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The Spanish Lawyer Online
The Spanish Lawyer Online

Antonio Flores’ Blog

Thoughts about laws and regulations which affect foreigners in Spain

Chaos ensues with new laws on Spanish mortgage loans

June 18th, 2019

BankLogoPicThe recently enacted Real Estate Credit Act 5/2019 has not left anyone indifferent; from those who applaud a reinforced protection for consumers -traditionally seen as the losers in the lender-borrower equation- to the more selfish who predict a sharp decline in real estate transactions due to the obvious hassle of formalizing an even more complex procedure.

A quick glance to last days’ national news headlines show little sympathy for a law seemingly written up to prevent bank abuses in the last boom-crisis cycle:

“El Mundo”: New Mortgage Law: Notaries in a mess, tougher lending criteria and… property sales dropping?

“El Economista”: The New Mortgage Law will make it more difficult for younger borrowers.

“Idealista”: Mortgage law madness: last-minute rush of banks and notaries to avoid a slowdown in sales.

“El Español”: First cock up with the new Mortgage Law: banks and notaries fail to synchronize their electronic register.

But what’s the deal with this law and why are so many reporters up in arms? The answer is not straightforward: whilst most recognize the underlying bona fide mission of protecting consumers, intensified credit checks on borrowers and the intricate pre-contractual stage of new loan agreements can only be deterrents for new business.

To qualify for a loan, any borrower will have to visit a Notary office 10 days prior to closing on the purchase sale to undergo a test; in it, the Notary public will have to evaluate the borrower and his understanding of the document he/she will be signing in 10 days’ time. More so, the Notary is to provide the borrower with two keys documents forwarded by the bank: the “FEIN”, which is the European Standardized Information Card and the “FiAE”, a standardized Warnings Card that includes mortgage parameters (opening commission, early maturity due to non-payment and what expenses are applied in this case) and a few other fairly elaborate items and mathematical formulas.

Not easy? Now think of a foreign buyer that speaks no Spanish, with a notary that equally does not understand foreign languages, and you have a deal breaker. Not to mention the unassumable 10-day wait period for busy investors and the yet-to-be defined role of lawyers here: advisers or just translators? Time will tell

Mortgages , , , ,

New Employment Law to Clock Working Hours

May 14th, 2019

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As of yesterday 12th of May 2019, a new law is in place in Spain to track the number of hours their employees work. The purpose of the law is to clamp down on the widespread practice of unpaid overtime which some estimates put it 3.5 million hours. Not complying may mean fines of between 626 euros to 6,250 euros.

The habit of clocking in and out of work place is however antiquated, and puts workers under the spotlight in particular where going out for breakfast (a very Spanish tradition) or smoke a cigarette, or more “labour” things such as sales representatives’ daily itineraries where employees are given flexibility and whose work performance is rated by numbers in turnover, not hours (not to mention employees’ that work from home).

The work hours’ records must be kept for at least four years and be available to employees, their representatives, and the Labour and Social Security Inspectorate.

Already various App developers have created specific platforms to monitor employees’ registration, inclusive of controversial geolocation apps to pinpoint employees’ whereabouts through their company mobile phones, all of which should be fully notified and agreed with the employee.

Companies

Unregulated Isle of Man Companies To Face Trial In Spain

April 30th, 2019

The View From Douglas Head, Isle Of Man..jpg

(Photo by Jim Linwood)

For financial and insurance companies based in the Crown Dependencies (Isle of Man, Guernsey and Jersey), the advent of the long-awaited Brexit will have no impact whatsoever as these territories are not part of the European Union (EU) and are not included within the scope of the UK’s membership of the EU.

Because but for those very companies, whether “brexiteers” or “remainers”, operating within the EU was never a problem despite not being licensed, authorized or regulated. But how so?

If we take the example of Spain, the likes of Old Mutual International, RL 360º or Generali have operated with infinite impunity for years, selling all manner of unregulated single- premium life insurance policies or, rather fancifully described, investment-linked assurance schemes (“ILAS”) through equally unregulated brokers.

It is believed that British expats in Spain have tens of millions deposited in a vast array of financial and investment products that these insurance platforms peddled for years, in exchange for substantial fees for managers and brokers. Many of these victims have lost substantially, and some have nothing to show for it. In these crown dependencies, the word “consumer” has no space.

