Spanish Law Tribune

One of the major problems landlords face post credit crunch is the increasing number of non-paying tenants. Many landlords rely on this source of income to offset partially or wholly the mortgage repayments of the property that is being leased being forced to have them legally evicted (http://www NULL.marbella-lawyers NULL.com/articles/showArticle/spain-tenant-not-paying-rent-spanish-property).

In my article on “Landlord: Keys to Successful Rental Income (http://www NULL.marbella-lawyers NULL.com/articles/showArticle/income-lease-rental-insurance-spain)” I pointed out that one of the best ways to avoid non-paying tenants was to take pre-emptive measures such as screening candidates carefully weeding out those with unsuitable profiles.

There is now a helpful website available that lists non-paying tenants nationwide: Fichero de Inquilinos Morosos (http://www NULL.fimiberica NULL.com/) (FIM). For a reasonable fee of only 9,95€ you will be able to search –in English- if your prospective tenant has actually defaulted previously on a Tenancy Agreement. As pointed out in my article, there are professional defaulting tenants that roam the country in search of their next victim, preying preferably on trustful non-residents. In hard times such as these, many struggling landlords cannot endure the hardship of a financial leach that eagerly exploits Tenancy laws shortcomings.

This website’s database is continuously updated with the input provided by both eviction rulings as well as by other users’ feedback. You can additionally include your own non-paying tenants in their list providing you comply and follow the online form’s instructions. Professional non-payers who’ve made a lifestyle out of it will have already been included in the list.

I think it is a useful tool that compliments nicely other tools such as rental insurance, rental bank guarantees, adding an arbitrage clause and screening out your prospective tenants. This gizmo can be used only for those candidates who’ve made it to the top of your screening list. You might as well spend a few dozen Euros now rather than having to fork out thousands at a later date. Better safe than sorry.

• Non-Paying Tenants? No Longer an Issue – 23rd October 2009
• Comunidad de Propietarios: Avoid Problems with Your Neighbours in Spain (http://www NULL.marbella-lawyers NULL.com/articles/showArticle/spanish-comunidad-de-propietarios) – 26th June 2009
• New Express Eviction Law: Much Ado About Nothing -13th July 2009
• Paying the Rent Late Twice will be Cause of Eviction – 4th June 2009
• Spanish Express Eviction Law Pre-Approved (https://belegal NULL.com/blog-by-antonio-flores/spanish-express-eviction-law-pre-approved/) – 24th December 2008
• Landlords Afraid of Non-Paying Tenants Take Pre-emptive Measures -16th September 2008
• Landlord: Keys to Successful Rental Income (http://www NULL.marbella-lawyers NULL.com/articles/showArticle/income-lease-rental-insurance-spain) – 31st January 2008
• How to Evict Non-Paying Tenants (http://www NULL.marbella-lawyers NULL.com/articles/showArticle/spain-tenant-not-paying-rent-spanish-property) – 17th December 2007

raymundo Property, Spanish Rentals defaulting tenants, FIM, non paying tenants, rental, rental arbitrage spain, rental insurance spain, renting, Spanish eviction, spanish tenancy, spanish tenancy agreement

Look no further. We had noticed early on this year (http://www NULL.marbella-lawyers NULL.com/forums/showthread NULL.php?t=193) how Spanish banks had offloaded large stocks of properties from their books and funnelled them to existing or newly incorporated real estate divisions under their control, much like SIV’s. This had turned Spanish banks de facto into the largest real estate agencies. What we had also noticed, based on the failed conveyance procedures our clients had endured this year due to them being unable to secure finance, was that banks seemed to offer significantly more competitive lending terms on those properties owned by them!

