain.
  • Your spouse and/or underage children live in Spain.

 

Reporting categories

There are three reporting categories, based on bank accounts, investments and immovable property.

Obligation to report?

You must report all assets in a particular category if the value of your total assets in it exceeds €50,000.

2018 submission period

From the 1st of January until the 2nd of April 2018.

Can I file it after the submission period?

Yes, but penalties may apply. Ask us.

If you have already filed tax form 720 in the past

You only need to file it again if:

  • The value of an existing asset grew by more than €20,000, or
  • You sold an asset, or
  • You obtained a new asset.

 

Penalties for non-compliance

The fines levied are stiff.

  • Failing to file 720 or filing it incorrectly: €5,000 per infraction.
  • Minimum fine of €10,000 for each group of assets.
  • Penalty of 150% on unpaid income tax.

 

Tax form 720 challenged in Brussels

The disproportionate fines have led to it being challenged in Brussels. And rightfully so.

In the meantime, this tax form is enforceable.

If you haven’t been filing it, for whatever reason, but you voluntarily file it before the tax office inspects you, the above fines are vastly reduced (you pay 15 - 20% as opposed to 150%). Which is why we strongly advise you to come clean and file it, even after the deadline.

The Common Reporting Standard

Please take good note that with the advent of the Common Reporting Standard, signed by over 100 countries to combat tax evasion, as from the 1st of January 2018, the Spanish Tax Office is being spoon-fed fiscal information by your home tax office.

For example, both HM Revenue & Customs and Ireland's Revenue Commissioners, are supplying the Spanish Tax Office with detailed information (and vice versa) on all your overseas assets and reported income derived abroad as from January 2018.

We strongly advise you to file tax form 720 if you are resident in Spain.

 

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 to book an appointment.

 

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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