Tax breaks on buying property in Andalusia extended indefinitely!

Raymundo Larraín Nesbitt, December, 4. 2021

Lawyer Raymundo Larraín briefs us on the landmark tax changes recently approved by Andalusia’s regional government, which have turned the tables, making it the region with the lowest taxation in all of Spain, along with liberal Madrid.

Marbella-based Larraín Nesbitt Abogados (LNA) has over 18 years’ taxation & conveyancing experience at your service. We offer a wide range of over 50 legal and corporate services. Our team of native English-speaking lawyers and economists has a long track record of successfully assisting expats all over Spain.

You can review here our client’s testimonials.

Article copyrighted © 2021. Plagiarism will be criminally prosecuted.

 

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Abogados
8th of December 2021

To put it simply, now is the right time to buy (or sell) property in Andalusia, period.

Feel free to skip the rest of my article below.

Introduction

 

As we’ve been hammering in previous articles, there has never been a better time to buy property in Andalusia than now. A series of factors have coalesced to the point it has created unique buying opportunities. I can only think of 1998 (which kickstarted the longest real estate bull market that Spain has known to date, lasting a full decade) as a comparable situation to the one we are now living.

2021 was poised to be one of the worst years in record in Spanish real estate sales. The virus’ financial aftermath proved devastating, nothing seemed to withstand in its relentless wake.

And that’s when – least expected of all – Andalusian politicians stepped in saving the day.

Andalusia’s regional government took the bull by its horns and approved in April of this year a taxpayer’s aggressive relief package to combat the adverse consequences brought about by Covid-19. These included, amongst many others, drastic tax cuts on buying property, both off-plan and resale. The two most notable tax changes, from a real estate perspective,  were a 20% reduction in Stamp Duty (off-plan property) and the simplification of Property Transfer Tax into a single flat rate of 7% on buying resale property (which translates into massive savings ranging from 12.5% to over 30%, contingent on the sale price as this tax followed a sliding scale). In plain English, huge tax savings for property buyers.

But there was a catch. These lenient tax breaks from April 2021, conceived to combat the pernicious effects of Covid-19, were time-gated. Buyers only had until the 31st of December 2021 to take advantage of them.

That was until the Junta de Andalucia passed its new Law 5/2021 of 20th October. In effect, what this pivotal law did was to make these tax breaks permanent, indefinite. No longer are these tax breaks subject to an end-of-year deadline. On approving this law, the Junta have in fact extended the tax breaks into 2022, and beyond.

But the significance of this new regional law doesn’t only stop at Stamp Duty and Property Transfer Tax cuts. That’s just scratching the surface. It also extends to drastic cuts in Inheritance Tax (yes, again!), IRPF (personal income tax), Wealth tax, and a long etcetera.

Frankly, I would need to publish a couple of taxation articles every month only to keep abreast with all the taxes they keep tweaking, lowering or downright suppressing in a trend which remains unabated since 2019. Kudos to them.

I normally criticize Spanish politicians a lot in my articles, for which I make no apologies, but on this occasion, I take off my hat to what they are doing in Andalusia, because they are doing what’s right for the economy, and ultimately what’s best for the people.

What do these tax changes spell out for the real estate market?

 

Basically, it’s a win-win.

On the one hand, the Junta de Andalucia, and by extension all the inhabitants in this region, benefit from lowering taxes as this, paradoxically, increases the tax revenue. Hang on, you may be wondering, how on earth can they increase the revenue flow if they are cutting down taxes drastically left, right and centre? Well, the previous administration, which had been in power for almost 40 consecutive years, had extremely high taxes in place. On drastically lowering taxes – to more reasonable levels in line with fellow European countries – it has now levied an extra 600 million euros a year because of the increase in economic activity! Madrid too lowered its regional taxes, and as a result also raked in billions of euros in additional revenue proving – once more – that lowering taxes is the right path to attract foreign investments, foster job creation, and generate wealth for society at large. In Economic Theory, we know this as the Laffer Curve, after reputed US economist Arthur Laffer. This increase in additional tax revenue translates into the Junta offering better services to all its citizens and reducing public indebtment.

On the other hand, taxpayers and property buyers, likewise reap the rewards of a low-taxation environment. Taxpayers pay significantly less taxes having more purchasing power available to spend, propping up the economy. In a post-vaccination scenario, this is really being noticed as more and more people spend their extra money in amenities, boosting the overall economy. As for property buyers, well, that’s easy, you pay significantly less taxes on buying property in Andalusia! It ain’t rocket science.

One of the winners of this liberal fiscal policy is the real estate market, no doubt, but ultimately society as a whole, as this property bonanza translates into the creation of more jobs, which in turn creates wealth, and attracts even more foreign investments creating an upward spiral.

In effect, these generous tax breaks on buying property from April 2021 have created a property boom in Andalusia, as we wrote here: Andalusia: now is the right time to buy property – 8th October 2021.

Permanent real estate tax breaks in Andalusia

 

  • Off Plan (Stamp Duty): 20% discount on Stamp Duty Tax. Tax rate is now a flat 1.2%.
  • Resale (Property Transfer Tax): tax savings range from 12.5% to 30% (or more) on Property Transfer Tax, hinging on the sales price. Tax rate is a flat 7% on any sale price.

Of particular interest are the tax cuts in resale property. The gist is that the higher the sales price, the more tax a buyer stands to save. With numbers:

  • On a €500,000 sale price, the tax savings are 15%.
  • On a €3,000,000 sale price, the tax savings are 27%, and so forth.

In short, simply spectacular for high-end property. This has prompted a tidal wave of villa sales, the press reports 573 villas are selling a day in Spain!

Yes, but what about Spain’s new Housing Act? Surely that’s a spanner in the works!

 

Actually no, it is not. Last month I published a scathing article on this new law. On the bright side, as I pointed out in the article itself, this pernicious law will not be implemented in Andalusia because regional governments have devolved competencies on housing matters.

This means that while other regional governments in Spain will gladly embrace the hardships of a planned economy (increasing property taxes, fining landlords, dictating at what price you can, or cannot, rent out your property, extending tenant evictions) in Andalusia we will continue to enjoy economic and personal freedom, which translates into attracting even more foreign investments, spurring job creation and wealth.

Spain’s new housing bill will, unfortunately, fracture and polarize Spain furthermore, into two regional tiers: investment-friendly and those regions which are not. It’s an insidious side effect I cared to point out in the article’s conclusion, but it will not impact Andalusia one iota, nada.

If anything, Spain’s new Housing Act will only contribute to consolidate Andalusia’s status as a tier 1 tax region; an investment-friendly region which boasts an ultra-low taxation that attracts foreign investments and property buyers from the world over.

8 reasons why you should invest in Andalusia

 

  1. Ultra-low taxation. As we’ve covered in previous articles (Andalusia lowers Property Transfer Tax and Stamp Duty), early on this year Andalusia drastically reduced the taxes on buying property, to the point we have never seen such low taxes in this region. Furthermore, the tax breaks on buying property have now been extended indefinitely, so they are no longer time-gated. The Junta de Andalucia has also approved a batch of measures to also cut down several other taxes (Inheritance Tax, IRPF, Wealth tax etc) turning Andalusia de facto into an ultra-low taxation area, along with Madrid. In plain English, Andalusia and Madrid are now the two areas where you pay fewer taxes in all of Spain. And last I checked, Madrid had no beach, so the choice is easy. To sum up, the continued landmark tax changes implemented by the new regional government since April 2019 (lowering, negating or suppressing them) are so eventful they have ushered in a new era of wealth-planning in Andalusia.
  2. Ultra-low interest rates. Interest rates are sitting now at an all-time low, which enables would-be buyers to secure cheap loans (fixed interest is your best bet if the ECB hikes the interest rate in the future to offset a spike in inflation). Bank loans become ‘cheaper’ as inflation rises, as you actually owe less money to your lender (in real terms).
  3. Pandemic & Brexit induced price reductions. The ongoing pandemic and Brexit have forced sellers to reduce their asking price creating once-in-a-lifetime buying opportunities for savvy investors.
  4. Property boom. Andalusia is in the midst of a property boom, since April’s huge tax cut, that has prompted a rise in property prices, specifically in coastal areas. Property is appreciating an average of 8% p.a. in coastal resorts and gathering pace. In some exclusive locations, such as Marbella, property prices have already risen by over 30% over the last two years. More on this property bull market here: Andalusia leads house price boom triggered by Covid.
  5. Spike in inflation. In a financial context of a sharp rise in inflation, having your money stuck in a bank is a losing proposition. In an inflationary environment, such as the one we are in, money depreciates fast losing its value day-to-day. Finance experts agree that a smart way to hedge your savings against rising inflation is to take on a mortgage loan and invest in real estate to avoid losing purchasing power over the long run as bank deposits devalue over time with high inflation. Although Financial Authorities, the world over, are quick to point out this surge in inflation is merely transitory, and bend over backwards to downplay or defuse the situation, the fact is that new virus strains emerge all the time; such as the new South African strain from last week which caused mayhem. Meaning disruptions in the supply chain are here to stay and we need to factor this in; which implies that inflation is also here to stay, at least for several years. Taking on a mortgage loan and investing in real estate was the key strategy that many savvy investors followed in the 70’s, during a time of high inflation, which in hindsight made them very rich.
  6. Buy-to-rent. Annual rental yields are over 5% net. If you also add on top the capital appreciation (point 4 above), you are looking at a safe investment that is netting you over 10% p.a. risk-free. No other safe investment offers you such yields in a context of an underperforming bond market. In addition to this, the Spanish Tax Office offers lenient tax breaks which on average reduce landlord’s tax bills by 70%, or more (if EU-resident). A landlord can offset most, if not all, of their property-related expenses, vastly reducing their income tax on buy-to-lets (i.e. holiday rentals). More on this topic in my articles: Rental prices soar for 5th consecutive year in Spain! and 8 Tips for Buy-To-Let Success in Spain.
  7. Pound rally vs. Euro. For our UK SPI readers, following up on point two above, expectations are high the BoE will raise the interest rate to combat the pernicious effects of inflation. In anticipation of this move, the pound rallied, since April this year, appreciating significantly against the Euro. This translates into UK buyers having greater ‘purchasing power’ on buying euro-denominated property. In plain English, any property in euros becomes much cheaper for sterling pound purchasers.
  8. Gorgeous weather. I know, it’s so cliché, but I had to tack it on, soz. Andalusia boasts 330 days of sunshine a year. After having spent years working in the UK, under dull grey skies and non-stop rain, I can only say it’s pure gold.

