Antonio Flores’ Blog

According to most studies, death, divorce and changing homes are the three most stressful moments in a person’s life. In my opinion, however, renting property out should also be included, judging by the amount of queries, complaints and eviction legal instructions this office receives.

The email below was received from a client who had demanded payment of unpaid rentals on a townhouse and who was fobbed off, by his tenants, in a not very Queen’s English (they are vigorous East Londoners, in fact):

Hiya

As early emails we have NO Contract, you had time to come and see us when I told you of our intentions by email which you replied to,  you have the keys for the property from Monica, we have taken legal advice and been informed no contact has been signed no notary has been attended or no verbal agreement made with you,  as I said before we was all square financially.

The tenants had not paid and simply disappeared without any notice or warning, leaving the keys with the neighbour. The landlord was not expecting a with thanks bottle of champagne but neither breadcrumbs, eggshells, a stinky fridge, walls full of blue-tack and a filthy and defective gas barbecue (which nobody wants to touch), yet the fact that they were, I am told, a couple of alcoholics, helped temper the landlord’s rage, as he’d rather have them out owing money than in without paying (and without being able to rent out).

The lady, presumably after having guzzled a couple of gallons of wine, thought up a new law whereby not having a written contract meant that they were not liable for payment, that a notary was required to make a binding agreement or that no verbal agreement had been struck, in spite of them having paid two months deposit and one month of rent to a real estate agent. A very confused mind, indeed.

Non-payment is a big problem mostly because tenants seem to forget that their obligation of payment (in fact, the only one, other than maintaining the property as they received it) is not conditional upon the landlord doing anything: Spanish law does not allow renters to withhold the rent under any circumstance (other than destruction of the property). If they wish to make a claim, it has to be done separately from the main obligation of payment of the rent.

The string of excuses for not paying is endless, and enumerating all would be boring, so I have thought that the best advice I can provide is for both landlords and tenants to know what their respective rights are and what they can do about them (note that rights have a corresponding obligation, and vice versa).

Rights and obligations of a landlord:

• Right to get paid on time.
• Obligation to provide a property in a good and habitable condition for the use it is destined to, as well as in an optimal hygiene and safety standard.
• Obligation to maintain the property in a good state, carrying out the reparations that are required (maintenance, functionality and security), except for the normal wear and tear the property is likely to suffer with use.
• Obligation to not impede the unhindered use of the property by the tenant, except  in those cases where the property is in need of urgent repairs.

Rights and obligations of the tenant:

• Obligation to pay on time (this means no withholding of rentals).
• Obligation to keep the property in good condition, as was received.
• Right to demand from the landlord the necessary repairs to conserve the property in a habitable condition.
• Obligation to pay for small jobs that are necessary by normal use (wear and tear) of the property

A Note on Maintenance Works and Repairs

In respect of repairs, the following is to be noted:

• Conservation Repairs: The tenant will have the right to demand from the landlord the necessary repairs to conserve the property in a habitable condition for the use it was intended to, unless the damage to be repaired is attributable to the tenant, exclusively. If these repairs are to last more than 20 days, the tenant will have the right to reduce the rental, proportionally to the part of the property he/she cannot use. Small jobs that are necessary by normal use of the property are to be paid by the tenant (wear and tear). According to the Spanish Supreme Court, conservation or necessary repairs are those that are indispensable for the property to be kept in the use determined by the contract, referred to the time when the tenant took possession of the property, without this right being indefinitely extended in favour of the tenant. The tenant will have to notify the landlord, as soon as possible, of the need for any repairs (to keep the property in a habitable condition, as above), and allow the landlord direct verification, for this purpose exclusively, personally or by technical staff appointed for it, of the state of the property. Only where these repairs are necessary to avoid imminent damage or grave discomfort, will the tenant have the right to carry them out, and immediately demand payment to the landlord.

• Improvement Repairs: The tenant is obligated to accept improvement works that cannot be reasonably deferred until completion of the tenancy agreement. The landlord will have to give 3 months notice prior to his intention to start the works, after which time the tenant will have the right to cancel the contract, unless these are not essential. The tenant will have the right to a proportional reduction in the rental if he/she chooses to remain in the agreement. According to the Supreme Court, these are repairs that enhance comfort, convenience, luxury, recreation, embellishment or value of the property.

