Antonio Flores’ Blog

This matter was raised in Court on at least four occasions and interesting rulings resolved the matter, albeit in different directions.

In La Manga (Murcia), a Community of owners was made up of 150 owners of which only 2 were Spanish. An AGM was conducted and approved in English, with the benefit of a translator for the 2 Spanish owners.

Not happy with the extensive use of Shakespeare’s language, the two Spaniards challenged the ruling in Court stating that Spanish was the official language of the country and hence, it should have prevailed. The Court of First Instance dismissed the ruling on the basis that a) the governing law on communities of owners had no particular norm on the matter and that b) the Spanish owners had had the benefit of a translator.

The Appeal Court, surprisingly, revoked the prior ruling stating that the Horizontal Property Act came under article 3.1 of the Constitution and, citing national sovereignty, concluded that the language of choice for the AGM should be prima facie Spanish, and thereafter as many translators as required by the different nationalities present at the meeting, at the Community’s expense.

Not content with the outcome, the dispute was escalated to the Supreme Court who overturned the ruling on grounds that the Appeal Court had wrongly understood the application of article 3.1 of the Constitution, which does not apply to juridical agreements conducted privately. The Supreme Court stated that “national sovereignty” has nothing to do with AGMs. Furthermore, it held that as the Horizontal Property Act does not specify the language of meetings, these can be conducted in any [language] so long as translators are available. Clearly, the Supreme Court recognized the multicultural nature of many AGMs along the Spanish Costas and rejected being influenced by notions of antiquated patriotism.

Down south, Malaga Appeal Court ruled that using English language in an AGM had not infringed any rights as the minutes were also in Spanish and at all times, a translator had been fully available.

Antonio Flores Property AGMs, Communities of owners spain, comunidades de propietarios, language in AGM Spain

With the Costa del Sol property market on the rebound, many owners have now chosen to maximize the return on their bricks and mortar investments and are actively listing their properties with –literally- hundreds of new (and old) real estate agencies.

The sequence is pretty well known: an owner approaches a real estate agency who, upon basic verification of the property paperwork, lists the property for a convened asking price.

Unfortunately but predictably, the long list of requirements set out in the famous Decree 218/2005 (necessary to put a property up for sale) is rarely met. Generally though, the information provided tends to satisfy all parties and safeguards agencies in case of unwanted inspectors turning up.

But what the Decree 218/2005 did not envisage is how to deal properties that are partly or insufficiently recorded with the land registry, a legal contingency that’s causing many deals to collapse where searches reveal those discrepancies.

In our experience, we have noted that many proprietors of detached dwellings, and occasionally town houses and semidetached units, actually own more square meters than they officially declare. In other words, there is an excess of built area which may not always be legal.

This may be due to unregistered extensions, guest houses, conservatories, porches, barbecues, terraces, walls, basements or pools, all of which have to be `normalized´ if one wishes to avoid losing a potential sale.

Currently, there are two possible scenarios: that the excess built area complies with existing regulations or that it does not. To find out, we always suggest hiring an architect or surveyor to measure up the property and compare it with the legal documentation and applicable laws and regulations. This way a vendor will be able to rectify potential inconsistencies that buyers will –nowadays- invariably detect, and object to, when carrying out searches.

Legalizing those improvements, extensions or alterations is then a matter of local laws and passing of time. If they conform to local (at times regional) laws, a retrospective planning application will suffice. But if they don’t and yet 6 years have passed since the erection of the offending construction, statute of limitations will make it immune to legal action, under certain circumstances.

The latter is case is known as they AFO (Asimilado a Fuera de Ordenacion), which is a legal term to designate those properties that while illegal, are tolerated by the Government because you can…legalize them.

More on AFO on our next column!

Antonio Flores Property AFO Spain, Asimilado Fuera Ordenacion, property in Spain, Property Spain, selling property

Regional and local press has extensively covered the enactment of the new rules governing rented accommodation. The rules, under the title Decreto 28/2016, de 2 de febrero, de las viviendas con fines turísticos y de modificación del Decreto 194/2010, de 20 de abril, de establecimientos de apartamentos turísticos, has failed to elaborate on two important aspects: what does compliance really entail and what are the fines for non-compliance?