The point being, is that if you are thinking of buying property in Spain, and you like to pay little to no taxes, think Andalusia.

Can you really afford to miss out on a new property boom?

 

At Larrain Nesbitt Abogados we can assist you buying & selling property in Spain and deal with its taxation. Ask us.

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

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

“Yo no voy a bajar impuestos, un socialista no baja impuestos (nunca). Esas recetas del neoliberalismo son ya historia. Está demostrado científicamente que la Curva de Laffer es una falacia.” – Luis Ángel Hierro Recio

Loosely translated as: “I’m not going to lower taxes; socialists don’t lower taxes (ever). These are neoliberalist ideas which are phased out. It is scientifically proven that the Laffer Curve is a fallacy.”

Luis Ángel Hierro Recio (1963). Ph.D. in Economics at the public University of Seville. Teacher of Economic Theory at Seville’s public University. Director of LL.M. in Urban Planning. Board member of the public University Pablo Olavide. Ex-congressman for Andalusia. He bid for the leadership of his political party in Andalusia and attained 5.51% of the ballots.

Mr. Hierro has never worked a day in his life in the private sector, devoting all his professional career to the public sector, paid for with our taxes.

Legal services available from Larraín Nesbitt Abogados:

 

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.

2021 © Raymundo Larraín Nesbitt. All Rights Reserved.

... Read more

Spain’s new Housing Act

Raymundo Larraín Nesbitt, November, 5. 2021

Lawyer Raymundo Larraín does a quick rundown on the major highlights this new bill introduces.

Marbella-based Larraín Nesbitt Abogados (LNA) has over 18 years' taxation & conveyancing experience at your service. We offer a wide range of over 50 legal and corporate services. Our team of native English-speaking lawyers and economists have a long track record of successfully assisting expats all over Spain.

You can review here our client’s testimonials.

Article copyrighted © 2021. Plagiarism will be criminally prosecuted.

 

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Abogados
8th of November 2021

Introduction

Spain’s social-communist government is in the last legislative stages of enacting a new housing bill that will create ripples across the real estate industry. A bill that has not been exempt from controversy, ruffling the feathers of all those involved in the industry. No doubt, a new feat of our beloved communist government.

As I can only review a draft bill at this stage, albeit a final draft with few changes to be expected, please be aware alterations may be introduced.

The lofty goal of this law is to stop speculation on housing and reduce rental prices, making them more affordable for vulnerable collectives, such as despondent youngsters.

To reach a wider audience, I will shy away from esoterics, and go the good old-fashioned way of listing the major highlights in bullet points in no particular order.

Housing bill’s major highlights

  • Housing earmarked as public is banned from being sold to investment funds to avoid speculation of a good of first necessity.
  • Landlords who leave housing empty for over two years may be faced with higher municipal tax rates (of up to 150% surcharge on IBI tax). Some communist regional governments, such as the Balearics, have already made public they will levy the maximum penalty as soon as the law allows it. This is done to avoid speculation and free up the housing to those in need. The question arises with second residencies, such as those held by fellow expats.
  • Creates new mechanisms to draw out (sic) non-paying tenant evictions (particularly longer for legal persons acting as landlords). We actually need the opposite in Spain to foster a robust rental market, but whatever.
  • The new law will cap rental prices in earmarked areas where demand is stressed out with a view to curb rampant speculation.
  • The law forces property developers to reserve 30% of all developed land for social housing.
  • Tenants may apply for forced renewals on periods lasting from one to three years, forcing the hand of landlords.
  • A new concept is created, the ‘great’ landlord. Defined as someone (legal or physical person) who has more than ten properties or who has a built surface of 1.500 m2 on rental.
  • Great landlords are now forced to offer rentals at a price set by Authorities, under huge penalties.
  • Great landlords cannot update the rental price year-to-year (as currently) and must remain frozen for a period of up to 10 years
  • Physical landlords will rent at a fixed price determined by Authorities in areas under ‘rental duress’ (zonas tensionadas, in Spanish).
  • Sliding tax breaks will be introduced for landlords who lease properties to tenants within the age group of 18 to 35 y.o.
  • Reduction or suppression of 85% tax breaks for great landlords.
  • Creation of landlord tax breaks of 60% when improvements over the previous three years exceed a 6-month rental.

 

Potential negative repercussions of this new law

We already glossed over them in detail in previous articles: Government to introduce rental control in 2021 – 28th October 2020.

  • Sharp rise of off-the-books rental agreements
  • Sharp increase of rental prices (as offer will foreseeably retract following these changes)
  • End of buy-to-let boom as we know it
  • Introduction of legal insecurity on creating several undefined legal concepts 
  • Artificial creation of ‘guettos’ in large cities with long waiting lists
  • Rise of unemployment in a sector that was thriving (we are in a property boom!)
  • Restriction in offer. Sharp decrease in offer as landlords, on learning the government will fix at what price they can rent, will cease renting
  • Introduction of price market distortions. Huge price distortions with new and old rental prices, creating ‘privileged’ rentals
  • New problems: What happens to existing signed rentals?
  • New problems: What happens to signed contracts under this new law if it is found unconstitutional and is repealed (as is likely under a new government)?
  • On reserving 30% for social housing on all developments, how are you going to market (and sell) a luxury development?
  • Landlord tax break on long term tenancies reduced from 60% to 50%
  • Longer tenant-eviction procedures (effect pursued on purpose)
  • Sharp tax rise (IBI) for some landlords

 

Personal opinion

To sum up, lofty ideals at the expense of other people’s estates.

This law introduces a plethora of undefined legal concepts left for ulterior regulation to develop, listing but a few:

  • Areas under ‘rental duress’
  • Empty homes
  • Fixed sliding rental scale set by Authorities

 

A golden rule is never to create a legal text with undefined legal concepts that can be construed in any manner of ways. Needless to say, this creates legal insecurity for investors. This is not what investors want to hear. This is exactly the type of regulation they abhor and move away from.

Spain has huge potential to attract foreign investments, creating jobs and wealth on its wake.  We see this actively happening in Madrid and in Andalusia which are in a property boom. But clumsy laws such as this one, which openly favour market interventionism over a free market economy, in a move straight out of the playbook from Maduro’s Venezuela, are counterproductive. Spain is not a planned economy. Spain's economic potential is held back by laws such as this one. Investors will invest elsewhere. The Spanish government should stop demonizing foreign investors which are key to our economy.

This piece of legislation is the latest in a long string that further undermines the rights of property owners. Spain’s social-communist government is hell-bent on curtailing ownership rights as much as they can, and then some.

We don’t need a nanny state that dictates at what prices we can rent out or not. I was under the impression we lived in a free market economy in a democratic country, silly me.

Conclusion

This law (unfortunately) will likely fracture Spain further into regions which are investment-friendly and those which are not. This introduces pernicious market asymmetries which stifle competition.

Regional governments in Spain have devolved competencies in housing matters. It can be reasonably expected that regions under moderate right-wing control will implement this law lightly, or not at all, in sharp contrast to left-wing regions. This is a very important nuance and the reason why I write this law will directly contribute to fracture the country and introduce market asymmetries. 

Free-market regions, with ultra-low taxation which enshrine personal and business freedom as core civic values, such as Madrid and Andalusia, not only will ignore it, but vehemently fight it. Much to the disgust of our beloved social-communist government.

Whereas regions under left-wing control, such as the Balearics and Catalonia, can be expected to implement the new housing bill stringently, imposing immediately the 150% surcharge of IBI on empty houses.

Honest to God, the last thing Spain needs right now is to exacerbate social or regional polarization further, thank you very much.

There is also the matter of housing affordability. As I mentioned in the article's introduction, the aim of this new regulation is to make housing more affordable, particularly rentals, for vulnerable collectives such as young people on low and precarious McJobs. Whilst the government's goal is certainly commendable, no doubt, the way it is trying to achieve this may backfire, at least to my mind. As I have collated above as possible negative effects, it is foreseeable that landlords (offer) will remove from the market properties given the stringent conditions that are now government-imposed (i.e. Authorities set rental prices in areas under rental duress, no updating of rental price in 10 years, taxes on empty property, temporal expropriation of empty properties to be rented out, 30% of all new developments earmarked for social housing, etc). These effects are far-reaching and greatly affect landlords and developers who will likely pull out their units from the property market. When offer retracts but demand remains steady, following the laws of demand and supply, the price of an asset undergoes a rise. This is why I write that all these new changes enacted through this law - as commendable as they are - will likely impact on the market and translate into a general rise of all rental prices as there will be fewer properties on offer to chase after. This, in a context of a sharp rise in inflation, is very negative as it affects precisely the vulnerable collectives this law attempts to protect and assist.   