Renting property is always a high-risk business, especially when a landlord is unlucky enough to mistakenly end up giving access to a professional at not paying rent. But if this happens, wait no longer than a day after payment was due and get your lawyer to give notice of eviction.

Antonio Flores Litigation, Property evicting non paying tenants, eviction in Spain, rental contract spain, rental contracts in spain, rental spain, spanish tenancy agreement

It is once again the opportunistic intuition of few: with the increasing number of property scandals in Spain, particularly those relating to failed off-plan investments, we are seeing how the legal profession is being invaded by so-called property action groups, which have started orchestrating aggressive and unethical campaigns of client poaching throughout the web and other platforms.

Among others, I can cite Spanish Property Action Group, Finca Parcs, Bulgaria-Property-Action-Group, Ramirez and Ramirez, organized and managed by non-legal professionals who cross pretty much every line when it comes to legal solicitation. The following prohibitions are flouted with ease by the below groups:

1. Payment of referral fees: The first “irregularity” is blatant: these groups are selling legal services when they are not lawyers. This means, in practical terms, that the lawyers working for or with them are incurring in the illegal practice of setting up referral fee  agreements, more ordinarily called “kick-backs”. The Spanish Legal Professional Rules and Regulations specifically ban referral fees, allowing only fee-splitting agreements either between lawyers or between professionals within the same area of work (economists, financial advisors etc.). Article 19 of the Disciplinary Legal Code stipulates that lawyers will not be able to pay, demand or accept commissions or retribution from other lawyers, or any other person, for referring clients. If these groups are run by non-legal professionals, clearly they are taking a neat kickback from whoever they designate to file their cases, or vice versa.
2. Utilization of third parties by lawyers to circumvent the provisions of the Disciplinary Legal Code. This is clearly the case with Finca Parcs: the latter is displaying a fierce and embarrassing campaign of client solicitation through various websites, where it is claimed that the group is legally represented by MC, director of CLL, and DCG Juridico, which consist of legal professionals including the father and two bothers of the former, who is also assisted by a Catedrático (translated here as a Civil Law Professor) from the University of Seville, as if this was going to make any difference.
3. Utilization of illegal publicity to gather clients: particularly objectionable is the August 2010 “Press Release” by Finca Parcs, in clear breach of article 7e) of the aforementioned code: “It is deemed as illegal client solicitation to approach, either directly or via third parties, victims of accidents or misfortunes that lack full and calm freedom to choose a lawyer as a result of a personal or collective misfortune. Yes, clients need to be advised of their rights and yes, clients need legal advice when dealing with tragedies affecting their lives. But, clients do not need to be solicited directly by attorneys/lawyers/solicitors when they are grieving or dealing with the results of a tragic event. Clients should reach out to these professionals when they are ready to do so and they should not be besieged and bombarded by those seeking to profit from their misfortune.
4. To generically or specifically encourage litigation: This is clear of all the above legal action groups, because it is their business! One example can be seen with Finca Parcs, for they have introduced an element of deceit and untruthfulness in their tormenting sales pitch: according to them, and the legal representation they have retained, abundant case law supports the unheard situation of banks being liable for clients’ deposit, regardless and irrespective of whether a bank guarantee line was ever approved by them or special accounts where used. According to the pitch, banks are always liable for refunding down payments made in respect of a failed off-plan project, for the simple (and simplistic) reason that the developer opened a bank account for them to operate: this is the essence of their strategy and their soon-to-achieve huge court windfall success, on the basis of some case law that as of yet, in spite of numerous requests, no lawyer has had sight of, unless they were referring to an isolated ruling of the Court of First Instance in Madrid (not deemed case law) where a bank is forced to indemnify a property buyer, on a failed development, since such funds were borrowed by the buyer from the developer’s bank (and hence, should have ensured that such funds were paid into a special account, protected by a guarantee, and not a normal account, in breach of the 57/1968 Act).  This ruling, which has already been analysed on a previous post, cannot be relied upon as applicable case law or jurisprudence unless it is ratified by a superior Court. Should this happen, not even then it could be of general application due to the very particular set of circumstances that surround the case.
5. Promising the achievement of results that are not exclusively dependent upon the activity of the lawyer that is publicising himself, and using means and expressions, audio-visual or in writing, that are discrediting, denigrating and scornful of the Legal Profession, the Justice and its symbols. The Spanish Property Action Group knows a bit about this, when advertising (or those of their undisclosed lawyers, for that matter) their “Get Your Money Back” seminars. They then go on to claim that people have lost their life savings or retirement funds and are all victims of the illegal activities or unscrupulous developers and the lawyers representing them, and promise, in return for a fee, a miraculous formula to recover this money (without even establishing, as one has to do, the legal position of these people they are pitching to!). The Action Group then state that those involved know how to recover funds because they have already done successfully and know the pitfalls to avoid: realistically, can anyone possibly envisage a more disgraceful and indecent way to make money?
6. All of the above in one. Finally, a special bullet point has to be dedicated to fraudulent companies known as ‘recovery rooms’, a particular type of boiler roooms specialised in fraud recovery fraud, which use registered lawyers to add appearance of legitimacy. The most prominent one is currently Ramirez and Ramirez Asesores (www.specialist-lawyers.com). Its owner, Fabian Ramirez Marcelo, an ex-timeshare reseller, in spite of the domain name he uses for his activities and his total detachment from the legal profession (as an astronaut orbiting the earth can possibly be), considers his Fuengirola recovery room, of all places, to be a specialist leading firm. But not any firm: one that cold calls thousands of victims of all sorts of scams, their names and numbers on illegal lists (sucker lists) bought in the black market, purporting to be leading lawyers in the matter and promising a quick result through the courts. Needless to say, never do these clients get anywhere because never the cases are followed up: all they do is fill out a form, take it to the courts or the police, ensure they get a stamp on it and then on to rip off the next one. The lawyer they allegedly use, Damian Vazquez, seems to not remember who Fabian Marcelo is, and when asked about his connections with Ramirez and Ramirez, claims that only occasionally has he collaborated with them. Two other lawyers I contacted also appeared to be losing memory fast when our conversation went into detail. Needless to say, again, Ramirez and Ramirez falls foul of all the above bullet points, their activities being dismissive of the most elementary rules of decency and honesty.