1. In respect to compliance, the rules obliges owners to offer clients –among other requirements- the following: license of occupancy, rooms with adequate ventilation and darkening devices (shutters or similar), sufficient furniture and necessary appliances, touristic information whether in hard copy or electronic, of data for the area (bus schedules, close-by parking facilities, medical facilities in the vicinity and a plan of the town), complaint form, first aid kit, bed linen, cutlery and crockery adequate to the size and requirements of the property (and a replacement set for each). As if not enough, the law says owners will have to have a telephone number available to tenants where they can call to resolve any incidences, an instruction manual for kitchen appliances, details of the use of communal facilities and property equipment, as well as details on access of pets to the property and information on potential restriction for smokers and a few other requirements.But whilst some of the above are clear, the meaning of ambiguous words such as “adequate”, “sufficient” and “necessary” can widely differ depending on who you ask. Attending these grey areas is a pressing requirement.
2. The fine system is also not clear. The 2016 Act refers to a 2011 Rural Accommodation Act for elucidation of what fines are applicable. Some scaremongers have enjoyed spreading the belief that if you do not register, you will be fined up to 150,000 Euros. The reality is that failing to register their properties can “only” be fined between 2,000 and 18,000 Euros, the heavier monster fine of “up to 150k” being reserved for other contraventions i.e. unlawful discrimination or obstructing inspectors on duty.

Interestingly, the Act does not address the fines for failing to comply with one or more elements within the the long list on point a), for instance: missing spoons, dirty linen or insufficient first aid kit.

The experience in Catalunya and the Balearics regions, where similar rules apply, shows us that lack of registration is attracting the vast majority of fines, with little or no precedent in respect to the degree or correctness of compliance.

Antonio Flores Property Andalusia Rental Law, property rental spain, rental spain

Banco Popular, BBVA, Banco Mare Nostrum and Valencian Building Society S.G.R. have been ordered to pay over 2 million Euros, plus interest, to 40 British investors represented by Lawbird Legal Services.

The rulings were received on the same day and refer to investors who had paid large deposits on off-plan properties in El Pinet, in Alicante, and Costa Palatinum, in Murcia.

Court number 1 in Madrid wrote the following arguments on deciding the outcome:Banco Popular had issued two bank guarantees, one for 19 mm Euros and a further one for 4.4 mm Euros.

• S.G.R. had too issued a guarantee for 5 mm Euros.
• Banco Pastor had offered the developer a counter-bank guarantee which, according to the Judge, amounted to a collective policy to insure off-pan deposits.

For its part, the Appeal Court in Madrid (Section 25) held, in support of the investors, that:

• A recent Supreme Court ruling had concluded that for the 57/1968 Act to apply, the off-plan property should be used for family living accommodation purposes, whether temporary, accidental or circumstantial. This includes “touristic apartments” as they are to be used by the owners as holiday homes, irrespective of their use as an investment for the most part of the year.
• The developer had voluntarily submitted to the 57/1968 Act by producing a general bank guarantee that specifically referred to the Act.
• Off-plan property buyers in Spain have an “inalienable right” to have their off-plan deposit underwritten, rights that cannot be waived by banks who, having issued a collective insurance cover failed however to grant individual policies to buyers.

 Banks have been ordered to pay the Courts the designated amounts, or face enforcement proceedings.

Both rulings are available to readers who so request a copy (less information deemed confidential at Lawbird’s discretion).

Antonio Flores Litigation, Property Act 57/1968, Bank Guarantee, El Pinet, Fortuna Hills, off plan deposits spain

This title of this post infers the existence of a type of residential rental contract that lasts for 11 months, no more but no less. And to a certain extent, if you had just landed in certain parts of Spain and you’d met up with property professionals (real estate agents mostly) there would be no reason to not believe that an 11-month contract –short term or holiday rental- is distinct from a 1-year plus contract –long term-.

At the same time, there appears to be an informal network of non-legal practitioners who are routinely consulted by people with legal problems and have, by reiteration, created parallel pseudo laws (and even case law) that, quite simply, do not exist in real life. And the 11-month contract is one ‘legislative’ creation of these “Costa” lawmakers as it does not exist as a standalone contract type. 