This weekend I’ve read for the first time in the financial press that banks are actually offering incredible financial terms on those properties held by them:

1. 100% Loan to Value for residents (yes, you read it right, not a typo)
2. Euribor plus a spread of only 50 basic points (or 0,50)
3. Timeline? Take your pick. 40, 30, 25 years; anything goes.
4. Interest-only? Not a problem Sir. Will it be 1, 2 or 3 years?
5. Grace period? How would you like it, Sir? 1, 2 or 3 years?
6. Opening commission? Early redemption commissions? It’s commission-free, Sir (!)
7. Discounts available of up to 30 and 40% off from the market’s peak in 2007. Prestigious valuers’ appraisals ready-at-hand to prove the fall in price. Take your pick.

So where’s the catch? There’s none. There’s no small writing to be gleaned. It’s a straightforward deal. Banks will make money in two manners, both on the sale and on granting a mortgage loan on the property.

Reading through the spreadsheet just left you gobsmacked. It was as if we had stepped back in time using HG Well’s time machine to the good old days of …2006. How could you possibly miss on the opportunity of buying a property through them with all the above lending terms bearing in mind the Euribor Rate is at an all-time low? Touchée, that’s exactly the point to be made.

How can developers or Estate Agencies compete against this? They cannot, it’s that simple. Banks have become the fiercest competitors in the Property Market taking no prisoners in their wake. If you request a mortgage loan on any property other than the bank’s, they will only offer you 50/70% LTV (non-residents), Euribor Rate plus a spread ranging from 0,7-1,50%, opening commissions (usually 1%), early redemption commissions, no interest-only, no grace period, no…well, you get the drift.  This is clearly a competitive advantage that, unless you are a fellow bank, you cannot hope to overcome.  

If this is not a buyer’s market, then frankly, I don’t know what is.

raymundo Spanish Mortgages

As we had previously reported, an Administration Procedure does not equate to bankruptcy as some mistakenly repeatedly uphold. Receivership procedures in Spain are geared towards saving ailing companies which are undergoing temporary cash-flow problems. Throughout the Administration Procedure, and dependant on a Financial report drafted by experts, the Mercantile judge will rule on whether a company under administration should file or not for bankruptcy.

Developer Llanera was the first large Spanish developer to seek Creditor Protection back in 2007. It is fitting that it’s the first one to announce its clawed comeback. The Creditors’ General Meeting must ultimately give its approval tomorrow to the company’s proposal.

This is indeed welcome news for stressed creditors who are now bogged down in similar legal quagmires and have lost all hope.

Source: El Economista (http://www NULL.eleconomista NULL.es/empresas-finanzas/noticias/1571923/09/09/Llanera-primera-gran-inmobiliaria-que-saldra-del-concurso NULL.html)

raymundo Litigation, Property administration, administration procedure, bankruptcy, creditor protection, llanera, receivership

Contrary to what would seem like reasonable Fiscal Policy in the midst of a deep recession, Spain’s Government has decided it will raise its Indirect tax, Value Added Tax or VAT.

It doesn’t take a degree in Economics to realise just how, errm to put it mildly, counterproductive this is to the broad Economy, more so in Spain’s case. With Consumer Confidence plummeting in Spain it would seem the Government should strive to incentivize spending, rather than curtailing it at every opportunity. Oddly enough and contrary to popular wisdom, that is exactly what it has announced last Saturday the 26th of September.-a tax raise leaving the door ajar to future tax raises…

With Spain’s Property Industry, which has long been Spain’s driving force along with Tourism, in the doldrums, with 5 million unemployed and reportedly steadily rising to unprecedented levels unseen since the days of the II Republic (1931), with a reported stock of between 1.6 to 3 million unsold houses (http://fistfulofeuros NULL.net/afoe/economics-country-briefings/three-million-unsold-properties-in-spain/) (both resales and new builds), with a Public Deficit spinning out of control adding 80 million Euros of debt everyday and with Consumer Spending spiralling downwards hitting fresh lows every month our Government decides that what is best needed by our countries’ ailing Economy is to …raise taxes; contradicting its much vaunted electoral promise of “lowering taxes”.