Antonio Flores Litigation, Property, Scams ambulance chasers, Bank Guarantees in Spain, Bulgaria-Property-Action-Group, Finca Parcs, litigation against spanish developers, property action groups, Ramirez and Ramirez, Ramirez and Ramirez Abogados, Ramirez and Ramirez Asesores, Spanish Property Action Group

The worst scourge of the Costa del Sol never sleeps. If we were used to boiler rooms selling shares, timeshare, legal services (sadly still operating and preying on those who have already lost money to some other boiler room), the very latest scam has now adopted the form of a 120% mortgage loan.

Wise Mortgages, run by a chap who answers to the name John Gladstone, is offering steroidal 120% LTV (loan-to-value) mortgages. The funny thing (there is certainly no fun if you have been stung) is that he claims that a company he works with lends the money.

The mechanism of this loan scam is based on the advance fee fraud, where you pay for something you never get. In the case of Wise Mortgages you end up paying for, probably (as I don’t know anyone who has paid for more than 1 concept), three different concepts: valuation, arrangement fee and insurance policy. I don’t think there is any more to say about this despicable man and what he does, but before I close the post, below is an open letter to Mr John Doust, the real name of John Gladstone.

Open Letter to John Gladstone

Hello John,

No doubt that when reading this post you’ll be taken over with raging fury, surely, as I would if I was framed looking like a silly crook signing worthless paperwork. But think about it for a second, you should be grateful to me: I am saving you from being arrested, yet again, by the Malaga Police Fraud Department II (that is, if you run fast).

We have had a coffee together and I have asked you a straight question: who is the guy on the picture, do you know him? And you have chosen to tell me, several times, that he is the originator of the concept of Wise Mortgages and that you hardly ever see him. You have then also warned me that I should keep it under my hat because it could bring me problems, as a few people who exposed Doust have been jailed for attempting to defame “him”.

