Antonio Flores’ Blog

On the 12th of March 2020, hours before Spain’s socialist government politicians imposed a nationwide lockdown, their Andalusian counterparts passed an untimely regional Law Decree under the exuberant and encouraging name “Law Decree for the Improvement and Simplification of Laws for the Promotion of Productive Activity in Andalusia”. 

The law contains an undisguised declaration of war on red tape, specifically on certain aspects of the planning laws governing the grant of “build licenses” and more importantly, on the dreaded yet coveted LFOs-or License of First Occupancy or Occupation-, a piece of paper without which you cannot, in theory, turn your property into an Airbnb money-making asset via applying for a “Holiday Rental” registration. 

The revolutionary norm now allows architects to substitute Town Halls in the monopoly of grant of LFOs and gives them powers to sign off properties that, in accordance with applicable laws and regulations, would be entitled to get one (because they are law compliant or where not, because enforcement action is barred due to passing of time); and this is no small feat because, all over Andalusia, many properties would just simply never get an LFO no matter how hard you tried and how long you waited.

Qualified architects will now be able grant LFOs by means of a “responsible declaration”, an equivalent to a sworn oath or affidavit where an architect, subject to certain verifications, will issue a fully valid LFO. 

This is very significant in municipalities that have endemic license processing issues or are short of staff to process LFO applications rapidly. But also, those properties that having been built legally no longer are, due to planning permissions being removed or declared illegal, most notably in Marbella (circa 30,000 units).

Do you want to rent -or sell- your property but you lack an LFO? Get in touch with me and I will sure help you.

admin Property, Uncategorized Licence of first occupation, spanish rentals

In an unprecedented decision, the Supreme Court has “frozen” a judgement passed by themselves…48 hours before.

This unusual situation originated in a ruling of the 16^th of October that determined that the bank is the only party with an interest in getting the loan certified by a notary, a prerogative that will allow them -as lenders- to initiate foreclosure proceedings if the borrower defaults on payments. The importance of this ruling lies with the fact that hundreds of thousands of borrowers could be eligible for a refund. 

The members of the Third Chamber of the Administrative Section of the Supreme Court added that because the lender is awarded this privilege, they should be paying all associated costs. It makes all the sense in the world, if you think about it. Or not, when the decision directly refers to who will pay approximately 8 billion Euros in mortgage taxes, or an average of 3,000 Euros per loan.

The complication with this is that the same Court, but the Civil Law Section of the Supreme Court this time, had confirmed earlier (28/2/2018) that taxes on loans were to be paid by the borrower and to reach such decision, they quoted the “consistent and constant” Administrative Section jurisprudence on the subject matter in dispute.

Jurisprudence, or case law, we know evolves with society and cultural advances, adjusting to usages, traditions and customs. It can take years, when not tens of years, to change. With the tax on mortgages though it has done a U-turn in 7 months, which is inexplicable unless we accept that most senior judges are backing the banks whilst a minority stand by the consumers, or perhaps the other way around.

Be what may, the Court’s Press Office issued a statement confirming that decision will be reached by 31 senior judges of the Administrative Division of the Supreme Court, on the 5th of November 2018. In the ruling they will decide who is to pay the taxes and if the banks, whether clients should claim the refund from the lender or from their regional tax agency, which could then in turn claim it from the lender.

Antonio Flores Mortgages, Property acto juridico documentado en hipotecas, AJD, mortgage loan stamp duty, Stamp Duty Spain, Supreme Court Spain

The Government of Spain wants to give neighbours vetting powers over short-term rental apartments. If the proposed law changes are finally passed, the quorum required in Communities of Owners general meetings to prohibit holiday rental activities will be reduced substantially.

Currently, the required quorum to vet short-term or touristic lets is unanimity; this wants to be changed for a minimum of 3/5 of the voting rights.

The law also wants to define what is a “season or holiday let” as opposed to a “short-term or touristic let”: some of the proponents want to establish a minimum of 45 days for a rental contract to be classified as a holiday let, below which they will be classified as short-term rentals.

This legislative ammendment could deeply impact property investment trends by creating clearly segregated short-term rental buildings or areas, separate from those neighbourhoods that choose to stick to exclusive residential use (by banning letting use).

Real estate agencies selecting properties for clients, and lawyers acting for them in the conveyancing process, would have to ensure what the specifications of each neighbourhood are in respect to potential statutory prohibitions to do short-term rentals.