The following bullet points will help understand the current situation with urban rental contracts:

• There are only 2 types of urban rental contracts: residential rental contracts and non-residential rental contracts (which includes short term/holiday lets, commercial, etc.).
• Duration of residential rental contracts can be freely agreed between the parties. If the agreed term is below 3 years, the contract will be automatically extended on expiration of contract term unless the tenant submits notice of termination of contract with at least 30 days.
• The above rule is mandatory and cannot be waived by the parties by private agreement.
• Many residential rental contracts are disguised as short term, and consequently many short term contracts will be treated as residential by the Courts.
• The Spanish Supreme Court has stated that irrespective of the name given to the contract or the term agreed by the parties, if the tenant had a requirement for a habitual and family domicile to take care of his/her permanent and essential needs (and that of the family), the contract will be deemed residential and therefore the 3-year rule will apply.

Likewise, the short-term nature of the contract refers to not the duration but to the reason and purpose of occupation of the property, it being determined by its brevity.

Means to prove that a short term contract is in reality a residential one are, for example, the tenant(s) having a job wherever he/she lives or running a company, children’s school enrollment, registration with the Town Hall (‘empadronamiento’) etc.

Antonio Flores Property eviction tenants foreclosure, Spain Property, spanish tenancy agreement

Unbeknownst to most property owners, management of “communities of owners” in Spain has become a source of real corruption.

According to consumers’ organizations, 30% of managers of communities of owners –whether professional administrators or “presidents”- are demanding commissions of between 5%-10% from contractors and supplier companies serving these communities. Where the communities have expensive-to-run or higher maintenance facilities such as gardens, pools or security requirements, providers have larger margins to play with.

Corrupt professional administrators that engage in these practices will demand -or expect to receive- a kickback for awarding contracts, but in a rather discreet elegant manner. After all, they are professionals that get paid for their services and need to dissimulate spurious activities, which are seldom expected of them.

Corrupt presidents on the contrary don’t get paid to their jobs. They become unusually keen on governing the community, will typically behave with crass insensitivity towards ‘dissident’ owners and show despotic manners at AGMs. Often, they will weave a web of friends that are nothing but naive or uninvolved neighbours who, through ignorance, will lend them support by giving out proxies for up and coming community meetings, thus perpetuating the fraud.

These communities are generally teetering on the brink of bankruptcy.

The Spanish Criminal Code can deal with these individuals, if they are uncovered. This is what article 286 states under the title “Corruption between private individuals”:

Whoever, personally or through an intermediary, promises, offers or grants executives, directors, employees or collaborators of a trading company or any other firm, partnership, foundation or organization an unfair benefit or advantage of any nature, in order for the to favour him or a third party against others, breaching their obligations in acquisition or sale of goods or in hiring of professional services, shall be punished with a sentence of imprisonment of six months to four years, special barring from practice of industry or commerce for a term from one to six years and a fine of up to three times the value of the value of the profit or advantage obtained.

But where they are not uncovered, there is only one solution: naive and uninvolved neighbours have to wise up and get involved, whether they live in these complexes permanently or occasionally, replace these corrupt presidents or administrators and establish transparent practices for every provider bidding process (sealed bidding being the fairest and most secure).

Antonio Flores Property Administrators community of owners, AGM horizontal property act, horizontal property act spain, Spanish Community of Owners, Spanish condominium, Spanish property laws

PROPERTY owners are filing increasing numbers of complaints about presidents of the comunidad de propietarios (community of owners) in their buildings.

Abuses of power, passiveness, overstepping legal boundaries, refusal to call annual general meetings and to sanction budgets, unauthorised maintenance and using community funds without approval are common grievances.

Considering that this is technically a non-remunerated post, this may sound like unnecessary aggravation for the presidents. However, could it be that some community presidents are being paid salaries or taking backhanders, and as result, acting like a toxic workplace bosses?

We shall leave the second scenario for now – as it is difficult to prove – and address the main question: are presidents of communities of owners entitled to remuneration?

The Horizontal Property Act is mute on this point as it neither endorses or bans it. Caselaw on the contrary is more specific, giving the following clues:

The Appeal Courts of Malaga, the Balearics and Tenerife have declared that presidents cannot have a fixed remuneration although

they may be compensated for the costs and trouble inherent to carrying out the job of President.