If there is a change in government in 2023 (highly likely) this new bill will be top on the list to be repealed. Key laws – ideally – should be consensuated, reconciling both political sides, and agreeing to a common text that can be upheld regardless on who wins on poll day. Otherwise, laws are short-lived and last what a 4-year legislature lasts (or even less), which is daft, unproductive and fosters widespread legal insecurity which deters foreign investments in Spain. You can expect this new Housing Bill to last a year. Smart money is risk-averse, the market rules need to be fair, clear and long-lasting.

Spain’s social-communist government unconcealed goal with this housing bill is to win the hearts and minds of a disenfranchised youth, mired by record-high levels of unemployment, the highest in any OECD country, wooing their vote in the upcoming election of early 2023. 

God willing, these changes will be for the better.

"I commend thee to Almighty God. He is the source of all good. Do the Will of God, which is the Way of Peace. Beware of bloodshed; de not trust in that, for spilled blood never sleeps. Strive to gain the hearts of thy subjects and watch over all of their interests, for thou art appointed by God and by me to look after their welfare. I have become as great as I am because I have won the hearts of men by gentleness and kindness. Never nourish ill feeling toward any man, for Death spares none. Be prudent in thyself. God will pardon the penitent, for He is gracious.” – Saladin’s parting words to his son, al-Zahir.

Al-Nasir Salah al-Din Yusuf ibn Ayyub (1137 - 1193). From humble Kurdish origins, Saladin displayed from an early youth a series of unique traits which distinguished him from his peers, allowing him to quickly climb through the ranks and elevate him to commander of all Muslim armies (over 70,000 men). He became the first sultan of both Egypt and Syria, founding the Ayyubid dynasty. As a master chess player, he developed an uncanny ability, almost preternatural, to ‘read’ opposing Christian commanders’ minds to the point he could effortlessly anticipate their every move; much in line with Alexander’s prescient ability. He would regularly inflict huge losses to armies who vastly outnumbered him and – in theory – were better equipped (with superior European manufactured gear). As a master tactician, he would cleverly deploy his troops in such a manner to always take advantage of the surrounding terrain paying great care to logistics. His unmatched military prowess and gallantry would garner him great admiration, not only from within his own ranks, but from his enemies alike, most notably from Richard the Lionheart, King of England. Through his strategic campaigns, in a tour de force, he would eventually wrestle the control of Jerusalem from Crusaders, which had held onto it for over 88 years. When Saladin recaptured the city, there was no killing and no desecration of holy places, and Christian pilgrims were allowed free access to their places of worship (unlike the first Crusaders who took the city in 1099, murdering thousands, including women and children). He encouraged the establishment of institutes of higher learning in Cairo, Damascus, and Jerusalem. He also set up courts of law. Unlike other potentates, before and since, Saladin did not set himself above the law. But more importantly, he displayed a rare acumen that singled him out and made him human and relatable to all, even his foes. He showed great compassion and piety and would refrain from any unnecessary bloodshed. In Saladin’s possession at the time of his death were one piece of gold and forty pieces of silver. He had given away his huge wealth to his poor subjects, leaving nothing to pay for his funeral. Ironically, Saladin incarnated like no other man the best of chivalric qualities making him a true knight in all but name. Salah al-Din is likely the greatest Muslim commander of all time bar none.  

At Larrain Nesbitt Abogados we can assist you buying & selling property in Spain and deal with its taxation. Ask us.

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

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

Legal services available from Larraín Nesbitt Abogados:

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.

2021 © Raymundo Larraín Nesbitt. All Rights Reserved.

... Read more

Andalusia: now is the right time to buy (or sell) property!

Raymundo Larraín Nesbitt, October, 1. 2021

Lawyer Raymundo Larraín briefs us on Spain’s ongoing property bull market.

Marbella-based Larraín Nesbitt Abogados (LNA) has over 18 years' taxation & conveyancing experience at your service. We offer a wide range of over 50 legal and corporate services. Our team of native English-speaking lawyers and economists have a long track record of successfully assisting expats all over Spain.

You can review here our client’s testimonials.

Article copyrighted © 2021. Plagiarism will be criminally prosecuted.

 

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Abogados
8th of October 2021

Plain and simple, now is the right time to buy (or sell) in Andalusia, period.

Feel free to skip the rest of my article below.

Introduction

2021 was poised to be one of the worst years on record in Spanish real estate sales. The virus’ financial aftermath proved devastating, nothing seemed to withstand its relentless wake.

And that’s when – least expected of all – politicians stepped in saving the day.

Andalusia’s regional government took the bull by its horns and approved in April of this year a taxpayer’s aggressive relief package to combat the adverse consequences brought about by Covid-19. These included, amongst many others, drastic tax cuts on buying property, both off-plan and resale.

We published a detailed article in SPI:  Andalusia lowers taxes including Property Transfer Tax and Stamp Duty in move that will boost the market – 28th April 2021

Little did we know at the time of publishing it that it would give way to one of the best performing years on real estate sales ever.

Six months later, we have witnessed one of the strongest bull markets to date in the Spanish real estate market. We have published several articles during this time to reflect this:

 

Spain’s National Bureau of Statistics (INE) published in August the hard figures on this bull market. INE reports a record-breaking 267,700 properties sold during the first 6 months of this year. We need to look back 13 years, all the way back to Spain’s property boom heyday, to see such strong sale figures.

You can see it in a graph here: House sales in Spain in 2021 (first six months of 2021)

In June ’21 alone, over 48,000 properties were sold, which is an 73.5% interannual increase. This is hands down the best performing June in real estate history. This confirms the unabated trend that we are witnessing the best sale figures in real estate in over 13 years. The property market has been nothing short of spectacular from March of this year.

There are several underlying factors that help to explain this spectacular property rebound (huge liquidity, new covid-induced consumer trends, drastic property tax cuts, ultra-low interest rates, sharp inflation spike, underperformance of bonds and other financial assets, etc) which we’ve collated in the above-mentioned articles. But to avoid beating about the bush, hands down it is the spectacular tax breaks now in place in Andalusia which have fostered the bull market we are in.

Even El Mundo (newspaper daily) reports how the buying frenzy is slashing the available stock of real estate in large cities in Spain.

Long story short, if you were ever expecting someone to tip you off when was the right time to buy real estate again in Andalusia, the time is now. If you’re thinking of buying (or selling) property in Andalusia, you should most certainly take advantage of the ultra-lenient tax breaks this regional government has on offer (for a limited time only):

  • Off Plan: 20% discount on Stamp Duty Tax
  • Resale: tax savings ranging from 12.5% to 30% (or more) on Property Transfer Tax, hinging on the sales price

 

Of particular interest are the tax cuts in resale property. The gist is that the higher the sales price, the more tax a buyer stands to save.

With numbers:

  • On a €500,000 sale price, the tax savings are 15%.
  • On a €3,000,000 sale price, the tax savings are 27%, and so forth.

 

In short, simply spectacular for high-end property. This has prompted a tidal wave of villa sales, the press reports 573 villas are selling a day in Spain! This is the highest figure on record since 2007, in the midst of Spain’s property boom.

As El Pais (newspaper daily) reports in August ’21, the capital appreciation of real estate in coastal areas has surged by 8.4% in 2021, as compiled by property surveyor TINSA (Spain’s largest surveyor). We hadn’t seen such capital appreciation figures since the early 2000’s.

Spanish financial newspaper The Economist reports today how some property hotspots in Spain have increased the asking price by over 20% year-on-year, particularly in coastal areas.

Undeniably, there is an upwards sales trend in Spain going on since March, but it is more prominent in coastal areas.

Bottom line, now is as good time as any to invest in real estate in Andalusia and take advantage of its time-gated tax breaks. In plain English, we’ve never had such low taxes on buying property in Andalusia – ever. ’Nuff said!

This is of particular interest to some fellow European investors, such as Dutch, who now face negative interest rates on their bank deposits (that is, you need to pay the bank to deposit your money)!  Ha ha ha. Excuse me, cheeky buggers!

It’s booming y’all! Are you gonna miss out?

 

At Larrain Nesbitt Abogados we can assist you buying & selling property in Spain and deal with its taxation. Ask us.

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

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

 

"We human beings become what we dream as children and during our youth.” – Manuel Patarroyo

Manuel Elkin Patarroyo (1946, Colombia). Reading comics as a young boy on Mr. Louis Pasteur, Father of Immunology, would inspire him to heed his calling in life as an immunologist and save (millions) of lives. He is a Colombian Professor of Pathology and Immunology who developed, under precarious third-world conditions, the world’s first synthetic vaccine against a severe strain of malaria, a disease which kills 1.5 million people per year. The man was offered a fortune by leading US Pharmaceuticals for his patent (rumoured at over 1bn US Dollars). Anyone would have accepted such a generous offer; anyone but him. He altruistically donated his patent to Humankind, and as a result the prices charged for his vaccine are ultra-low, because anyone can mass produce it without having to pay royalties brutally reducing the costs of the development pipeline. It is estimated his work saves two million lives every year. Much like his childhood hero, M. Pasteur, he too would one day grow up to become a real-life hero.

Legal services available from Larraín Nesbitt Abogados:

 

Related articles

 

Article originally published in Spanish Property Insight: Andalusia’s hot property market means it’s a good time to buy (or sell) property!

