Residential and Commercial Conveyancing

/Residential and Commercial Conveyancing

The Spanish Tax Agency targets companies holding Spanish residential property

The Spanish Tax Agency is sending letters to residents and non-resident companies alike, which it believes may hold Spanish residential property.

The letters are ostensibly about the property ownership and structure, including asking for several details in relation with the aim to identify the identity of the occupiers of such properties. Their main intention is to claim all taxes which should have been paid in the previous 4 years for the mere fact of enjoying the properties. These taxes will depend on who´s the occupier (a company director, a shareholder, a third party…).

Ignoring the letters may lead to further questions or a formal tax inspection. We recommend that recipients of such letters seek professional advice in how to respond.

We also recommend that owners of such companies who have not taken Spanish tax advice on them in the past years consider doing so now, even if they have not received one of these letters.  Tax relating to Spanish property has been changing rapidly, on an annual basis, in recent years. 

Without advice, the owners of such properties, or companies holding them, risk incurring Spanish tax liabilities of which they were not aware.

2019-09-23T15:44:41+00:00 23 September, 2019|

Deferred Payment When Selling Spanish Property

When selling a real estate property for substantial value it´s common to negotiate a deferred payment.

This is extremely convenient when selling real estate property to a professional investor. Let´s think about a plot of land, even if an old construction is already built on it. The Buyer would have seek for a split payment so that second or third payments are paid by using returns on their investment. This becomes extremely popular in attractive areas with lot of potential, such as Marbella, Majorca or Alicante.

One of the most recurrent questions from our clients are:

What happens if the Buyer fails to pay?

In most contractual disputes, where one party is in breach of its obligations under the contract, the “innocent” party will wish to claim damages for the loss it has suffered as a result of the “guilty” party’s breach. However, the clear priority from a Vendor´s point of view would be to terminate the contract as a whole so as to re-sell the property.

It is important to distinguish between rescission and termination of a contract for breach. Rescission is a very specific remedy which may be available in cases of misrepresentation, duress or mistake.

However, non-payment to a non-breaching party would entitle the latter to terminate the contract, which is separate to, and distinct from, any rights to rescind the contract.

When does a right to terminate the contract arise?

A right to terminate a contract is a contractual remedy. As such, this would only arise out of the express terms of the contract. A properly draft contract for the sale and purchase of property will usually incorporate an specific clause allowing termination upon breach of the payment clause.

Normally, termination would be subject to Court approval. However, this is exactly what the Vendor must avoid by all means: going to Court in Spain. It’s well known that going to Court in Spain is expensive, sometimes inefficient and it may take years until a ruling is issued.

Out-of-Court Termination

Although sometimes disregarded, the Registrar at the Land Registry is entitled – if certain requirements apply – to revert the transaction and to put the property in the Vendor´s name in just a few weeks. This means an immediate termination with full effects avoiding Courts.

This specific procedure must be carefully applied by the Vendor´s advisors who shall act promptly and with sufficient determination before the matter goes to Court.

Why this matters

Delays on completion are common in property transactions. Under the Spanish legislation time is not of the essence in a contract, unless specified. Proper drafting can provide the Vendor with an express right of termination, so long as it follows the relevant legal procedure and gives the defaulting party a valid notice to complete.

In a rising market, sellers should be aware of the risks of delaying payment, where an opportunistic Buyer could seize the chance to retain the property and delay payment beyond the agreed date.

The legal principles underlying a contract termination might seem simple, but often misunderstood. This is just one of the many reasons why both Sellers and Buyers must be aware of their need of a proper legal advice in advance so as to understand the proposed transaction and its foreseeable implications.

2019-03-12T11:56:49+00:00 12 March, 2019|

Top 5 Tips on How to Buy Property in Spain

In the current Spanish real estate market, properties are selling for less and sales completion are quite straightforward.

Unfortunately, in the Marbella area we are seeing more sales going abortive due to issues with properties which sellers aren’t dealing with early enough in the process. When compared to markets like Madrid or Majorca, it’s easy to notice that the trend has been reversed: properties are selling for more and sales are taking longer to complete.