The Appeal Court in Las Palmas holds a contradictory case where statutes specifically state: “

the President of a specific Community will not generate remuneration,

adding however

this prohibition is not incompatible with covering representation expenses, more or less modest, against submission of receipts or invoices for the most relevant expenses.

The appeal court in Granada is more restrictive and states:

while prima facie the job of President is pro bono, such a mandate is not incompatible with receiving consideration by the community.

In this case, an AGM resolution where the president was exonerated of paying his monthly fee was deemed void because it

altered the coefficients of ownership within the community of owners … and a professionally remunerated administrator can do this job.

On the contrary, the Appeal Court in Barcelona is adamant about the validity of the prohibition since the Catalan Civil Code specifically envisages the unpaid nature of this job.

Regarding the required quorum in an AGM (or EGM), most courts consider that a resolution to grant a regular remuneration requires unanimous consent, if it goes against the statutes or articles (because they stipulate that it is an unpaid job), whereas a resolution to simply cover representation expenses can be decided by a majority of votes, irrespective of what the statutes or articles state.

Antonio Flores Property agm, Annual General Meeting, Community of Owners, community of owners spain, Horizontal Property Act, President Community of Owners, Presidente Comunidad Propietarios, Spain condominiums

Targobank, the last bank still willing to open bank accounts to Iranian investors, has followed the trend of all other Spanish banks and placed a blanket ban on any Iranian national who, for the most part, arrive in the country to buy Spanish property.

These ordinary investors, attracted by the comparatively low prices of Spanish property, are seeking to invest in the country and that that effect, are granted tourist visas (some apply and attain permanent residency) by the Spanish Consulate in Tehran, N.I.E. numbers by district Police Stations, property deeds by Notary Publics and “empadronamiento” certificates by Town Halls and yet are, irritatingly, snubbed by Spanish banks on the pretext that laws don’t allow them to do so.

So whilst sanctions against Iran have been tightened and these have been particularly aggressively enforced in the U.S. and Canada and by contagion, those countries with closer links to the superpower, still today no trace of where within those sanctions lies the prohibition of merely opening of a bank account for an Iranian traumatologist, pistachio exporter or car dealer who wishes to buy a property in Marbella, Madrid or Gran Canaria.

This has arguably created a view where anything remotely related to Iran is often viewed as toxic and problematic and thus leaves lawyers, property developers and real estate agents to all but “abandon” business with the numerous Iranians that wish to invest in Spain.

Alas, on closer inspection it appears there is no such blanket ban in Spain because there is no specific regulation by the Bank of Spain, the Ministry of Interior or that of Foreign Affairs to the effect of entitling banks to slam the door in the face of Iranian investors.

And yet when one meets with branch managers armed with the mandatory ‘Know Your Client’ detailed paperwork, excuses fly around: Iranians have been banned by the EU, bosses say it is not possible, the computer system blocks that particular nationality, our entity does not specialize on dealing with such nationals etc. etc. La Caixa, for instance, does request certain disclosures in respect to Iranians but they are not specifically banned from opening accounts…and yet they do so.

Sadly, it all boils down to Spanish financial institutions being terribly scared of retaliatory action by the U.S. Government and so prefer to drop certain foreign citizens as clients, even if they risk being reported to the Banco de España for arbitrarily, when not discriminatorily, refusing to open bank accounts to them.

Antonio Flores Legal Practise, Mortgages, Property ban on Iranian bank account, Iranian Investors Spain, Iranian SPain, Spain Banks Iran, spanish bank iran

Great day yesterday in the office with James Scurrah, from Marbella Property Co, and Luis Ruiz, from TrecMedia. The purpose of the get together was to film 15 or so videoblogs in respect to matters pertaining to investing in Spain, property costs etc.

1. Anyone in the world can freely buy a property in Spain; there are no restrictions to any nationality nor a special permit is required. All you need is a valid passport, money and an NIE number.
2. Get a lawyer to represent you as not only does his/her expertise be very useful to ensure a safe outcome but also, they have mandatory professional indemnity insurance in case something does not go plan.
3. If you take out a Spanish mortgage, keep in mind that if you default, you will not be discharged from the loan by just “handing the keys back”. In fact, the bank can chase you in your own country.
4. If you are buying a finca, villa or any other form of detached property, a survey can be very useful to know where the boundaries lie and whether extensions built on the property require registration, in addition to what a survey normally does for you. In Spain, valuations for bank purposes are good enough because they include a survey. However, if you want something more specific and in English, you can hire a UK-registered surveyor, for instance, SurveySpain.
5. Ask about potential inheritance taxes (IHT) before buying as these are very different from the UK but also, each region within Spain has its own specific regulations. Splitting ownership with your inheritors will significantly reduce your exposure.
6. Draw up a will once you have completed on your property. This will avoid having to go down the grant probate route as inheriting will be a relatively straightforward matter.
7. Open a bank account to arrange a standing order payment for your utilities.