You may recall that we spoke on the phone (and I recorded you), and asked you again the same straight question: do you ever see John Doust? And again, your answer was: hardly ever, he lives further down the Coast, but is not relevant anyway. Oh yes, hardly relevant, especially when you can hardly avoid seeing your own self every second of your life.

Also, there are some recordings where you deny seeing John Doust, where you say that these mortgages are whiter than white and a few other lies. You don’t lie however when you admit that google is a terrible thing, for you, that is (not for your existing and future victims).

John, because you are hardly a descendant of Gladstone , you are in fact John Doust, previously John De L’Ouest and at times Michel West or John Michael, a tall and chubby man boasting an unrivalled criminal history and probably the oldest-serving conman currently still roaming the Spanish Costas, operating from an anonymous 3rd floor rented office in a central Marbella building.

So no hard feelings John: I don’t think that you are an unpleasant man but your time as a fraudster is now over: the inexorable march of technology has made it now very difficult to hide your criminal activities behind a silly website offering impossible 120% mortgages (you even have the arrogance to actually contemplate lending this money if HSBC doesn´t!) and the cheerful and “wise” yet fictitious disguise figure of John Gladstone, which you have thought up as being a descendant of the pensive 19th Century 4 times Primer Minister of England (below).

Antonio Flores Mortgages, Scams Advance Fee Fraud, John Doust, John Gladstone, Wise Mortgages

Following my previous post, where I propose a decalogue of tips to obtain a response from the bank when it is just not possible to keep repaying, below I have excerpted a sample of a letter of instruction, given to a lawyer, to act on behalf of the troubled borrower when nothing else has worked. The associated fees are not so important (there is absolute freedom in this respect) but it would give a guidance as to what should be expected when having to deal with this scenario and the actions that can be taken.

Letter to Potential Client

Dear Mr Doe

In relation to our services regarding your mortgage loan, our firm can act for you in three distinct stages:

1. Actions to attempt to reduce the mortgage installment whether by re-mortgaging, conversion of the repayment to interest only, reduction of the interest rate being applied (3.5 % should be the interest payable now) or a combination of all. The acceptance by the bank implies signing a contract with the new conditions and requires that you are present, unless we act for you with a power of attorney.
2. Actions to attempt to obtain an agreement whereby the debt is to be cancelled against transfer of the property to the bank, if repaying a loan is not possible. The acceptance by the bank implies signing a mortgage deed of transfer of the property and requires that you are present, unless we act for you with a power of attorney.
3. Actions in a Court of Law should none of the above are attained. In this instance you may need to have a lawyer acting for you if the equity on the property is substantial as you may wish to try to sell before auction (or ensure you get a fair deal) and this requires liaison with Court proceedings. Also, if you reach the auction stage, having a lawyer may help in ensuring that if there are bidders for the property they can get the information for the property promptly, even if it means providing them with access to it (many bidders refrain precisely because they cannot access the property, which is an obvious thing!). Finally, note that it is possible for the bank to foreclose and adjudicate the property, through the Courts, for 50% of the value of the property for mortgage purposes (that generally coincides with the valuation), which could be far less than the debt. This means that if the value of the property is 100.000 the debt is 90.000 Euros, the bank could end up keeping the property for 50.000 Euros, and you would still owe 40.000 Euros. It is therefore recommendable to appoint a lawyer and find a “dummy” bidder (who would be a friend) to force the bank to push up the bid as much as possible. This however would require lodging 30% of the value of the property for mortgage purposes, a deposit that would be reimbursed by the Courts.

Courts can take up to 12 months to finally adjudicate the property to the creditor or a third party so there is some time to act.

If the equity is negligible or negative (the outstanding mortgage loan will need to be increased by an average of 10 per cent for legal fees and arrears) there is no point in incurring in heavy legal fees unless there is an opportunity to sell it, or there is a risk that a substantial portion of the debt will remain unsettled (as explained in point 3).  Renting the property during this period will bring in some cash but it is advisable to inform the tenant of the situation, unless it is for short rental.

Our fees to act on your behalf have already taken into account the financial difficulties faced and are as follows:

• For Stage 1: 750 Euros plus VAT (inclusive of signing at the Notary office).
• For Stage 2: 1400 Euros plus VAT (inclusive of signing at the Notary office
• For Stage 1 and 2: 1600 Euros VAT.
• For stage 3: will depend on the value of the property (minus whichever amount paid as above).