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.

2.021 © Raymundo Larraín Nesbitt. All Rights Reserved.

 

 

... Read more

Do you need an updated NIE certificate to sell property in Spain?

Raymundo Larraín Nesbitt, December, 1. 2020

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

You can review here our client’s testimonials.

Article copyrighted © 2020. Plagiarism will be criminally prosecuted.

 

 

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Abogados
8th of December 2020

We published several years ago (in eight languages) a detailed article explaining what a NIE number is and how to go about getting one. A NIE number is assigned by the national police and is yours for the remainder of your lifetime, it never changes. Many years ago, Spanish police issued them as an A4 sized certificate that had a three-month expiry date printed on them. Modern-issued NIE numbers no longer show ‘expiry’ dates.

At times notaries, on selling, demand a seller procures a new updated NIE number certificate. This is because they have seen the 3-month expiry date is (long) overdue and are asking for a ‘new’ updated copy. In truth, the ‘new’ certificate will bear exactly the same number and details as the former, the only difference is that there will not be any expiry date on it.

Imagine sitting the morning of completion at a notary’s office, surrounded by a group of anxious strangers, and feeling a knot at the pit of your stomach when the notary officer informs you the sale has fallen through because your NIE number is not accepted by the notary! Now imagine millions of euros are at stake. It can well happen. The sale needs to be postponed or else change over to another notary (not always possible when mortgage loans are involved, as is often the case).

Then again, some notaries, who are not prone to nit-picking, will have no qualms accepting an ‘expired’ NIE number certificate. They will find it completely unnecessary to re-apply for a new copy and are more than happy to accept an old one which shows a 3-month expiry date.

The problem is that sellers cannot pick the notary witnessing a sales deed. This is a right that belongs only to buyers, who are legally entitled to pick whichever notary pleases them most. One of the many disadvantages this poses to sellers, is that they are unable to know beforehand - often until it is too late in the day - which notary will be the one selected by the buyer. Meaning they cannot know if the selected notary will demand they update their old NIE number certificate, or not, on selling.

This can be easily pre-empted by your appointed conveyance lawyer on including a clause in the POA to attain a duplicate NIE number should the need arise on selling. Bottom line, in practice it’s a bit akin to playing Russian roulette; a seller cannot know for sure if the chosen notary will demand an updated NIE certificate, or not. It is the duty of your conveyance lawyer to plan ahead for this eventuality and overcome any unforeseen obstacle.

“Politicians were mostly people who'd had too little morals and ethics to stay lawyers.” – George R.R. Martin

George Raymond Richard Martin (1948). Is an American novelist and short-story writer in the fantasy, horror, and science fiction genres. He is best known for his international bestselling series of epic fantasy novels, A Song of Ice and Fire, which was later adapted into the HBO dramatic series Game of Thrones.

 

At Larrain Nesbitt Abogados we have over 17 years’ experience assisting clients buying & selling property in Spain and dealing with its taxation.

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

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

Legal services available from Larraín Nesbitt Abogados

Selling-related articles

 

Article originally published at Spanish Property Insight (SPI): Do you need an updated NIE certificate to sell property in Spain?

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 on 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 dragons, Lannisters or self-serving politicians were harmed on writing this article. VOV.

2.020 © Raymundo Larraín Nesbitt. All Rights Reserved.

... Read more

Home-Seller’s Checklist

Raymundo Larraín Nesbitt, May, 1. 2020

Lawyer Raymundo Larraín gives us a rundown on the points we should have ready on selling a house in Spain. This is the third, and final, of a three-part series on buying & selling property in Spain. Previous entries:

 

Marbella-based Larraín Nesbitt Lawyers has over 17 years' taxation & conveyancing experience at your service. We offer a wide range of 40 legal and corporate services. Our team of native English-speaking lawyers and economists have a long track record successfully assisting expats all over Spain.

You can review here our client’s testimonials.

Article copyrighted © 2018, 2020. Plagiarism will be criminally prosecuted.

 

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Abogados
8th of May 2020

 

Congratulations, you have found a buyer for your Spanish property! You should now instruct a lawyer to represent you in the sale, particularly if you are non-resident in Spain.

To secure the deal, your appointed lawyer will require from you a long list of documents you should have ready at hand. These documents will then be forwarded to the buyer, or his legal representative, as they are necessary to prepare a due diligence.

Following this, the next step would be exchanges; to sign the all-important Private Purchase Contract (contrato privado de compraventa, in Spanish). At times, buyer’s & seller’s skip this key step and go straight to completion, but in my opinion, this is unadvisable for reasons I won’t go into.

The below list is thought only for non-resident sellers acting as physical persons. If the seller is a holding company, there would be additional documents that need to be handed over to a buyer, or his representative.

Selling property may at times prove a daunting and stressful ordeal for sellers; to save yourself aggravation and time it is most advisable a seller pre-empts this by collating the below list well ahead of time.

You are welcome.

Seller’s checklist

 

  • Full scanned copy of your purchase Title Deed
  • (Updated) scanned copy of a Nota Simple
  • Copies of your national ID, passport and NIE Number certificate (in force). A duplicate NIE certificate is at times demanded by notaries if your certificate already expired i.e. 3-month validity (the assigned number never changes)
  • Copy of recent utility invoices (water & electricity)
  • Copy of IBI tax invoices, for the previous 4 years
  • Copy of Refuse Charge (Basura, in Spanish), for the previous 4 years
  • Energy Performance Certificate
  • Licence of First Occupation
  • Community of Owner’s administrator contact details
  • Scanned copies of the minutes of the last three General Assemblies (Junta General Ordinaria, in Spanish)
  • Community of Owner’s Certificate stating the property being sold is not in arrears
  • Spanish fiscal residency certificate (to avoid a 3% retention on the sales proceeds)
  • Copy of Power of Attorney, if instructing a lawyer (it is highly advised that you do to avoid payment scams at completion, which are rife)
  • If renting out, copy of the signed lease agreement

 

Capital gains tax mitigation checklist

 

On hiring our law firm, we can GREATLY mitigate your tax bill on selling property. We can offset all the following taxes and fees at no extra cost:

  • Lawyer’s fees (on buying).
  • Notary fees (on buying).
  • Land Registry fees (on buying).
  • Taxes (on buying) yes, these can be offset in full on selling – you are welcome.
  • All property-related improvements (not maintenance costs) i.e. glass curtains, refitted kitchen, roof retiling, wood flooring, A/C installation, house alarm etc.
  • Estate agent's commission (on selling): VAT invoice/s.
  • Lawyer’s fees (on selling): VAT invoice.

 

3% tax rebate on selling property in Spain

 

To close, free of charge, we also apply for a tax rebate on the 3% withheld by the Spanish Tax Authorities on account of a non-resident seller’s CGT liability. This is taking 5 months on average through us.

Selling at a loss?

 

If you’re selling at a loss, we can apply for a full tax refund of your plusvalia tax for a very competitive fee. More on this service in our article: Have you sold property at a loss in Spain? You can now apply for a tax refund. In general, you only have 30 days as from the date of sale to apply for this tax rebate.

Sounds interesting? Call us.

 

At Larrain Nesbitt Abogados we have over 17 years’ experience assisting clients buying & selling property in Spain and dealing with its taxation.

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

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

Legal services available from Larraín Nesbitt Lawyers

 

Selling-related articles

 

Article also published at Spanish Property Insight: Home-Seller’s Checklist

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, 2.020 © Raymundo Larraín Nesbitt. All Rights Reserved.

... Read more

Home-Buyer’s Checklist - RESALE

Raymundo Larraín Nesbitt, April, 10. 2020

Lawyer Raymundo Larraín gives us an overview on the points we should cover on buying a resale in Spain. This is the second of a three-part series on buying & selling property in Spain.

Marbella-based Larraín Nesbitt Lawyers has over 17 years' taxation & conveyancing experience at your service. We offer a wide range of 40 legal and corporate services. Our team of native English-speaking lawyers and economists have a long track record successfully assisting expats all over Spain.

You can review here our client’s testimonials.

Article copyrighted © 2020. Plagiarism will be criminally prosecuted.

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Abogados
8th of April 2020

 

You have fallen in love with a property in Spain and now it’s time to take the dip and sign the contract!

This short article is written with the aim to provide a buyer with a basic guideline on what you should be asking a seller for. It is not meant to substitute professional legal advice.

Whilst it is possible to buy a property in some overseas jurisdictions, including Spain, without having to appoint a lawyer, it would be very unwise to do so. Buying a house is one of the biggest investments most people make in their lifetime. So why take the risk by not obtaining proper legal advice?

Banks and notaries are not your own personal lawyers and will not carry out stringent legal checks to protect buyer’s legal interests; that is not their job. This is a common blunder buyers’ make, particularly non-resident ones.

Instruct your own independent lawyer and never under-declare; besides being illegal, you will pay a massive Capital Gains Tax bill on selling it later on. It is illegal, it is stupid and only benefits the seller, not the buyer.

Remember to store safely the following invoices on buying which can be used to GREATLY mitigate your tax bill on selling:

  • Lawyer’s fees (on buying).
  • Notary fees (on buying).
  • Land Registry fees (on buying).
  • Taxes (on buying) yes, these can be offset in full on selling – you are welcome.

 

 

Buying Resale Checklist

 

Please note I only have in mind physical individuals acting as sellers on writing this rundown, if companies are involved, then far more checks would be necessary.