Antonio Flores Property Buying Property Spain, Marbella Property Co, NIE Number, Spain Property, Spanish Mortgage, Spanish Property Purchase, Trecmedia

What Mr. Keith Rule and Castro Abogados have achieved is one great result for the 47-strong Finca Parcs (Hellín) group of claimants who, having paid upfront deposits on a failed off-plan development, found to their horror that through the incompetence of their legal representation, no bank guarantees were available.

An undeniable great exposure has meant that numerous claimants who are on the same boat are starting to enquire what is it with this case that is different from many others, in process or already finalized with equal result. Our firm has received a handful of such enquiries, and presumably, many other are already receiving similar emails.

In writing this, I am aware that I do risk being dismissed as some miserly person void of happiness and filled with envy at the successes of others, but far from it: I do wish to congratulate the Castro family and Keith’s group for this success that, by “juridical contagion”, should help everyone involved in this conundrum.

But still, factuality deserves respect and so, once again, let us allow the truth get in the way of a good story:

• The CAM bank and Cleyton Ges S.L. had given out the 1968/57 bank guarantees to a very large number of customers at Finca Parcs, some of which in fact happened to be represented by us. When the developer kicked the bucket, those with bank guarantees were duly refunded by the CAM whereas those who did not, were told to sod off. No surprise there considering that the predatory CAM bank was governed by a gang of pirates who saw no issues with lending themselves astronomical amounts to invest in the Caribbean, a robbery now subject to criminal investigation.
• To contend that this is a landmark ruling is to be dismissive of the work of many other lawyers who have already obtained success in identical cases. The reality is that there are plenty of rulings that contradict Mr. Rule’s claim that this is legal precedent, no matter how hard, perhaps at the insistence of the media, they were conveniently omitted. Strangely enough, the original article published in El Pais does not say it’s a groundbreaking case, and it does not for the simple reason that it was a serious journalist who did his homework and got the facts right (he did call us and we pointed him to  the most reliable source of information: online law libraries!). Conversely, we could admit that, where no bank guarantees of any description or special accounts were available, a ruling ordering a bank to pay would be deemed worthy of being classified as legal precedent. In the ruling of this post, both bank guarantees and a special account were actually available.Keith’s Rule: Don’t let the truth get in the way of a good story!
• To say that Mr. Rule had “…taken on bank bosses after discovering a 45-year-old property law making them jointly responsible with promoters for returning guaranteed deposits on failed developments” is just risible; Mr. Rule has not discovered the 57/1968, just as Roberto Sanchez Saavedra did not discover the Spanish Civil Code (it was already there when his great-grandfather was born). The reality is that the “dug out” 1968 Act was helping many when Franco still went wild-boar hunting, and thousands have already benefited since then…including many of the Finca Parcs victims.

In summary, what has really happened is that Keith Rule and his group hired competent legal representation to help them out, and were lucky that funds were channeled through the developer’s accounts with the CAM, and not pocketed by the rogue developers via overseas accounts (even in this case protection may still be available). And not the least, that many buyers had bank guarantees whereas others didn’t (implying the existence of a blanket bank guarantee), an unfair situation caused by the inaction of property conveyance lawyers, the developer and the CAM bank and, as far as Spanish consistent case law is concerned, totally unacceptable.

But to announce that this is a groundbreaking ruling -when the bank had already given out dozens of individual bank guarantees (a few examples below) to as many customers, and there are plenty of identical rulings on the matter-  is just false.

Proof that Bank Guarantees for Finca Parks do Exist

Downloads

• Bank Guarantees for Finca Parks (PDF)

Antonio Flores Litigation, Property bank guarantees, CAM Bank, Cleyton Ges S.L., Finca Parcs, Keith Rule