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Can the lawyer we have instructed to purchase our property pay a fraction of the purchase price without declaring it officially?

Civil Law

Antonio Flores Vila

22nd of March 2002

Q. In May 2001, we viewed an apartment through an agent in Fuengirola 2 bed etc. with parking off street. Price 20 million Ptas. The following morning we placed a 10% deposit signed a "SALE-PURCHASE AGREEMENT" with the agent they then signed and officially stamped the agreement. This agreement clearly states that the purchaser to pay all costs except plusvalue tax. We asked to see the apartment again that day, we went along with a different lady from the agents office after a lengthy discussion, in spanish which we are not familiar with, we were informed that there was not a parking space included.

We were introduced to a lawyer to handle the matter for us by the same agent he assurred us he would act in our best interest and we left Spain very happy the next day. Further enquiries by our Spanish lawyer assurred us that there has never been a parking space attached to this apartment we accepted his word, although there are 32 apts in the building 32 car spaces and 32 post boxes. We paid the remaining money to our Lawyer within the 28 days required and took occupation of the apartment in July 2001.

In Oct 2001 we were handed the Escritura de Compraventa [copia simple] in Spanish which stated that we were to be responsible for all costs and taxes including the plusvalue tax and the price had been entered at 12,000,000 a massive 40% under-declaration well over the allowable 20% Taxmans figure for fines and penalties which as you state could be declared as a "gift" and taxed at 85%. I, as Chairman of the British Co. can not explain the loss and/or fraudulant drawing of 20,000,000 Ptas when the documentation only shows 12,000,000. I could face fines and or imprisonment in Britain for this action.

We were called back to Spain in February and March in the anticipation of everything being sorted out by our Lawyer but I have now refused to sign the Escritura with the Notary until matters have been sorted out. My Lawyer seems very reluctant to work with me and that this is normal practice in Spain. I have recently paid my commun fees only to find that I am also paying for a car park space in the garage underneath the apartment building. In Spain, is it possible that at this late stage of these proceedings can I appoint another Lawyer, The sellers are in breach of the original contract I presume they are at fault and if I do not proceed with this transaction will they have to pay me double the deposit monies?

Tom
London

    A. I have read with interest your email, but I do not understand when you say you are not willing to sign the escritura. From the first paragraph it appears it was already signed. If the escritura has not been signed, then obviously you have a right to enforce the full purchase price on the deeds. The way this lawyer has been acting on your behalf is not appropriate, to say the least.

    Underdeclaring property prices is illegal, however much your lawyer and the agent assure that it is normal. You have to decide whether you wish to go down that route, and not your lawyer for you. This situation is unheard of, unless he has been appointed by the agent, to who he is answerable in the first place. The saying ´you should not bite the hand which feeds you´ can define the situation.

    In summary, if the deeds have been signed already, there is then not much you can do, apart from make a claim directly to your lawyer for the wrongdoing. If the deeds have not been signed, you can enforce the full purchase price, unless the underdeclared amount had already been paid on exchange of private purchase contracts. If all the funds went to your lawyer´s account, the ´underdeclared´ amount is obviously an unjustified gain in his account. You could claim that amount from your lawyer, as he has not legally used it to purchase property, and he possibly has no receipt.

    Another possible scenario is that the purchase price was less than 20 million, and by using a ´recommended´lawyer, the agent was in a position to offer you and the seller a different asking and offer price, respectively. This would enable him to keep the difference between both prices.

    Regarding the penalties envisaged in the Ley de Tasas, you are right in pointing out that these have been declared illegal, and therefore not applicable. That however does not mean you cannot be sent a supplementary demand for tax, at the going rate (6%, or a combined 7.5% if purchasing a new property).

    You are able, at this stage, to use the services of another lawyer if you wish, there is no legal precept to the contrary.

    If you need more help do not hesitate to contact us.


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