  • Request a copy of a seller’s Title deed.
  • Request a copy of a Licence of First Occupation, where possible. This is required for holiday rentals and also by lenders to raise finance against a property (i.e. to buy the property itself, or because you need money to pay health-related expenses later on in life, etc).
  • Ensure the person/s you are dealing with as sellers are the ones registered as the property owners. If not, ensure they are acting through a valid Power of Attorney.
  • Request an updated nota simple, or else procure yourself one.
  • Ensure the property is classified legally as a dwelling and not as commercial property.
  • Ensure the property is freehold, not leasehold.
  • Verify the property is not in arrears with its Community of Owners, if applicable. A buyer becomes liable for the previous 3 years in arrears plus the current one (total 4 years).
  • Verify there are no outstanding local rates to be paid: IBI and refuse charge (basura, in Spanish). A buyer becomes liable for the previous 4 years.
  • Verify there are no tenants living in the property. Under new stringent rental laws tenants at times are legally entitled to stay 8 or 10 years in a property, even if sold on! The buyer must respect the duration of the whole rental contract, unless a tenant formally agrees to leave ahead in exchange of ‘compensation.’
  • Ensure the property is unencumbered (no mortgage against it).
  • Ensure the property is free of liens i.e. rights of way, rights of view, hunting rights, gathering rights, well rights…
  • Ensure the property is free of charges i.e. no registered embargoes against it.
  • If investing in a Buy-to-Let, verify your Community of Owners has not banned or restricted holiday rentals.
  • If investing in a Buy-to-Let, ensure you are compliant with holiday homes regional regulations and attain a Tourist licence to rent where necessary - seek legal counsel.
  • Post-completion: arrange payment of local rates (IBI & basura) as a direct debit against your Spanish bank account.
  • Post-completion: if you are non-resident, ensure you pay every year your Non-Resident Imputed Income Tax (NRIIT) on your Spanish property.

 

 

 

" We human beings become what we dream as children and during our youth.” – Manuel Patarroyo

Manuel Elkin Patarroyo (1946, Colombia). Is a Professor of Pathology and Immunology who developed, under precarious third-world conditions, the world's first synthetic vaccine against a severe strain of malaria, a disease which kills 1.5 million people per year. The man was offered a fortune by leading US Pharmaceuticals for his patent (rumoured at over 1bn US Dollars). Anyone would have accepted such a generous offer; anyone but him. He altruistically donated his patent to Humankind, and as a result the prices charged for his vaccine are ultra-low, because anyone can mass produce it without having to pay royalties brutally reducing the cost of development. It is estimated his work saves two million lives every year. Much like his childhood hero, the much-acclaimed French microbiologist Mr. Louis Pasteur, he too would grow up to become a real-life hero.

Our world needs more people like Mr. Patarroyo.

 

At Larrain Nesbitt Abogados we can assist you buying & selling property in Spain and deal with its taxation. Ask us.

 

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

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

 

Resale-related articles

 

Article originally published at Spanish Property Insight: Home-Buyer’s Checklist: RESALE

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.

2.020 © Raymundo Larraín Nesbitt. All Rights Reserved.

... Read more

Home-Buyer’s Checklist - OFFPLAN

Raymundo Larraín Nesbitt, March, 1. 2020

Lawyer Raymundo Larraín gives us an overview on the points we should cover on buying off-plan in Spain. This is the first of a three-part series on buying & selling property in Spain.

Marbella-based Larraín Nesbitt Lawyers has over 17 years' taxation & conveyancing experience at your service. We offer a wide range of 40 legal and corporate services. Our team of native English-speaking lawyers and economists have a long track record successfully assisting expats all over Spain.

You can review here our client’s testimonials.

Article copyrighted © 2020. Plagiarism will be criminally prosecuted.

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Abogados
1st of March 2020

You have fallen in love with a property in Spain and now it’s time to take the dip and sign the contract!

This short article is written with the aim to provide a buyer with a basic guideline on what you should be asking a developer for.

Whilst it is possible to buy a property in some overseas jurisdictions, including Spain, without having to appoint a lawyer, it would be very unwise to do so. Buying a house is one of the biggest investments most people make in their lifetime. So why take the risk by not obtaining proper legal advice?

Banks and notaries are not your own personal lawyers and will not carry out stringent legal checks to protect buyer’s legal interests; that is not their job. This is a common blunder buyers’ make, particularly non-resident ones.

Instruct your own independent lawyer and never under-declare; besides being illegal, you will pay a massive Capital Gains Tax bill on selling. It is illegal, it is stupid and only benefits the seller, not the buyer.

Remember to store safely the following invoices on buying which can be used to GREATLY mitigate your tax bill on selling:

  • Lawyer’s fees (on buying).
  • Notary fees (on buying).
  • Land Registry fees (on buying).
  • Taxes (on buying) yes, these can be offset in full on selling
  • All property-related improvements (not maintenance costs). Providing you have VAT invoices to back them up. You are welcome.

 

Buying Off-Plan Checklist

 

  • Verify the plot of land is registered under the developer’s name whose contract you are signing.
  • Request a copy of the developer’s Building licence.
  • Request bank guarantees or insurance policy securing ALL your stage payments, including the initial holding deposit paid to the developer/estate agent. These will act as a safety net safeguarding your interim payments should the developer complete the property late, or not at all.
  • Ensure the development is compliant with Coastal Laws.
  • If the development is finished, request a copy of the Licence of First Occupation.
  • If the development is finished, ensure you do a snagging list before completion.
  • Post-completion: ensure your property is now registered under your name at the Land Registry and never take anyone’s word for it! Verify it yourself.
  • Post-completion: arrange payment of local rates (IBI & basura) as a direct debit against your Spanish bank account. With offplan, IBI is normally available on the following year. You will be notified in your Spanish address.
  • Post-completion: if you are non-resident, ensure you pay every year your Non-Resident Imputed Income Tax (NRIIT) on your Spanish property.

 

“Ring-a-ring o’ roses,
A pocket full of posies,
A-tishoo! A-tishoo!
We all fall down.” – Popular British nursery rhyme that sinks its roots deep in the Middle Ages.

 

At Larrain Nesbitt Abogados we can assist you buying & selling property in Spain and deal with its taxation. Ask us.

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

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

Off-plan related articles

 

Original article commissioned and published by IDEALISTA: Home-Buyer’s Checklist

Article also published at Spanish Property Insight: Home-Buyer’s Checklist - OFFPLAN

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.

2.020 © Raymundo Larraín Nesbitt. All Rights Reserved.

... Read more

Community of Owners in Spain

Raymundo Larraín Nesbitt, December, 3. 2019

Lawyer Raymundo Larraín explains to us the legal intricacies of community of owners, or comunidad de propietarios in Spanish. Makes for excellent bed reading!

Article dedicated with affection to my friends Ann and Andy H., from Wakefield, West Yorkshire, England.

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

Article copyrighted © 2.009, 2.012 and 2019. Plagiarism will be criminally prosecuted

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

Introduction

Now that the season of General Assemblies is fast approaching for Q1 2020, I thought I’d revisit my 2009 article. The following is a revamped version of my decade-old article updating it in line with the new changes in legislation.

Community of Owners is an article which gist is to provide basic guidance on what becoming an owner in a community entails, with particular focus in Andalusia. It is not an in-depth treatise.

General Assemblies, held once or twice a year, are prone to bickering and backstabbing, where every neighbour it would seem has an axe to grind. You’d do well in acquaint yourself with your owner’s duties and rights to better protect your interests; which may not be aligned with others’.

Because this is just a ‘short’ article, I strongly recommend reading the law itself, as I have considerably abridged the sections pursuant to it, on reviewing them, giving only a general overview of its key sections and casting aside any pesky nuances which are only of interest to other lawyers.

This is a link to the Commonhold Act in English as amended by Law 8/99 & others, courtesy of Castillo Traductores. English version starts on page 4. You are welcome.

Definition

On buying property in an urbanisation, or block of flats, you may automatically become a member of what is known as a ‘Community of Owners’, or CO for short. The CO is a legal entity comprised by all the property owners within the same development, or building, and is governed and ruled by its own self-approved statutes and bylaws, besides a national legal framework that acts as common denominator to all CO’s.

General Legal Framework

There is a general legal framework acting nationwide as backbone common to all communities in Spain, as set out by the Commonhold Act 49/60 (AKA Ley de Propiedad Horizontal, Horizontal Property Act, or Commonhold Act) and by the Spanish Civil Code (arts 396 et seq).

The 1960 Law on Horizontal Property was amended most significantly by Law 8/99, amongst others, to bring it line with social changes. It is now a 60-year-old law.

Community Statutes and Bylaws

In addition to the above general laws, the day-to-day running of each community is really determined by the Communities’ Statutes which are drafted at the time of lodging the Master Deed (aka Escritura de División Horizontal or Horizontal Deed). Unanimity is required to amend either the Master Deed or the Community Statutes (arts 5 and 17). So, in practice it’s quite a feat to change either of them. An exception to this unanimity, is a recent legal change on holiday rentals (see section further below).

That’s why a community may, at its own discretion, approve additionally its own Community Rules or Bylaws (in Spanish Normas de Regimen Interno or Normas de Funcionamiento de la Comunidad de Propietarios), which are not to be confused with the above Community Statutes. Community Rules (Bylaws) need only a simple majority vote to be approved and amended so as to waive the unanimity rule. They allow for great flexibility and will rule, for example, on communal services such as garbage collection or the use of communal facilities such as the swimming pool or lifts. They cannot rule on matters reserved only to Community Statutes.