Fortunately, Spain thinks differently and in the first of its kind, a case for civil fraud against Old Mutual International Isle of Man is going to trial in Marbella, on the 20/5/2019. Not even the best lawyers money could buy has saved this company from being closer to having its best-preserved secret aired publicly: that they were illegally selling insurance in Spain, for years, with absolutely impunity.

If the Court of First Instance rules that Old Mutual did indeed operate in Spain unregulated, hundreds -thousands perhaps- could follow suit and trigger yet another scandal in the already dubious Isle of Man, where insurance represents 14% of the economy (and financial services more than 32%).

To be updated on this case you can call or email us and of course, feel free to attend the public trial should you wish.

Litigation , , ,

Corporate expenses and cheeky tax paying: deductible vs. non-deductible

March 19th, 2019

Less than a week has passed since we learnt that Emilio Cuatrecasas, owner of the largest fiscal advisory firm in Spain, just hired former Deputy Prime Minister Soraya Saenz de Santa María. In 2015, Mr. Cuatrecasas pleaded guilty to 8 counts of tax fraud in exchange for a rather lenient 2-year suspended imprisonment -suspended- conviction agreed with both the Prosecutor and the State Lshutterstock_777564574awyer, the latter working on direct instructions of Mrs. Saenz de Santa María, when the PP party was in power.

What’s interesting of this case -besides the fairly obvious connection between Mr. Cuatrecasas’ favourable Court ruling and the hiring of the instigator of such advantageous outcome- is the nature of the tax fraud: deducting personal outlays as company expenses. In this case, it was done in a grand scale where, for example, servants hired for his personal residences or his privately used yacht, electrical appliances, decoration and generally, maintenance of his personal assets, were all introduced in the company balance sheet as deductible expenses. In the end, Mr. Cuatrecasas had to pay over 3 mm Euros plus 1 mm Euro in interest to avoid doing jail time.

Spain is no different from any other country when it comes to tax deductible expenses. But what are they? Broadly speaking, they are those deemed helpful and appropriate for a business, as well as necessary and reasonable. More specifically, this what the law says:

Deductible expenses: employes salaries and social security, rentals (office or part of a home used to work from) and associated expenses, equipment and supplies, repair and maintenance, stationery, external advisors, VAT (where it is not claimed) and uniforms not susceptible of private use, to name a few. Vehicles not exclusively used for business purposes will be deductible on prorate, with a maximum of 50% (save for cargo, transport and similarly used vehicles which will be 100%). Travel expenses, meals (maximum of 1% of turnover) or Christmas presents can be deducted if they are associated with business and this can be proven when required.

Non-deductible expenses: Director’s salaries, dividends, fines, services provided by providers based in a tax haven, guard dogs, clothes (including lawyer’s suits), parfums, beauty treatments, sunglasses or mobile phones (where it is no possible to show that they are exclusively used for a business purpose), weddings, weekly “Mercadona” personal shopping and many other non-expenses habitually picked up by tax inspectors.

Finally, deductible expenses must be provable by means of regular or simplified invoices, as mere receipts will not be valid.

Corporate Law, Tax Law , ,

Mortgage loan taxes: Spanish Supreme Court appeals its own ruling

October 26th, 2018

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In an unprecedented decision, the Supreme Court has “frozen” a judgement passed by themselves…48 hours before.

This unusual situation originated in a ruling of the 16th of October that determined that the bank is the only party with an interest in getting the loan certified by a notary, a prerogative that will allow them -as lenders- to initiate foreclosure proceedings if the borrower defaults on payments. The importance of this ruling lies with the fact that hundreds of thousands of borrowers could be eligible for a refund. 

The members of the Third Chamber of the Administrative Section of the Supreme Court added that because the lender is awarded this privilege, they should be paying all associated costs. It makes all the sense in the world, if you think about it. Or not, when the decision directly refers to who will pay approximately 8 billion Euros in mortgage taxes, or an average of 3,000 Euros per loan.

The complication with this is that the same Court, but the Civil Law Section of the Supreme Court this time, had confirmed earlier (28/2/2018) that taxes on loans were to be paid by the borrower and to reach such decision, they quoted the “consistent and constant” Administrative Section jurisprudence on the subject matter in dispute.