Although it is not possible to force banks to agree, acting quickly can help your position as bankers sympathise with borrowers who are sincere and upfront in their proposals. We are aware that your current predicament is shared by many property owners and that you may sustain a monetary loss if you eventually lose the property. In addition, it is important that you take some measures to limit or even eliminate completely any bad credit records both in Spain and in your country as well as to try and prevent any further action by the bank.

Antonio Flores Mortgages, Property, Uncategorized dacion en pago, foreclosure in spain, spanish mortgage repayments

After absorbing tens of thousands of properties through negotiation with defaulting borrowers, or via foreclosure proceedings, banks are now property-sicker than ever to take on anymore bricks and mortar that are less valuable than the loans registered against them.

When not being able to repay the loan and when such loan is well over the value of the property, one has to implement some creativity when attempting to convince the lender that they should book an appointment at the Notary Public to arrange the process of Dacion en Pago, where your loan is cancelled against transfer of title to the bank (or in plain English, handing over the keys to the bank), without going to Court.

Unfortunately, this is generally quite difficult to achieve, but where there is no other option, one has to press on. Here are a few tips, some of which I have borrowed from Manuel Gonzalez, a blogger expert in the matter :

1. Find ways to get rid of other assets you may have: Careful however, do it before you start defaulting as you could be accused of concealment of assets (alzamiento de bienes).
2. Stop paying: Some people like to think that by keeping up the repayments you are a more authoritative negotiator. Quite the contrary! If they see that you are repaying there is no need for them to waste their time with you.
3. Understand your enemy and know the way he thinks: Understand what is the reason for them not to be interested in keeping your property, and why that keenness in “screwing you”. So when approaching a bank manager or clerk, try to concentrate on attacking the lender as an entity, not the person individually, even if he was the guy who shook your hand when you first bought the property. These guys, understandably, will be following instructions, and so it will be better to befriend them, as they may be in your position tomorrow and could even share some tips with you.
4. Prepare your paperwork and check the value of the property for mortgage purposes, if it is equal or higher than the debt you have.
5. Approach the bank manager, and if possible, the area risk manager, and expose your predicament. Try to have empathy and expect and demand same, they could be sacked by close of business (day).
6. Have a formal notice sent to the bank: It is important the your meeting and your intentions are documented. A burofax is the preferred and cheaper method.
7. Persevere: You are already causing discomfort to the persons working in the branch and to the entity, which is very good. If you have the time try to pay them a visit every day or every other day, although always in a friendly manner. You will manage to stand out from the rest of dacion en pago pursuers and will come across as a man/woman on a mission.
8. If credible, advise them that you are leaving the country as you have managed to secure a 10 year contract as a dockmaster in Antananarivo port, Mauritania, or an equivalent extravagant location. Have your supporting paperwork ready, and if you don’t have it just make it up!
9. Don’t fall for the branch manager scaremongering tactics: Make sure that you show no emotions when they tell you that, if you stop paying, they will take you to court, and that your debt will exponentially grow with all those lawyers’ fees, arrears interest and costs, as bank managers are used to saying. Offer them a friendly grin and the shoulder shrug, which incidentally will also help you train your trapezius muscles. Also, don’t be so silly to wear your best suit and Italian shoes when meeting with the area risk manager. Smart but casual is the norm: sporting sandals, or flips flops, with socks, will do the job. I suggest something like this.
10. And finally, be ruthless, just like they are and have been with you since you first stepped into that branch.

Antonio Flores Mortgages, Property bank repossessions, dacion en pago, handing back the keys, spanish mortgages

Offshore is definitely off. The times of the property owning offshore-based companies are over. The glamour associated with names such as Seychelles, British Virgin Islands, Turks & Caicos etc., has now turned into a stigma. Because there was a time in Spain when, if you went to certain summer cocktail parties or high-flying bashes and you did not own an offshore company based in some fanciful island, you were a nobody. In fact, your lawyer was quickly tagged as unsophisticated, uncreative, in essence, not up to scratch with this new posh trend that was all the rage among the richer.