On Saturday the 26th of September it has been decided that as from next year 2010:

1. The extended VAT of 16% is to be raised to 18%.
2. The reduced VAT of 7% is to be raised to 8%. This is the tax that is levied on new builds (off-plans). The tax on resales remains unchanged. This is not welcome news by a struggling sector vying to unload a huge stock of unsold new build properties
3. The super reduced VAT of 4% will remain unchanged.

One can only pray our Government will not raise even further our tax burden in such dire times. Lowering taxes is always the right path on the road to economic recovery which incentivates citizens saving and helps to attract Foreign Investments; both of which will be invested reactivating Consumer Spending which will ultimately lead to creation of new jobs, not to their destruction and the reckless public subsidizing of lost causes.

raymundo Property, Taxes tax, Taxes

We would like to remind all of those buying off-plan from Aifos that the deadline to submit your request to join Aifos’ creditors list ends on September 30. All of those who have not done so already please contact your solicitor as soon as possible.

You will have to forward your solicitor the following:

• Original Private Purchase Contract signed with Aifos.
• Original bank statements as proof of the different stage payments paid to Aifos.

Those who fail to submit the paperwork on time will be left out of the creditors list and will lose every chance of recovering anything from their deposits.

If you don’t have a solicitor who can represent you, please contact us (http://www NULL.lawbird NULL.com/services/contact) urgently.

lawbird Litigation AIFOS, aifos administration, aifos admnistration, aifos bankrupt, aifos bankruptcy, aifos insolvency, aifos receivership

For those who are wondering what on earth is meant by a “Floor Clause” (Cláusula Suelo), we had already reviewed them in detail in our article 10 Common Abusive Clauses in Spanish Mortgage Loans (http://www NULL.marbella-lawyers NULL.com/articles/showArticle/10-common-abusive-clauses-in-spanish-mortgage-loans) and in Antonio’s blog post Reduction in Mortgage Repayments Limited by Floor Clause (https://belegal NULL.com/blog-by-antonio-flores/reduction-in-mortgage-repayments-limited-by-floor-clause/).

A “Collar” clause is when the minimum interest rate to be repaid to your lender in a mortgage loan is capped i.e. 4,5%. So even if the Euribor rate heads below, you still have to pay the said minimum interest rate. These clauses are the very reason on why many borrowers are not benefitting from the historically low Euribor rate to which most Spanish mortgages are referred to plus a spread (diferencial). We had already anticipated last year in our post, Steep Drop in Euribor Translates into Cheaper Mortgages, that lower mortgage repayments were to be expected in 2009. Many borrowers which were gleefully expecting to lower their monthly mortgage repayments in 2009 have come to know and dread this obscure clause which was worded in their Mortgage Deeds unbeknownst to them.

We had criticised these clauses as being basically abusive to borrowers because they were one-sided. The public outcry has been echoed at last at the Senate this morning.

This initiative was fostered by Senator Mr Francisco Javier Vázquez who belongs to Spain’s Conservative party. The Senate has pleaded that these abusive clauses ought to be removed in compliance with Spain’s new law on Consumers’ Rights, Law 1/2007 (http://noticias NULL.juridicas NULL.com/base_datos/Admin/rdleg1-2007 NULL.html), which was enacted by the current Socialist Government.

It is estimated that this initiative, if upheld by Spain’s Socialist Government, would benefit an estimated two out three borrowers translating into cheapermortgage repayments.

Source: El Mundo daily newspaper. (http://www NULL.elmundo NULL.es/elmundo/2009/09/23/suvivienda/1253700997 NULL.html)

raymundo Spanish Mortgages collar clause, floor clause, spread

Rumours were confirmed last Wednesday 22nd of July when Aifos’ petition to file for receivership was formally accepted by Malaga’s Mercantile court number one. On the following day Aifos issued a press release by which it informed they had filed for voluntary receivership.

As we had previously pointed out in prior communications, filing for administration does not equate to bankruptcy as has mistakenly been reported at large e.g. In Spain’s highest profile administration procedure to date, involving well-known developer Martinsa-Fadesa, this company will restructure its 7 billion euro debt and will continue trading normally within the next years.