Jurisprudence, or case law, we know evolves with society and cultural advances, adjusting to usages, traditions and customs. It can take years, when not tens of years, to change. With the tax on mortgages though it has done a U-turn in 7 months, which is inexplicable unless we accept that most senior judges are backing the banks whilst a minority stand by the consumers, or perhaps the other way around.

Be what may, the Court’s Press Office issued a statement confirming that decision will be reached by 31 senior judges of the Administrative Division of the Supreme Court, on the 5th of November 2018. In the ruling they will decide who is to pay the taxes and if the banks, whether clients should claim the refund from the lender or from their regional tax agency, which could then in turn claim it from the lender.

Mortgages, Property , , , ,

Spanish short-term rentals to be scrutinized by Owners Communities too

September 28th, 2018

shutterstock_4310665The Government of Spain wants to give neighbours vetting powers over short-term rental apartments. If the proposed law changes are finally passed, the quorum required in Communities of Owners general meetings to prohibit holiday rental activities will be reduced substantially.

Currently, the required quorum to vet short-term or touristic lets is unanimity; this wants to be changed for a minimum of 3/5 of the voting rights.

The law also wants to define what is a “season or holiday let” as opposed to a “short-term or touristic let”: some of the proponents want to establish a minimum of 45 days for a rental contract to be classified as a holiday let, below which they will be classified as short-term rentals.

This legislative ammendment could deeply impact property investment trends by creating clearly segregated short-term rental buildings or areas, separate from those neighbourhoods that choose to stick to exclusive residential use (by banning letting use).

Real estate agencies selecting properties for clients, and lawyers acting for them in the conveyancing process, would have to ensure what the specifications of each neighbourhood are in respect to potential statutory prohibitions to do short-term rentals.

We are eagerly awaiting further news on this proposed law change.

 

Property , , , ,

Community of Owners to Fine Property Owners

September 15th, 2018

shutterstock_739051237Some days ago, a worried property owner wrote to us with a query relating to his “Community of Owners”, along with a photo of a resolution recently adopted by the President of the said community, in the municipality of Benahavis.

The text read as follows:

  1. The President is then allowed to set fines between €30 and €600, depending on the important and seriousness of the matter, when breaching the above articles, regardless if any damage made has been restored: these amounts will be deposited into the Community’s bank account.

  2. Penalties must be notified in writing to the owners committing the infraction, describing the specific infraction and penalty imposed, which will be charged directly to the owner.

  3. The HOA (Homes Owners Association) reserves its right to take legal action against owners in violation.

After rubbing my eyes in disbelief, I hastily checked up our main source of legislative updates (www.vlex.es) in case I had missed this implausible new legal change that would give nasty and corrupt Presidents and Administrators jurisdiction to suppress dissidence within the community of owners; there was none of it, thankfully.

So, it the above prerogative lawful? Absolutely not. The Juridical Regime of the Public Administration Act 30/1992 grants the State the monopoly of imposing pecuniary penalties or similar fines, without exception, following a due adversarial administrative procedure. This is not to say that a Community of owners may not, following the appropriate procedure to adopt community resolutions, agree on a fixed surcharge for late payment of fees or even impede non-payers the use of communal elements (pools for instance). But never the prerogative to -arbitrarily- sanction specific conducts by its members.

A congress held in 2010 by an association of community administrators to debate Horizonal Property Law matters resolved that “it is not possible to fine owners for breaching internal regulations, even if this resolution is written into the Statutes or voted by a majority”.

Presidents and Administrators who despite the above insist on coercing owners into paying fines could face criminal action.

Property , , ,

Spain Speeds up Squatter Evictions

June 19th, 2018

Spain’s Senate has approved specific measures against illegal occupiers of private property. Under the new bill, named specially “Amendment to Procedural Act 1/2000 in respect to illegal occupants of property”, squatters will be served with an eviction notice and told to justify ownership of the property through a title deed, or show lack of one on the part of the claimant. If no sufficient justification is provided by the squatters, the court will order immediate repossession of the home with no chance of appeals.