Normally, on buying off-plan, there will be a clause whereby the purchaser allows the developer to draft and lodge the Master Deed as well as the Community Rules (Bylaws) at the Land Registry. Buyers may later on amend these, when they become owners, on complying with the strict majorities that are required by the Commonhold Act (unanimity).

This means that every development may enact their particular laws governing it but always subject to, and in compliance with, the general legal framework that must be respected and adhered to at all times. Bylaws will rule for example the Community’s governing bodies such as the need or not for the optional role of vice-president or how must the owners be notified in advance of an owner’s assembly i.e. think of non-residents being notified abroad of an upcoming General Assembly (AGM or EGM).

Bylaws stem from Spain’s Commonhold Act and adapt it to the requirements of each particular CO. That’s why each CO has its own unique Bylaws, tailored to suit their own individual needs.

Naturally, given the tight space constraints of such a short article (and frankly, not to bore gentle readers to tears), I can only offer a general overview of the shared legal framework and concepts which underpin all communities in Spain without focusing on any particular Bylaw, which are unique to each CO, as I write.

Commonhold Quota

On drawing up the Master Deed before a Notary, every property within a community is assigned a quota or percentage thereof. This quota is composed both of privative and communal elements which are assigned to each property. Storerooms and garage spaces are tallied as well for this purpose.

A commonhold quota is important twofold:

  1. The expenses of a community will be allocated apportioning them to your quota. So, the larger your quota, the more you will have to contribute towards expenses. These can be paid monthly, bi-monthly or even quarterly depending on the Community Rules.
  2. On voting at owners’ assemblies, the quotas need to be tallied for majority vote purposes. So, each owner does not equate to one vote. There may be a single owner, such as a developer or bank, holding a significant communal quota which translates into great voting power. The resolutions reached bind all units within, regardless of whether they cast an opposing vote as majority rules apply (see below).

Owners’ Duties

Section 9 rules them in detail. The main duty will be, of course, to contribute towards the maintenance and financial upkeep of the CO.

Falling in arrears with your community fees will eventually result in your CO placing a lien against your property and may even lead to selling it in a public auction. This legal procedure in Spain works surprisingly efficiently. You have been warned!

This important article mentions the endowment of a community’s mandatory reserve fund, in accordance to each owner’s commonhold quota. The percentage of this endowment has now been raised to 10% of the community’s ordinary budget (used to be 5%). The purpose of this fund is to create a safety net for a rainy day i.e. the maintenance and repair of a building such as lift repair work. This reserve fund shall be endowed with an amount not lower than ten percent of its last ordinary budget. Its funds will be used as well to pay for the building’s insurance cover.

It is also very important to find out – prior to buying a property in an urbanisation – what your contribution is to avoids nasty surprises. Some of those private gated communities that lure you with breathtaking views, 24/7 top-notch security, lush tropical gardens, private gym and dream-like infinity pools command (very) steep monthly fees. This is particularly true of well-off off plan developments (when the community is not up and running yet) where it is not uncommon that unscrupulous salespeople tell you the community fees are X/month and later on it becomes only too apparent they are in fact 3X/month!

Communities’ Governing Bodies

Art 13 establishes the governing bodies are the Owners’ General Assembly (ordinary or extraordinary), the President (vice-presidents are optional), the Secretary and the Administrator. Oftentimes, the role of Secretary is also taken by the community Administrator (paid role).

Presidents and vice-presidents must be appointed from among unit owners only. The roles of Secretary and Administrator can be held by unit owners, as well as by outsiders, providing the latter hold the necessary professional qualifications and are legally licensed to perform such roles.

The Statutes will be the ones which detail exactly what roles exist in each Community of Owners. Presidents, by law, alas do not receive any remuneration for this most ungrateful task.

Following the above, no one in their right mind wants to be President, much less be elected to the same role year after year. A well-known issue is that some community presidents (which officially hold an unpaid role) perpetuate themselves year after year abetted by their web of cronies and do in fact make a very tidy living running whole communities at the expense of pocketing fees from fellow owners on fudging the numbers (specifically fellow gullible non-resident expatriates, bless their warm hearts!). I tell you - by experience - that no one who has held the role of community President wishes to repeat from one year to the next as it is a very ungrateful task that’s almost like a second job. Be wary of community Presidents who hold their position indefinitely and fight tooth and nail to retain power and control. Only on changing administration does the corruption of the former management come into light.

Owners’ Assemblies (AGM’s and EGM’s)

At least once a year an Annual General Meeting (AGM) will be called to approve the community budget and accounts. An Extraordinary General Meeting (EGM) may additionally be called at any time, needing 25% of the unit owners’ quotas.

The notification must be given with a minimum of 3 days’ notice.

This creates serious practical problems to non-residents owning second homes in Spain i.e. you need to book a flight to Spain which may be very expensive with such short notice besides having to take time off your job. Therefore, communities with a high number of non-resident owners may include in their Bylaws more realistic notices of, say, 30 days and to be notified by e-mail in addition to placing it on the Community’s Notice Board. There’s freedom and flexibility to rule on this as each community deems fit in accordance to their own needs and circumstances. Logic should prevail, albeit it seldom does in practice.

Majority and Unanimity Votes

Section 17 deals with when unanimity votes are required. Basically, unanimity is necessary for modifying the rules contained, either within the Master Deed or in the Community’s Bylaws.

A majority vote (three fifths of the owners’ assessed quotas) is required for things such as the lift service, janitors, security services or any other common service or facility. This type of majority vote will be the one used to decide on the Community Rules. Proxy votes are also allowed. Only owners who are up-to-date with their community fees may vote at owners’ assemblies. You are allowed to settle your arrears even on the same day as the General Assembly is being held. However, there are new practical limitations in place to settle arrears in cash. In compliance with new national and EU Anti-Money Laundering Regulations in force, payments in cash in excess of 2,500 euros may be declined. So, if you plan to pop over to the meeting with a wad of banknotes, you may be turned down by the Secretary!

You may find that in new unsold off plan developments, a developer may hold the majority vote as he still holds a large stock of unsold units. Conversely, it can be its lender, if they have taken over the developer’s units (repossession). Either way, both are obliged to contribute to the communities’ upkeep, paying their communal fees in proportion to their communal quotas, just like everyone else.

General Assembly Resolutions

Section 19 deals with the recording of the resolutions reached. They will be recorded in a book of minutes, validated and stamped by the Land Registrar.

A copy of the meeting’s minutes will be sent to each owner with the adopted resolutions following the AGM or EGM. Ideally shortly after the assembly, not several months after when no one can remember what transpired at the meeting.

The Secretary will act as the custodian of the general meetings minutes book.

Any Other Business

If you want to put a concrete matter forward to the Assembly for consideration, you must do so well in advance of being notified by the General Assembly. You cannot simply turn up at the AGM or EGM and expect to nonchalantly raise new issues which were not previously included in the day’s agenda. The President and/or Secretary will simply disallow it and move on with the agenda’s points.

Challenging General Assembly’s Resolutions

Section 18 rules on how assembly resolutions can be challenged at court. I’ve written a specific article on the matter due to its complexity: Community of Owners in Spain: Challenging Assembly Resolutions – 21st October 2011.

This can be done on three accounts:

a) When resolutions are contrary to Law or the Community Statutes;

b) On them being seriously detrimental to the interests of the community and benefit one or several unit owners.

c) When they are seriously detrimental to some unit owner who has no legal obligation to sustain such detriment or when they have been adopted in abuse of power.

There are four deadlines depending on the matter. The most important deadline is the 3-month-rule. Or else a year, if a resolution is against the Law or the Community Statutes. I would always advise challenging a resolution before the three-month deadline is up as a judge may not agree with you that the adopted resolution is against the law or community statutes, in which case you wouldn’t have a year to challenge it, only three months. Pro tip: don’t wait over 3 months to challenge them.

Only owners who are up-to-date with their community fees may challenge community resolutions before a court. Alternatively, they can lodge the owed amounts before a law court prior to litigating. You can only challenge approved assembly resolutions at court, through litigation; sending a strongly-worded letter or e-mail to the President, Secretary or Administrator stating you are in full disagreement with resolution X is a futile exercise. But if that indulges you…

Holiday Rentals

As we reported back in March (Spain's new rental laws in 2019), a new law was approved early on in 2019 which brought a raft of changes, specifically on holiday rentals. If you buy into a gated community or building, chances are high you will become part of what is known as a community of owners. New laws passed on March 2019 have empowered communities of owners across Spain to outright ban, or restrict, holiday rentals. You really do not want to invest several hundred thousand euros in a property only to find out later on you are banned by your community to offer it as holiday accommodation! All changes effective as from 6th of March 2019. General Assemblies (AGMs or EGMs) which adopt restrictive resolutions on holiday rentals should lodge them at their local Land Registry for them to be enforceable.

The main two changes are as follows:

   1. Community of owners may now ban holiday lettings outright

Spain’s Horizontal Act has now been amended allowing Community of Owners to vote by a simple majority of 3/5 (or 60%) to ban outright holiday rentals within a community.

I had already pointed out in a blog post in 2017 that this step was necessary, as the Horizontal Property Act at the time required unanimity to ban them, which logically was never going to happen because landlords would vote against it because of their vested interest.

This change has no retroactive effect. Meaning that if you attained a Tourist licence before your community banned holiday rentals, you can continue doing so. There is an ongoing debate on this point between lawyers, as it is a bit of a grey area until there are further like-minded rulings consolidating a jurisprudential trend settling the open controversy.