There are lots of tips available about safely buying a property in Marbella. Top 5 tips are as follows:

  1. Urban Planning: Marbella urban plan was declared void by the Spanish Supreme Court in 2010. This means that an urban plan enacted 30 years ago (PGOU 1986) is now fully binding. As a consequence, most residential properties in Marbella are now deemed as illegal. Cheated owners are now looking forward to sell their properties – with the invaluable help of real estate agents – to unwary buyers. Instruct a verified and trusted legal team to check the specific property and to confirm whether the construction is legal (due diligence) becomes critical.
  2. Hiring a True Solicitor: If hiring a solicitor currently practicing in Spain please check that he is qualified, reliable and have experience operating in Spain. A true solicitor – unlike a bare Spanish lawyer – must be registered with the Law Society in the UK. Double qualified solicitors are entitled to practice simultaneously in the UK and Spain and do normally specialise in international transactions. At Fitzwilliam, our real estate practice is steered by a Double Qualified Solicitor of E&W and Spain.
  3. Timescales: Try to agree timescales for completion at the outset. A solicitor should be able to assist with this and it helps to focus all parties’ minds on getting the deal done. Of course, do not sign any papers or hand over any money until you have taken independent legal advice.
  4. Tax Liens: A tax lien is a lien imposed by law upon a property to secure the payment of taxes. In Spain, tax liens are extremely common and may be imposed for many reasons, normally as a result of failure to pay income taxes or other taxes. If buying a villa of significant value, beware of the special tax to residential properties owned by overseas companies domiciled in a tax heaven (most commonly, Gibraltar or BVI). This amounts to 3% -of the property value- per annum, and is a common tax lien.
  5. Legitimation and Consents: As buyer’s solicitors we require lots of information about the property. Liaise with your solicitor as early as possible to make sure he requests the Seller to provide all the correct documentation. Everything shall be inspected in advanced, from works which have been carried out to the property to the identity of the Seller and his binding powers to proceed with the sale. Be open and flexible to the solicitor’s requirements. There is no getting around the fact that it is a buyer’s market at the moment so you need to listen to any issues which the solicitor raises and then have a realistic conversation about your options.

For further information about the issues raised in this blog, please contact any member of our Real Estate team or send an e-mail to contact@fitzwilliamsolicitors.com

2018-10-17T16:35:34+00:00 17 October, 2018|

Spain: Buy-to-Let… (and re-sale within 5 years)

The Spanish residential market is boosting. Certain areas such as the Costa del Sol are experiencing a real boom in terms of conveyancing and rentals alike. Then, why not invest in both?

When buying a property in the south of Spain (Andalucia), the buyer must pay ITP-AJD (equivalent to SDLT). How much tax you pay highly depends on the value on the purchase price, though this ranges from 8% to 10%. This means that, if buying a property in Marbella for EUR 750,000 an extra EUR 75,000 shall be ready for paying ITP-AJD upfront (i.e. you will eventually pay EUR 825,000 when purchasing and of of course your gain will be taxed again when selling).

However, during the financial crisis new regulations were brought in to tackle the residential market recession, among others a tax loophole reducing ITP-AJD to just 2%.

 

Loophole: 2% of the selling price (instead of 8%-10%)

Requirements: The buyer must be a property investment company and the property must be sold within 5 years

 

Plain, simple and a true attractive proposal. Time is key for real estate investors and the 5 years period seems the perfect timing for renting the property.

 

Let´s imagine that you intend to purchase the EUR 750,000 in Marbella East.

Price (deductible as a real estate professional): EUR 750,000

Taxes : EUR 15,000

Rental Income: EUR 120,000 (EUR 25,000 p/year)

Selling price after 5 years: EUR 900,000

Net after-tax-gain: EUR 230,000

 

For further information about the issues raised in this blog, please contact any member of our real estate team.

2018-08-02T15:33:32+00:00 2 August, 2018|

Buying International Property: Why hiring an expert local firm

Experience shows that international Buyers can misunderstand the property buying process in Spain. Most international buyers misjudge the costs involved and are unaware of property professionals’ responsibilities and the Spanish conveyancing terminology can cause confusion.

Understanding these issues from the outset becomes critical to improve the chances of a smooth transaction.

 

Finding the Right Property

The Spanish real estate market is overcrowded. The immense offer of properties normally leads to confusion and most Buyers don’t know where and how to start.