We are eagerly awaiting further news on this proposed law change.

Antonio Flores Property holiday aparments spain, Holiday rentals spain, LAU Spain, LEy arrendamientos urbanos, short term lets spain

Some days ago, a worried property owner wrote to us with a query relating to his “Community of Owners”, along with a photo of a resolution recently adopted by the President of the said community, in the municipality of Benahavis.

The text read as follows:

1. The President is then allowed to set fines between €30 and €600, depending on the important and seriousness of the matter, when breaching the above articles, regardless if any damage made has been restored: these amounts will be deposited into the Community’s bank account.

2. Penalties must be notified in writing to the owners committing the infraction, describing the specific infraction and penalty imposed, which will be charged directly to the owner.

3. The HOA (Homes Owners Association) reserves its right to take legal action against owners in violation.

After rubbing my eyes in disbelief, I hastily checked up our main source of legislative updates (www.vlex.es) in case I had missed this implausible new legal change that would give nasty and corrupt Presidents and Administrators jurisdiction to suppress dissidence within the community of owners; there was none of it, thankfully.

So, it the above prerogative lawful? Absolutely not. The Juridical Regime of the Public Administration Act 30/1992 grants the State the monopoly of imposing pecuniary penalties or similar fines, without exception, following a due adversarial administrative procedure. This is not to say that a Community of owners may not, following the appropriate procedure to adopt community resolutions, agree on a fixed surcharge for late payment of fees or even impede non-payers the use of communal elements (pools for instance). But never the prerogative to -arbitrarily- sanction specific conducts by its members.

A congress held in 2010 by an association of community administrators to debate Horizonal Property Law matters resolved that “it is not possible to fine owners for breaching internal regulations, even if this resolution is written into the Statutes or voted by a majority”.

Presidents and Administrators who despite the above insist on coercing owners into paying fines could face criminal action.

Antonio Flores Property Benahavis Country Club, Benahavis Hills, Community of Owners President, community of owners spain

Spain’s Senate has approved specific measures against illegal occupiers of private property. Under the new bill, named specially “Amendment to Procedural Act 1/2000 in respect to illegal occupants of property”, squatters will be served with an eviction notice and told to justify ownership of the property through a title deed, or show lack of one on the part of the claimant. If no sufficient justification is provided by the squatters, the court will order immediate repossession of the home with no chance of appeals.

What´s interesting is that squatter´s rights to fight the case in Court -and effectively ‘buying’ an average of 15 months whilst the case in dealt by the Courts- are drastically curtailed under what is a fast-track procedure aimed at preventing, in particular, what the preamble of this described as “extorsion to the owner or lawful possessor of the property with the purpose of obtaining financial compensation as a condition for the recovery of the property”, often conducted by  “very organized mafia-style networks”.

Courts will now serve notice on squatters (identified or not) giving them 5 days to produce a rental agreement, or any other document enabling them to lawfully stay in the property, failing which the Court will order immediate eviction. In addition, under the new law the Courts will have to observe the following:

• Squatters will have no rights other than to produce a valid agreement to cover their stay in the property. Opposing any application to have them evicted will not have suspensive effects.
• Sentences against squatters will have no right of appeal and will be immediately enforceable.
• Social services will be on stand-by in case of eviction of children, elderly or people with special needs.
• The reform will only affect properties whose owners are “private individuals, non-profits and public agencies that own social housing.” It leaves out real estate held by banks and investment funds.

The above measures will become applicable 20 days after the publication of the law reform in the Official Gazette.

Antonio Flores Property eviction tenant, Rental Contracts Spain, Spain eviction, spanish eviction procedure, tenancy laws Spain

A recent writ of accusation by a Murcia-based prosecutor is a stark reminder that certain illegal practices by toxic tenants, and other occupants of real estate, will not enjoy impunity. The writ refers to a non-paying tenant who -in the middle of an eviction process- chose to retaliate against the landlord by stealing, among other items, 2 fans, a mattress, a washing machine, a dishwasher, hobs, curtains, a coffee machine, a microwave over, a table and 4 chairs.

The State Prosecutor is asking that the tenant serves a minimum of 2 years in prison as the value of items stolen exceed 400 euros.

In a similar case, Criminal Court 15 in Valencia has imposed a 14-month prison sentence to a tenant for misappropriating furniture items and a 3,000 fine for causing damage to various others, consequence of “a deep resentment and a direct intention of causing financial and emotional harm to the owner”, according to the sentencing Judge.