   2. Community of owners may now increase the community fees of all those owners who market their properties as holiday lets through holiday platforms

Spain’s Horizontal Act has been amended allowing Community of Owners to increase the communal quota assigned to a landlord of the overall community budget.

In plain English, communities of owners may now vote to increase the community quota of a property owner who uses his property/ies as a holiday home. The Community can vote to increase your quota by as much as 20%.

This change has no retroactive effect.

‘Inheriting’ communal debts

Unlike in other countries, in Spain community debts follow the property, not the owner. When you buy a property in Spain you may find yourself being liable for several thousand euros of unpaid community fees owed by the ex-owner. At times, sellers blissfully forget (God forbid) to mention any outstanding community fees pre-completion. When you buy a property in Spain you immediately take over all existing debts and the seller walks away scot free. A buyer is liable for the previous three years of community arrears plus the current one (total 4 years). More on this in our in-depth blog: Buying in a Community of Owners – Outstanding Debts!

Also, on buying a property, which is part of a Community of Owners, I strongly advise you to request the general assembly’s minutes of the previous 4 years (both AGM’s and EGM’s). The reason is that, unbeknown to you, the community may have voted on an item that requires you to fork out thousands of euros i.e. to repaint the whole flaking paint of the building’s façade. Seller’s at time surprisingly neglect to disclose such key points, I guess they are too busy booking flights to Bora Bora with the sales proceeds!

Which is why, under law, the signing of the deed of transfer of ownership requires a Communities’ certificate, signed by the President and the Secretary (normally the Administrator) stating that all communal fees are up-to-date for that unit. The purchaser can however waive this requirement voluntarily – unadvisable.

Property located in Andalusia

Following arts 7 & 9 of Decree 218/2005, off-plan vendors of property located within the autonomous region of Andalucía must hand over the DIA (Documento Informativo Abreviado) to purchasers. The DIA is the Spanish equivalent of the UK’s Home Purchase Information (HPI), or Seller’s pack. Both the Community’s Statutes and Community Rules must be included in the DIA pack.

Conclusion

There is a general legal backbone, common to all communities in Spain, which is embodied by both the Commonhold Act and the Spanish Civil Code. Besides this girder - which applies nationwide - each community of owners fleshes out its own set of Community Statutes and Bylaws adapted to its own idiosyncrasies; the latter are really the ones that rule on the day-to-day of each community and are unique i.e. no pets allowed in the pool. No two communities hold the same bylaws.

It is strongly advised that, prior to purchasing a property on a development, you request both a copy of the Community Statutes, known in Spanish as Estatutos de la Comunidad de Propietarios, as well as the Community Rules (Bylaws), known in Spanish as Normas de Regimen Interno, if at all existent. You may avoid unpleasant surprises, such as communities that ban pets or even piano players, gasp!

Communities of Owners should be run – in theory – like small, tidy democracies. Well, that’s the theory anyhow.

In practice, they resemble more dictatorships with full blown egos as many owners can vouch for. I would advise you bring your tin hat to owners’ assemblies and prepare for some serious and protracted trench warfare, whereby each owner will hold his own ground, yielding occasionally to fleeting interests.

Good luck; trust me, you’ll need it.

At Larrain Nesbitt Abogados, we can assist you twofold:

 

"Every pound is a prisoner.” – Margaret Nesbitt

Margaret Nesbitt (nee Conway) 1917 – 2013. From a humble working-class background, she lost her husband at a very young age, and was forced to fend for herself, single-handedly raising her four young children. Assisted by a generous (unsecured) loan of St Aloysius churchgoers, she bought a guest house in Glasgow and set up a business all by herself, without formal education, which she would run until her mid-nineties. Within only the span of a few years, working hard, she managed to repay the kind private loan with interests on top. As is often the case in life, she placed great value in that which she had been deprived of in her youth, which was a formal higher education;  she went to great lengths to generously ensure all her children, grandchildren and even great grandchildren enjoyed the perks of a privileged higher education. A quiet, courageous woman with strong religious beliefs that always managed to hold a positive outlook towards life despite all the social and financial hardships she was forced to endure and overcome alone. In the wee hours of any morning at Aldara, you would find her guest house’s kitchen brimming with bobbies on the beat enjoying a short pause and savouring the lavish generosity for which she was much loved.

 

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

Larraín Nesbitt Lawyers is a law firm specialized in conveyancing, inheritance, 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 available from Larraín Nesbitt Lawyers

 

Related articles

 

Article originally published at Spanish Property Insight: Community of Owners in Spain

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

2.009, 2.012 and 2.019 © Raymundo Larraín Nesbitt. All Rights Reserved

... Read more

8 tips on buying a home in Spain

Raymundo Larraín Nesbitt, May, 21. 2019

Lawyer Raymundo Larraín gives us a few insider tips on buying your dream home in Spain.

Marbella-based Larraín Nesbitt Lawyers has over 16 years' taxation & conveyancing experience at your service. We offer a wide range of 40 legal and corporate services. Our team of native English-speaking lawyers and economists have a long track record successfully assisting expats all over Spain. You can review here our client’s testimonials.

Article copyrighted © 2019. Plagiarism will be criminally prosecuted.

 

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

 

1. Location, location, location.

Undeniably a worn out trope, but that doesn’t make it any less true. You are better off buying the smallest house in the best neighbourhood than buying the fanciest house in a less reputed estate. In practical terms, this translates into capital appreciation over the long run as well as making it easy on yourself to sell on. A well-located property enables you to sell it in a few months, as opposed to a poor-chosen location which may leave you waiting for years on end. Seasoned estate agents are your best source of information on the ground when it comes to choosing the ‘right’ address, whether for investment purposes or for bragging rights. Some hallmark names, such as Marbella or Mallorca, are consolidated world-renowned household brands that greatly mitigate exposure to any market downturn, allowing you to buck the trend, as they are always highly sought-after locations.

2. Orientation

On buying property in Spain, we advise you procure yourself a south or south-east orientation due to the sun’s angle. This will ensure your property is drenched in sunlight all year round and will significantly contribute to reduce your heating bills (and electrical bills) in winter. Spain’s electricity is not exactly cheap. If you are in a coastal area, a southern orientation may also secure you nice sea views to boot.

3. Affordability vs maintenance

Budgeting carefully is a key element of any successful conveyance procedure. Yes, you may afford to buy a swanky property in a great location, but can you afford its steep maintenance? Much like some high-maintenance partners in real life, some properties’ upkeep are (very) demanding and you better have the deep pockets to keep up in the game. You really do not want to get involved with a property you cannot afford to maintain, as this will be a financial millstone that will drag your finances down and may even lead you to file for bankruptcy. Only buy a property you are absolutely confident you can afford to maintain over the mid to long run. Do not get carried away with wishful expectations on commanding high rental yields to offset mortgage repayments, as property bills pile up inexorably at the start of every month. If you are relying on rental income to service your mortgage instalments, flat out you shouldn’t buy.

4. Buy-to-let or buy-to-live

This is a fairly important point that is often overlooked by buyers. The characteristics you need to look for are very different depending on whether you are looking at buy-to-let or else with a view to live in. If you are looking at the former, the property must have attained a Licence of First Occupation, it should be smaller, with good communications, within walking distance of all amenities and the sea (on coastal resorts). If you are after the latter, the property should be larger, with nice views, and good schools and hospitals nearby.

5. Ground floor or penthouse?

We had already covered in-depth the pros and cons of each in our blog: ground floor vs penthouse, from a Spanish perspective. Take good note that in Spain both property types are perceived as the opposite from the United Kingdom; which in turn impacts on price, capital appreciation, maintenance and even security.

6. Be familiar with your community bylaws

Before you commit buying a property in a Community of Owners, you should ask for copies of the minutes of the previous General Assemblies, which will highlight any existing issues in your community. It is also of vital importance you fully understand the rules governing your community (i.e. Community of Owners may now outright ban holiday lettings). If you are looking to invest in a buy-to-let and only find out post-sale that your community forbids holiday homes, you have wasted your money. It is also important you fully realize how much money you need to pay every quarter, as some quarterly community fees are exorbitant, especially in exclusive gated communities dotting upmarket coastal areas. Another well-known issue is that some community presidents (which officially hold an unpaid role) perpetuate themselves year after year abetted by their cronies and do in fact make a very tidy living running whole communities at the expense of pocketing fees from fellow owners on fudging the numbers. I tell you - by experience - that no one who has held the role of community president wishes to repeat from one year to the next as it is a very ungrateful task. Be wary of community presidents who hold their position indefinitely and fight tooth and nail to retain power and control. Only on changing administration does the corruption of the former management come into light.

7. Urban vs rural

Unlike in the United Kingdom, rural property in Spain is marred with legal issues. In the region of Andalusia alone, there are over 200,000 illegal properties. Buying a property with issues could see your trapped for years on end without a chance of selling it on. Moreover, on buying an illegal property you take over the liability of any prior planning illegality; the previous owner gets to walk away scot free – with your money. On buying rural, hiring a competent conveyancing lawyer from the outset is a must to help you waddle through the admin minefield. I would advise a reputed surveyor is also instructed, preferably regulated by RICS and working to UK standards. That is not to say that urban property is all good and rosy, far from it. But no doubt urban property offers much less legal risks than its rural counterpart. If you are looking for a quiet rural life to commune with nature, the choice is obvious. If you are more the city type, that easily gets bored watching grass grow and sheep bleat, you may want to look at urban instead.