The objective is clear: finding the right property meeting virtually all the Buyer´s requirements while keeping the sale price within budget.

Surfing the internet is the first option, though this can become an exhausting work with very few (or none) findings.

Contacting a local Real Estate agency seems to be the perfect alternative. However, this is not always the case, especially in bustling areas like the Costa del Sol. Why? The reason is simple: the market is not only saturated of properties but of real estate agencies. Recent research highlights that one 1 out of 4 companies set up in the Costa del Sol in the last 12 months is a real estate agency.

 

Market Saturation = Poor Service 

For too long, unprofessional agents with no qualifications have been able to operate in the sector and advise homeowners as they undertake the most important purchases and sales of their lives.

Of course, this doesn’t apply to all real estate agencies, thought the truth is that it has become steadily more complex to find trustworthy professional agents with a truly valid skills.

 

Instructing a Reputed Law Firm for Search and Completion

Buyers now have a third alternative: to hire all-inclusive services from local international law firms, covering from expert brokering services to all the legal and tax implications related to the transaction.

That is, hiring a market specialist such a law firm to steer the conveyancing process, from finding the right property among those most suitable in the market while helping at every stage of the transaction, from legal pre-sale investigations to tax and post-completion formalities.

At Fitzwilliam, our local branch in Marbella is top ranked for providing clients with all-in conveyancing services at a non-surprises fixed fee of 1% of the purchase price. From viewing properties and finding your next home, to finalising your mortgage and the completion of sale, our team will be on hand to advise you every step of the way.

 

Why are Law Firms so Well Positioned to Find a Property?

We are based locally where you most need us. Our extensive network of contacts in the field (from direct owners to qualified agents), together with our legal expertise, makes us able to ensure that we can find the best property meeting your criteria. We search and find properties, carefully separating the wheat from the chaff.

 

What Happens After we Find the Right Property?

 

Pre-completion

Once our real estate lawyers have reached an agreement with the Seller, who has accepted an offer on the property and has agreed on the sale, it’s time to carry out the legal process in order for the property to change owners legally.

At Fitzwilliam we will receive title and contract papers from the Seller’s solicitor. We, acting on your behalf, would then:

  • ensure that good title is being given (the Seller is in fact the registered owner of the property);
  • examine any rights or restrictions that may affect the land;
  • check the terms of the lease if it is leasehold property;
  • make enquiries about the owner’s use and enjoyment of the property;
  • ensure that the Buyer is happy with the arrangements for the purchase;
  • organise various searches on the property with public bodies such as the local authority, assess the search results and report to the Buyer with the findings; and
  • deal with the mortgage offer and conditions, if a mortgage is required.

 

Reservation Agreement

If everything is in order and the Buyer is happy to proceed, the transaction can progress to signing a Reservation Agreement.

This is where the Buyer reserves the right to buy the property for a period of time.It is only from this point in the transaction that the Buyer is legally bound to purchase the property. Up until entering into the Reservation Agreement, the Buyer is free to withdraw from the transaction without penalty.

The completion date agreed between the parties will appear in the Reservation Agreement. Upon signature of this agreement, a deposit is usually required to be paid to the Seller. This is traditionally 10% of the purchase price.

If applicable, at this point we would request mortgage funds from the lender so that they arrive in time for the completion date.

Prior to completion, our team would carry out a last-minute priority search at the Land Registry to protect your interest in the property and to ensure that no last-minute problems have occurred with the title to the property.

 

Completion

At the agreed date and time, we would accompany you to the Notary where you will sign the transfer deed in ours and the Notary´s presence. Keys will be provided at that very same moment so that you can move into your new property.

Should you preferred not to attend to the Notary we would appear on your behalf by means of a Power of Attorney. This is a notarial document which allows us to sign on your behalf pursuant to the agreed terms. This is a simple document that can be signed before any Notary abroad.

 

Post-Completion Formalities

After completion has taken place, we will arrange payment of the Spanish Transfer Tax.

We will also deal with the application to the Land Registry to register the transfer of ownership of the property into your name. We will also deal with any notice of transfer or notice of charge that is required to be sent to the Seller.

 

Should you be interested in buying or investing in real estate property in the Costa del Sol, get in touch with us and we will be delighted to help.

2018-10-17T16:36:51+00:00 28 June, 2018|