What developer Aifos has sought is for creditor protection allowing it to buy time to restructure its financial commitments. However, the mercantile judge ruling on the matter may ultimately decide at a later stage that Aifos should file for bankruptcy if it is deemed not to be able to continue trading. This will be decided upon in the ensuing procedure.

As from the time the official announcement is published in Spain’s Official Law Gazette (B.O.E.), creditors will have a deadline of one month to join Aifos’ Creditors list. (EDIT:  Today 31st of July it has been officially published)

Off plan purchasers may fall in any one of these three categories:

1. Purchasers that signed a Private Purchase Contract and have not had their off plan dwelling delivered.
2. Purchasers who had already withdrawn from their Private Purchase Contracts and had filed a lawsuit with no final ruling issued yet.
3. Purchasers who had litigated already and had a final ruling on their case but had not been refunded yet.

As a general rule everyone who purchased a non-delivered property through developer Aifos, whether having litigated or not, should retain a lawyer (and court agent) to join the Creditors’ list and/or litigate. The difference between cases is on their rights (i.e. those with final rulings will be labelled as “ordinary” creditors which lands them higher above on the Creditors’ ladder). Notwithstanding the above, all three cases will be considered as non-secured creditors.

Purchasers will have to liaise with their existing legal representative or else appoint a solicitor to either join the Creditors’ list and/or litigate. Once the receivership has been accepted trials will now be heard only at Malaga’s Mercantile court number one unlike before in which it was actually Civil courts that passed judgement on cases involving Aifos.

Appointed lawyers will seek to best defend their client’s interests in the ensuing procedure taking the following actions amongst others:

• Claiming from the judicial administrators the creditors’ position of the clients submitting all the necessary documents on time and in the due manner. To challenge adopted resolutions on the matter if proven detrimental to the inclusion in the Creditors’ List.
• Continued monitoring of the receivership procedure ensuring client’s rights are upheld
• To negotiate with the judicially-appointed administrators reaching agreements as necessary
• To keep the client informed on the ongoing procedure
• Assisting to Creditors’ meetings to defend the client’s interests
• To claim or challenge judicially agreements taken by Malaga’s Mercantile Court

We will be sending this week to all our Aifos’ clients a detailed newsletter informing them of the legal situation and the available options available to them. This newsletter will also be available to non-clients upon request.

If you have purchased a non-delivered property through Aifos and wish to receive further information on this matter, please contact us free of compromise. One of our lawyers will contact you to explain clearly your legal options.

Email:  Contact Form (http://lawbird NULL.com/services/contact)
Phone: +34 952 86 18 90
Summer opening hours: Monday to Friday, from 8:00 till 15:00 hours

lawbird Litigation, Property AIFOS, aifos administration, aifos bankrupt, aifos bankruptcy, aifos files for bankruptcy, aifos insolvency, aifos problems, aifos receivership

Web owners and in general owners of forums, blogs and wikis are not to be held responsible of the user’s posts and comments, following the Law of Services to the Information Society, LSSI for short. Lugo’s High Court has just passed a recent ruling on this matter which acquits the web owners of “mindoniense.com”.

“Mindoniense.com” is a website dedicated to providing general information on the mainland town of Mondoñedo. Two anonymous forum users attacked relentlessly the town’s major. The major filed a libel law suit defending his honour. It was turned down as there weren’t enough grounds to sentence anyone in particular. The major alternatively sued the website’s owners as they were unable to identify both forum users.

In the first ruling the judge ruled that website owners cannot be held accountable on comments posted by users in accordance to art 16 of the LSSI. However the nuance is that web owners must not be aware of the illegality of the posted comments or that they undermine someone’s legitimate rights subject to compensation, and must act hastily to remove libellous remarks or else make them inaccessible on them being reported.