In Barcelona, the Appeal Court (Section 10) passed a prison term to a tenant that, with the intention of causing the maximum possible damage, knocked walls, pulled pipes and cables, broke shutters and tore curtains and generally, left the property in a lamentable state of despair.

Its worth noting that in all the rulings, the actions caused by the tenant exteriorize a deliberate and intentional desire to cause monetary loss to the owner.

If the above scenarios want to be avoided by both tenants and owners, it is highly recommendable that parties carefully examine the property to be rented and draw up an inventory (photographic or video if possible) before granting possession.

Antonio Flores Property eviction tenants Spain, rental agreements spain, rental law spain, spanish tenancy agreement

The Catalonian separatists’ independence adventure has ended up in economic failure: no longer a Catalan bank has its HQ in the region, following Banc Sabadell and Caixa’s hasty departure to pastures new -Valencia-. And they’re not alone: fearing massive loss of clients and being left out of the protective umbrella of the EU, hundreds of companies are following suit in what could be, potentially, an unprecedented financial debacle for any European country or region.

But rather than macroeconomics, what interests me is the -possibly- hundreds of foreign investors with private contracts exchanged for property in Catalonia that have been caught in the middle of this nightmare. What are their options? Should the proceed, or wait? Can they rescind and recover their down payment, or must they complete or lose their deposits?

We can confirm, almost without margin for error, that no contract signed for any property in the Catalonian region would include a “political unrest” get out clause. You can probably say the same for any EU country. Unfortunately, political unrest is exactly what is happening in the region, as confirmed by the Foreign and Commonwealth Office in a recent warning to travelers.

So, without contractual stipulation to the contrary, it appears that those who deem the situation uncertain, to say the least, don’t have a remedy under Spanish law…or perhaps they do.

The principle clausula rebus sic stantibus  (Latin for “things thus standing”) is the legal doctrine allowing contractual undertakings to become inapplicable because of a fundamental and extraordinary change of circumstances not envisaged by the parties. It is essentially an “escape clause” that makes an exception to the general rule of pacta sunt servanda  (“promises must be kept”) and favor contractus (“conservation of contracts”).

For instance, the hotel chain Accor persuaded the Supreme Court that the 2008 crisis impacted tourism so dramatically that a 29% reduction in the rent for a hotel was acceptable. Similarly, a couple who had specifically intended to finance the final payment on an off-plan property and were left “high and dry” by banks following the onset of the worldwide financial crisis, were granted remedy. Still, the Spanish Supreme Court remains cautious when applying the clause and recommends a case by case analysis of each contractual scenario.

As for the buyers of Catalonian-based property, we suggest a wait-and-see approach as the next days, if not weeks, will hopefully relax the political turmoil and allow for safe decision-making.

Antonio Flores Property buy property catalonia, property Barcelona

Off-plan property resales have been hard to come by since the days of the real estate boom; in fact, they have been all but absent. But with the property market finally rising from the ashes of the devastating real estate crash and new build properties being gradually offered to the public -and fast snapped up by speculators and consumers alike-, many off-plan buyers are finding that there is now a market to sell on their contracts before they get the keys to the properties.

What are their options from a legal and tax viewpoint? There are two methods to transfer the property rights (if should be noted that both methods will require the consent of the developer):

• Method 1: The current buyer terminates the contract with the property developer who will refund the deposit paid and, simultaneously, will sign a new a fresh new off-plan contract with the new buyer. Any profit or premium will be settled between the parties although, almost always, the developer will demand just compensation -often times called commission- for consenting to the deal. This method would avoid -and evade- taxes as it is not obvious that a resale has taken place. However, property developers have been in the past investigated for these practices and can be made joint and severally liable for non-payment of taxes, for which reason this solution is not very popular.
• Method 2: The current and the new buyer exchange contracts for the sale of the off-plan property, pay the relevant purchase transfer tax and inform the property developer. The latter party will then either draw up new contracts with the new buyer or just wait until completion, when they will transfer title to the new buyer. From a tax viewpoint, an off-plan sale will attract a heft enough 10% VAT plus 1.5% Stamp Duty for the buyer when he/she completes on the sale. But if a new buyer comes in, he/she will have to pay, in addition, Transfer Tax (8% minimum in Andalusia) on the assessed value of the under-construction off-plan unit, or the value of the premium, whichever the highest. For its part, the vendor will have capital gains tax (19%) on the net profit (the premium minus any commissions paid) although few choose to pay it.