What´s interesting is that squatter´s rights to fight the case in Court -and effectively ‘buying’ an average of 15 months whilst the case in dealt by the Courts- are drastically curtailed under what is a fast-track procedure aimed at preventing, in particular, what the preashutterstock_354121799mble of this described as “extorsion to the owner or lawful possessor of the property with the purpose of obtaining financial compensation as a condition for the recovery of the property”, often conducted by  “very organized mafia-style networks”.

Courts will now serve notice on squatters (identified or not) giving them 5 days to produce a rental agreement, or any other document enabling them to lawfully stay in the property, failing which the Court will order immediate eviction. In addition, under the new law the Courts will have to observe the following:

  • Squatters will have no rights other than to produce a valid agreement to cover their stay in the property. Opposing any application to have them evicted will not have suspensive effects.
  • Sentences against squatters will have no right of appeal and will be immediately enforceable.
  • Social services will be on stand-by in case of eviction of children, elderly or people with special needs.
  • The reform will only affect properties whose owners are “private individuals, non-profits and public agencies that own social housing.” It leaves out real estate held by banks and investment funds.

The above measures will become applicable 20 days after the publication of the law reform in the Official Gazette.

Property , , , ,

Driving in Spain: The costly experience of using a fake driver’s license

May 13th, 2018

shutterstock_277982513It is a well-documented fact that the Spanish Costas’ rich variety of foreign residents increases the complexity of legal issues and driving licenses -that turn out to be fake- is one of them.

This same paper reported some months back that a US national was fined €500 for carrying a ‘bogus’ international driving license, a lucky escape I should say considering that a middle-eastern businessman is facing prison time for using an “International Driver’s License” issued by an entity named as International Automobile Alliance (IAA), purportedly based in New York.

According to the State Prosecutor’s writ of accusation, the license was deemed “fake in its entirety, having a photograph affixed by the owner or a third person” and, based on those findings, requested the Court that the alleged offender is sentenced to a minimum prison term of 19 months for forging a public document and plus an additional criminal fine of 12 euros/day for a period of 18 months if the offender is unable to show evidence that he did have a valid driver’s license from another country (it now appears that only U.S. officially-approved “AAA” and “AATA” associations can issue such international licenses).

The are tens of online ‘businesses’ selling fake driving licenses, along with passports and IDs. One advertises its business offer as having […] year of experience producing original quality real/false passports, ID’s, drivers’ licenses.

Alongside these obvious clandestine operators, there is second tier of businesses that -purporting to have a specific Government official approval- state they can issue valid international driving licenses pursuant to Annex 9 of the Geneva Convention and Annex 6 of the Vienna Convention.

To sum up, a) international drivers’ licenses are generally only issued by officially recognized agencies to drivers who already have a valid license from the country and b) the agencies issuing them must be approved by the specific Government.

Legal Practise , ,

Tenants and Occupants Could Face Jail for Theft and Damage

April 17th, 2018

shutterstock_1057453064A recent writ of accusation by a Murcia-based prosecutor is a stark reminder that certain illegal practices by toxic tenants, and other occupants of real estate, will not enjoy impunity. The writ refers to a non-paying tenant who -in the middle of an eviction process- chose to retaliate against the landlord by stealing, among other items, 2 fans, a mattress, a washing machine, a dishwasher, hobs, curtains, a coffee machine, a microwave over, a table and 4 chairs.

The State Prosecutor is asking that the tenant serves a minimum of 2 years in prison as the value of items stolen exceed 400 euros.

In a similar case, Criminal Court 15 in Valencia has imposed a 14-month prison sentence to a tenant for misappropriating furniture items and a 3,000 fine for causing damage to various others, consequence of “a deep resentment and a direct intention of causing financial and emotional harm to the owner”, according to the sentencing Judge.

In Barcelona, the Appeal Court (Section 10) passed a prison term to a tenant that, with the intention of causing the maximum possible damage, knocked walls, pulled pipes and cables, broke shutters and tore curtains and generally, left the property in a lamentable state of despair.

Its worth noting that in all the rulings, the actions caused by the tenant exteriorize a deliberate and intentional desire to cause monetary loss to the owner.

If the above scenarios want to be avoided by both tenants and owners, it is highly recommendable that parties carefully examine the property to be rented and draw up an inventory (photographic or video if possible) before granting possession.

 

Property , , ,