Source: El Mundo Newspaper (http://www NULL.elmundo NULL.es/elmundo/2009/07/15/navegante/1247664007 NULL.html)

Antonio Flores Litigation defamation in spain, libel in spain, slander in spain, spanish libel lawyers

Within the next months we are going to be bombarded with articles spinning the Government’s eagerly anticipated new Express Eviction Law (http://www NULL.senado NULL.es/legis9/publicaciones/html/textos/A_032-01 NULL.html) which has yet to be pre-approved by the Senate (https://belegal NULL.com/blog-by-antonio-flores/spanish-express-eviction-law-pre-approved/) before it is returned to the Congress of Deputies for its final enactment and publication in Spain’s Official Law Gazette.

This new law aims primarily to tackle cases of non-paying tenants which overstay in let properties, to the astonishment and despair of landlords.

But will it really help out? In short, no.

The proposed measures implemented by this law can be easily challenged or overcome by tenants. Besides the new measures will not shorten the eviction procedure significantly as sought as it hinges on the courts not being clogged, as they always happen to be. The shortcomings of the proposed measures are self evident.

The core of this proposal is the much vaunted 2 weeks waiting time, dubbed express eviction, as from the time there is a ruling evicting the tenant. But there’s a catch; the trick is that the said ruling can easily take 6 months on average dependent on the courts’ agility, so the tally would really be 6 months plus the 2 weeks. So yes, there is some reduction in the timescales involved to evict non-paying tenants, albeit not groundbreaking enough to open a champagne bottle as we are being led to believe. This half-baked attempt to redress matters will at best save only a couple of months. Landlords will still have to wait months to recover the possession of their let properties.

This is a classic example of passing new laws to satisfy the broad public (read electorate) at large which at the end of the day may only complicates matters further without really tackling pressing issues and even leaving the door ajar to potentially adding new problems. At best we can label it as a half-hearted attempt to address the situation.

At a time when many ex-pat landlords are already struggling with their mortgage loans (https://belegal NULL.com/blog-by-antonio-flores/cannot-keep-up-repayments-on-your-spanish-mortgage-not-all-is-lost/), as they relied on the let’s income to offset it against the mortgage repayments, the last thing they needed was the aggravation of withstanding non-paying tenants (http://www NULL.marbella-lawyers NULL.com/articles/showArticle/spain-tenant-not-paying-rent-spanish-property). This situation has lead many landlords to default on their mortgage loans which in turn have lead to a soar in repossession procedures. (http://www NULL.marbella-lawyers NULL.com/articles/showArticle/home-repossessions-in-spain-defaulting-on-mortgage)

A golden opportunity has been missed –again- by the legislator to address Spanish Tenancy laws that are heavily biased, for historical reasons, in favour of tenants. These laws need to be urgently and decisively adapted to modern social reality. When this is done, here’s wishful thinking, letting will become a serious alternative to purchasing properties allowing the Spanish rental market to pick up from the ground as in the rest of Europe.

In the meantime we will regrettably have to continue waiting until a law is passed that will boldly challenge this unfair situation once and for all allowing for express evictions instead of politically ill-conceived piecemeal attempts aimed to satisfy everyone.

raymundo Litigation, Property evicition in Spain, landlord insurance spain, landlords, Spanish eviction, spanish tenancy, spanish tenancy agreement, tenants

Spain’s Tax office has replied within the last month two binding legal queries which shed some light onto the taxation of the amendment of mortgage terms.

On the first reply of 25th of May, the Dirección General de Tributos (DGT) clarified that switching  to interest-only will no longer attract Stamp Duty. On the second reply of 10th of June, the DGT has stated that changing the mortgage’s reassessment date will no longer pay Stamp Duty either. It would be regarded as exempt following art 9 of Law 2/94. E.g. a borrower changes the mortgage resetting from once a year to a quarterly basis.

Regardless if the borrower chooses one or both options they will not attract tax. Also, a lender cannot lawfully charge more than 0,1% to extend mortgage repayments. 

This is welcome news indeed for struggling mortgage borrowers that will now have more options available to them without being taxed on choosing them. Reducing citizen’s tax burden is always the right path on the road to financial recovery.

raymundo Property, Spanish Mortgages, Taxes