Clearly, buying an off-plan unit can place excessive costs on the new buyer, making it a prohibitive proposal. It is suggested that prior to offering this to a prospective purchaser, real estate agents lay out the total costs (VAT & Stamp Duty, Transfer Tax, CGT, theirs and the developer’s commission) and where necessary, make a more evenly distribution.

Antonio Flores Property off plan spain, Property development spain, tax off plan spain

The effects of Brexit appear to have reached some Spanish government offices, 
inclusive of Courts of law. The Directorate General of Registrars and Notaries (DGRN), a regulatory body equivalent to the UK Notaries Society, has recently issued a startling ruling (14 Sept. 2016) rejecting the validity of all Powers of Attorney (PoA) granted by a qualified United Kingdom “Notary Public”, on grounds that the authority and competence of these British professionals is not equivalent to that of their Spanish peers.

The ruling went as far as unbelievably stating that only UK-qualified “notaries-at-law” or “lawyer notaries” could validly issue powers of attorney, negating this prerogative to plain “notaries public”.

As was expected and with immediate effect, the erratic decision sent shock waves throughout the network of thousands of professionals, directly or indirectly, involved with expat legal work. And for a reason: hundreds of Court cases could be dismissed (one of Lawbird Legal Services’ case among many), thousands of property transactions could be voided (on the upside, along with their mortgage loans) whenever such PoAs were used and overall, legal chaos.

Alerted by this misguided ruling, the Notaries Society, based in Ipswich, issued the following statement:

1. A Notary is a qualified lawyer whose work is recognized internationally, unlike the work of Solicitors. The primary function of a Notary therefore, is the preparation of documents and the authentication of clients’ identities and signatures principally for use abroad.
2. Some Notaries are also “Scriveners”, who mostly operate in London.
3. “Notaries-at-law” or “lawyer notaries” do not exist as a separate profession.

Hundreds of Spanish Notaries and Registrars, fully aware that their regulator´s historical cock up would certain bring embarrassment to their reputation but more importantly, cause incalculable financial damage, have taken an unusual step: completely ignore this binding ruling and fully accept the Powers of Attorney correctly granted by UK Notaries Public.

And as if to soften the blow, the International Law Registrars Council has issued a non-binding report where it is confirmed that documents signed by UK Notaries Public, who are appointed by the Archbishop of Canterbury and are regulated by laws as ancient as the Ecclesiastical Licenses Act 1533, an Act of the Parliament of England.

Antonio Flores Legal Practise, Property POA UK Spain, Power of attorney conveyance property spain, Power of attorney conveyancing property spain, Power of Attorney UK Notary Public, Spanish Wills, Use of UK POA Spain

Two Court rulings have each confirmed that real estate agents should serve a minimum of 2 years in prison for defrauding both buyers and sellers in at least two property deals. The punishment meted out to these professionals relates to the dishonest -albeit not common- habit of structuring their commission payment, in addition to what % they formally agree on with either party, on the difference between what the buyer pays and what the seller receives…without telling either party what these amounts were.

The Courts, on finding the estate agents guilty on counts of criminal fraud, concluded the following:

• Both buyer and seller were unaware of the real terms of the deal, having the estate agent effectively obtained the consent of both parties on different prices to those reciprocally agreed with either party, causing loss to both.
• The dual agreements are not a reflection of the real facts, the price for the buyer and the vendor are different and the “agreed commission” is not real, as it was jacked up.
• The “buyer’s price” was not the lowest he could get away with and the “seller’s price” was not the highest the property could achieve, owing to an artificial and fabricated deal.
• The Court refutes the defense allegation that the real estate bought and then sold the property, at a profit, on grounds that it is improper conduct for real estate brokers to act in such manner, in addition to concealing the true nature of the deal to its customers.
• The Court neither accepts that both buyer and seller were satisfied at the time with the terms of the agreed transaction: they probably were as they did not know otherwise, owing to the disinformation and deception devised by the agent.
• There is an aggravating circumstance in that the real estate agents, operating via an establishment opened to the public, added further credibility to their actions and facilitated the removal of objections by buyer and seller.

Similar behaviours as those described are known to have happened in the Costa del Sol but the likelihood of them resurfacing, considering that approximately 95% of all transactions included 2 real estate agents, is mostly residual.

Antonio Flores Property, Scams real estate agent commission, real estate agents fraud, spain real estate agents, SPanish litigation lawyers, Spanish property