The Mallorca Provincial Audience (May 2010) has sent a lawyer to jail for almost 4 years and given him a fine or €600K  for setting up a “fiscal engineering scheme to instrumentalise defrauding and money laundering procedures “, in the sale of a property in Puerto Pollensa (Mallorca). In this case, he had set up the structure to, among other aims, avoid (or rather evade) paying Capital Gains Tax (at 35%) on the real price (as opposed to the officially declared) when selling his client’s property.

According to the prosecutor, and the judge in the examined ruling, the investigated  law firm indiscriminately offered offshore companies, via the website offshore.biz site (in which even two Mallorca notaries were mentioned), to their clients with the intention of:

• Minimizing the tax almost to the point of exemption.
• Offering 100% protection to the assets.
• Offering 100% anonymity.

The message this Court ruling has sent out is a very clear one: using offshore companies to hold Spanish property does not entitle the beneficiary to legally avoid payment of taxes in Spain, whether you sell the shares, and alongside it, the property. This applies also to the buyer of the structure, who is not exempt from paying transfer taxes.

The Court Office, in reaching its decision, invoked the following:

• Non-Resident Act 5/2004: Capital Gain Taxes obtained, directly or indirectly, from property situated in Spain, will be taxed in Spain. In particular, the following gains are included: when they are originated or derived from rights or shares of a company, resident or not, which assets are made of up of, primarily, directly or indirectly, property based in Spain. The gains obtained from transferring the shares of a company, resident or otherwise, that attribute its ultimate owners the right of their enjoyment in Spain.
• Double Taxation Agreement between Spain and Ireland of the 18th of November 1986: the gains derived from the sale of property can be taxed where the property is located (for some reason, this was invoked as part of the defence strategy).

In this case, the tax office, assisted by the police, found enough evidence of the crime when they were given authorisation by the court to raid the firm’s premises, in which they found not only crucial information on the transaction (particularly deeds of share transfer and deeds of resignation of director and appointment of new director, both done on the day that the property changed hands, bank transfer slips, etc.) but also a private purchase contract for €875,000 for the property in question, when the price paid officially paid was €425,000.

Finally, the Tax Office’s report puts under serious scrutiny Law Firms that, apart from offering the standard juridical, financial and accounting services, have specialized in the design of schemes and structures of fiscal engineering that are utilized to defraud and launder money. These professional firms, which act as company incorporating agents, don’t have as its object international fiscal planning, but are purveyors of mechanisms for subjective simulation, by inserting physical and juridical persons, national and foreign, in the ownership of the assets they intend to conceal. The mechanisms, according to the Tax Office, are as follows:

1. Incorporation of offshore of property holding companies (offshore-based) .
2. Incorporation of Spanish Companies (mostly Limited-SRL), owned by the above offshore, to manage Spanish property. These companies are merely holding property, having scant bank movements.
3. Appointment of directors different from the ultimate owners, either being the same lawyers that created the structure or, as in the case study, someone paid to do the job (and who has also been sentenced to a jail term, albeit suspended). These persons are also authorised to operate both the offshore and the onshore accounts and are, at times, beggars pulled off the street. 
4. Utilization of the law firm’s clients account to receive and remit transfers, with the intention of a) concealing the true nature of the transactions behind the transfers and b) avoiding compliance with anti-money laundering provisions (thereby making it more difficult to know the real nature of the deal).

As a result of the above court action, the lawyer, the ultimate beneficiary and the director were all sentenced to jail terms, although only the lawyer will have to serve time, for the beneficiary paid up the taxes owed prior to the hearing (€135,000) as well as the fines, and the director was found guilty only of conspiracy to defraud.

Offshore is definitely off, and therefore it would be advisable that anyone willing to sell a property owned by a string of companies opted for not selling the shares abroad, because, not only all the above could easily be applicable, but also whoever was buying them would be buying into problem, unless of course he/she was sitting on a pile of cash he wanted to get rid of…(not advisable anyhow).

It may be interesting to see how this links with this new trend of incorporating UE based companies to avoid Spanish Inheritance Tax, particularly UK based, but will leave the study of this dubious proposal for a separate post.

Antonio Flores Companies, Corporate Law, Inheritance, Property, Taxes offshore companies, spanish capital gains tax, spanish inheritance tax