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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


Archive for January, 2012

New Restrictions on NIE Numbers Put Off Investors

January 25th, 2012

A row between the Secretariat of Labour and Immigration and the Central Police Station is threatening to discourage hundreds of potential property buyers from taking the plunge. The former has ruled, against the opinion of the latter, that the obligatory NIE numbers can no longer be applied by representatives with a power of attorney and so personal attendance is mandatory (as from the 3rd Jan 2012).

Although the reason behind the disagreement appears to be how both Government offices interpret a particular norm, the consequences can be devastating given that NIE numbers are now required for almost anything and many people will just not feel that Spain is a country worth investing in if you need to queue up at 6 AM at police stations, get a ticket, walk to a specific bank to pay the fee and then go back to the police station to apply for the number: buying property, setting up a business, signing up for a job and many other legal matters just don’t deserve this third-world treatment. In Madrid, a city that aspires to become a European financial hub, you can expect a 3 month wait for an appointment to apply for the NIE.

Also, there is a total lack of uniformity in what documentation is required: for EU and Non-EU citizens alike, some police stations in the Costa Blanca are asking for notarized documents of the property one wishes to buy, others will accept a reservation contract (original or copy) and proof of payment of deposit and if you are not around to pick the number up, you will have to give an official power of attorney to someone if you are in Ibiza. The random nature of documentation requirements is perplexing to professionals and unbearable to investors.

Spanish Consulates, not particularly equipped to assist investors, have been commissioned to process applications and return an NIE number within 5 working days (RD 557/2011), a tall order for some of such offices not used to dull admin work. And that is if you have a consulate nearby, as cost-cutting has meant that the Spanish Government has closed many (e.g. Manchester and Hamburg), so if you happen to be a billionaire currently in Vladivostok looking at buying a property for a zillion euros that you have already visited and reserved, and you are told that you need to fly to Moscow, or back to Marbella, to apply for the NIE that you forgot to get whilst property hunting, then Spain has a problem.

The property industry is dismayed by what are probably the weirdest, craziest and most idiotic laws around Europe, and is hoping that as with most things, common sense will ultimately prevail.

Property ,

Spanish Courts Accept Crisis Woes and Protect Defaulting Buyers

January 6th, 2012

The Provincial Audience in Cordoba recently passed an interesting sentence in a dispute between an off-plan property purchaser and a developer, on account of the inability of the former to complete the purchase due to lack of financing and the unwillingness of the latter to refund the deposit, on those grounds.

The buyer had argued that he was a victim of the financial crisis and requested a full refund, considering the downturn of the economy as an Act of God. The developer, in turn, counter-sued and requested that the contract was complied with (specific performance suit) and, only in the event that the buyer was declared unable to complete, due to insolvency, the contract was terminated and the deposit kept.

The courts started stating some general observations, applicable to most contracts, whereby:

  1. It is a well-known fact the property buyers require financing to complete property deals.
  2. Prior to entering into an off-plan property contract, buyers have a duty to establish their credit-worthiness and the financial means available to them.
  3. Obtaining financing from a lender, where the balance of the price is not readily available, is a buyer’s obligation.
  4. To the extent that the buyer is able to complete, the courts will not examine the required diligence in the buyer’s activities or actions in respect to compliance with his obligations.
  5. As a consequence, in the event of the buyer’s insolvency, he still has an obligation to complete the sale and should this not occur, the developer will be entitled to formally terminate the contract (which is exactly what happened here).

But then, in a solomonic ruling, established that indeed the crisis could be considered as a mitigating factor, and upheld the following considerations:

  1. That penalty clauses are envisaged by parties as a means to fix the value of the loss, in case of full or deliberate contractual default.
  2. That in this economic day and age, the financial cataclysm that has affected lenders and the drastic downturn of the property market are events that property developers cannot stand aloof from, even if they can be considered to be “risks of the trade”.
  3. That although in this case the buyer is the victims of the debacle, property developers are well aware that it is now no longer possible to find a buyer at year 2007 prices, and thus cannot stay in “limbo”, estranged from reality.
  4. That in this case, the buyer did not default fully but partially, as a result of events outside of their control, and therefore the penalty clause has to be reduced as a result of the necessary sweetening  or mitigation of the degree of default, to avoid unjust enrichment.

The Cordoba courts, on account of the above considerations established that, notwithstanding the content of the penalty clause, it was fair and equitable to reduce it by 50% as the buyer had not fully defaulted

Litigation , ,