8. The lawyer

A necessary evil. You would never buy a property in the UK without instructing a solicitor or conveyancer, and yet a surprising number of people choose not to instruct a lawyer or legal representative when buying abroad. If anything, it is even more important to obtain good legal advice when buying overseas as it is highly likely that you will be unfamiliar with many of the key processes. Whilst it is possible to buy a property in some overseas jurisdictions, including Spain, without having to appoint a lawyer, it would be very unwise to do so. Buying a house is one of the biggest investments most people make in their lifetime. So why take the risk by not obtaining proper legal advice?

Choosing a reputable conveyance law firm will be your best line of defence against the stack of odds you will be facing. Make sure your lawyer is truly independent and is not affiliated with your chosen estate agency in any way, you would come to regret this. Having a seasoned lawyer on board is having half the fight already won. Your lawyer will be able to cut through the red tape seamlessly, enabling you a smooth and safe buying procedure. Three expenses on which you should never skimp are: doctors, lawyers and education. You would regret dearly ‘saving’ money on any of the three.

Our law firm has over 16 year’s conveyancing experience at your service. We are members of the British Chamber of Commerce, Spain, and regulated by the Spanish Law Society.

Because peace of mind is priceless.

Conclusion

But enough of platitudes. All that matters is that we are in a buyer’s market.

Do not be rushed into buying a property, you will be spoilt for choice.

If you have qualms over a property, or its area, why don’t you consider renting it for a while? You should ponder such factors as leasing it on or off-peak. You can always sign a rent-to-buy contract. If it is to your liking, then go ahead and buy it; you only live once.

 

We offer the most competitive fees in the market.

Conveyancing – Buying fees on application

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 to book an appointment.

Article also published in Spanish Property Insight: 8 tips on buying property in Spain

 

“Audentis Fortuna iuvat.” – Aeneid, Virgil.

Loosely translated as “Fortune favours the bold.”

 

Legal services available from Larraín Nesbitt Lawyers

 

Conveyancing-related articles

Buying distressed property in Spain – 8th August 2011
Buying resale property in Spain – 21st February 2013
Buying off-plan property in Spain – 8th of June 2013
How to buy commercial property in Spain – 4th July 2014
How to buy rural property in Spain – 8th August 2014
How to Buy Property in Spain Safely – 10th October 2014
House Hunting in Spain – Interview with The New York Times. June 2015
Buying property in Spain from a private seller (Resale Property) – 21st of February 2017
Buying property in Spain from a developer (Off-Plan Property) – 8th March 2017
How to inspect an off-plan property overseas – Q&A with The Sunday Times. July 2017
Buying property in Spain – 10 reasons to hire a lawyer – 8th November 2016
8 Tips on Buying Off-Plan in Spain – 8th June 2018
Tax advantages on becoming resident in Spain – The Address magazine (pages 358 - 373). December 2018
Taxes on buying Spanish property – 8th December 2018
Do’s and don’ts on buying property in Spain – 8th April 2019
8 tips on buying a home in Spain – 8th June 2019

 

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.

2.019 © Raymundo Larraín Nesbitt. All rights reserved.

... Read more

Do’s and don’ts on buying a home in Spain

Raymundo Larraín Nesbitt, March, 25. 2019

Marbella-based lawyer Raymundo Larraín gives us a few light-hearted tips on buying a home in Spain.

Article copyrighted © 2019. Plagiarism will be criminally prosecuted.

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

 

 

Springtime is upon us. It is again that bright season of the year where flowers bloom, bees dart around doing whatever it is they do, and real estate agents are busy dusting off glossy house brochures with a big smile on their face. Scores of buyers will now be booking flights to Spain with a view to acquire their dream house next to the sea.

With this in mind, I thought it would be a good idea to write this short amusing article to clue up buyers, so their dream does not turn sour on tripping themselves over in pursuit of their bolthole under the sun.

 

3 Do’s

 

  1. Hire a qualified registered lawyer (abogado)

I know, I know. I just had to add this shameless plug in the first place.

No, a Spanish Notary is not your personal lawyer and will not look after your interests. He’s there to ensure taxes are paid, period.

No, a lender does not susbstitute a lawyer and much less defends your legal interests on taking on a mortgage loan. No, they do not do a due diligence on the property title. A lender is there to give you a loan, period.

Beware of intruders who claim to be lawyers or law firms but are not registered to practice. Within the last year alone, I’ve come across three such interlopers. Unlike lawyers, they don’t have professional indemnity insurance and lack the legal qualifications to practice. I see plenty of such outfits advertising themselves regularly on popular expat magazines with glossy ads peddling their conveyance ‘services’. They will label themselves with all sort of fancy titles such as: consulting firm, legal consultant, iuris consultant, jurist, legal executive, legal advisor, legal assistant, paralegal etc.

In Spain it is very simple, you are either a lawyer (abogado) or you are not; there is no in-between. Always ask the person you are dealing with for their Law Society’s practising number and verify they are indeed registered to practice. Wrong assumptions lead to expensive mistakes.

  1. When in Rome, do as the Romans do

I know, we have all been there. You come to Spain and you think some things are stupid and you could do them much better in your own way. Perhaps, perhaps not. The point is that there are rules in place you ought to follow; if you skip them nonchalantly, you are only setting yourself up for a nasty fall.

  1. Follow the 3 L’s: Look, listen and liken

This is not your turf, it is a new world you’re braving. Take your time to look around where you picture yourself living. Visit the property during the week and over the weekend, by day and by night. Listen to what neighbours and natives have to say about the place. Compare the pad you fancy with other similar properties and areas. If all adds up, go for it. You only live once.

3 Don’ts

  1. Don’t pay any money in cash

Would you seriously pay in cash a home in your home country? So, why do it in Spain? This only benefits the person asking to be paid in cash, it does not benefit the buyer in any way. When you come to sell the property later on, you will be hit by a massive capital gains tax bill. Under-declaring is illegal, it is stupid; don’t be a muppet.

  1. Don’t be pressurized to sign

The never-ending sun, the sweltering heat, the cool sea breeze, the enticing beach sunset with a mojito and a saxo playing, all them nice piña coladas you drank late into the night, the soft-spoken agent gently cooing into your ear promises of wealth and capital appreciation; all these things play tricks on our minds and make us lose the plot when we get off a plane in Spain. Unlike timeshare, there is no cool-off period when you buy property in Spain. Holding deposits are normally non-refundable (unless your lawyer words it). If you wouldn’t rush ahead and sign on the dotted line in your home country, don’t do it in Spain. Focus, breath and take your time to commit before you sign any binding document giving away your life’s savings. Don’t let the big lights dazzle you, you will be spoilt for choice. It's a buyer's market.

  1. Don’t cut corners

“Jack knows how to cut through all this red tape.” Maybe he does, maybe he doesn’t. Don’t try to outsmart local procedures by cutting corners; it is a one-way ticket into a world of pain. If you would follow set procedures in your home country, why on earth are you trying to skip them in Spain?

 

We offer the most competitive fees in the market.

Conveyancing – Buying fees on application

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 to book an appointment.

 

"Me ha bastado pensar que la naturaleza pertenece a los niños para reanudar mi batalla encaminada a la conservación de la fauna.” — Félix Rodríguez de la Fuente

“I need only remind myself that Nature belongs to our children’s morrow, to give me strength in the battles to come in defence of wildlife conservation.”

Félix Samuel Rodríguez de la Fuente (1928 – 1980). Decades before the BBC's brilliant Planet Earth, narrated by Sir David Attenborough, there existed Félix. He was a Spanish precursor of what is now branded as ‘ecologist.’ The son of a reputed Notary, he was expected to dutifully fall in line and follow on the wake of his father’s footsteps. But following social conventionalisms were not his cup of tea. After graduating in medicine, he heeded his calling and would go on to become a naturalist and broadcaster defending what he thought mattered most - Nature and the endangered wildlife. He would become world-renowned for his much-acclaimed tv series El Hombre y la Tierra (1975 – 1980). His calm, collected demeanour and rugged commanding voice, coupled with powerful images of an unleashed Nature the likes viewers had never witnessed, bewitched Spaniards and other nationalities, for decades to come. His enduring legacy would be to imbue and imprint on younger generations his indelible passion and love in defence of Mother Nature. This constitutes all unto itself a wondrous feat, given how Félix managed single-handedly to change the whole country's mindset, which was not particularly renowned for its love and protection of wildlife at the time (seventies). He had a soft spot for wolves, which had been driven by Authorities to the brink of total annihilation. Decades on after his death, young generations of Spanish ecologists and eco-activists, who grew up watching his show, took the torch and would follow on the path laid by him, steadily bringing back wolf packs into a land which was once their rightful domain. He would tragically meet an untimely death in a plane crash aged only 52. No accolade can honour enough what this man achieved in benefit of us all. Almost four decades on after his tragic death, he is still mourned and is credited as the father of Spanish environmentalism. There isn’t a single town in Spain who does not pride itself in having a street or plaza named after him. So much for adhering to social conventionalisms, eh?

 

Article also published in Spanish Property Insight: Do’s and don’ts on buying a house in Spain

Legal services available from Larraín Nesbitt Lawyers

 

Property-related articles

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
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.

2.019 © Raymundo Larraín Nesbitt. All rights reserved.

... Read more
1
Colegio abogados

RAYMUNDO LARRAIN NESBITT ABOGADOS
COPYRIGHT 2016

Brithish Chamber