Antonio Flores’ Blog

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

It is a well-documented fact that the Spanish Costas’ rich variety of foreign residents increases the complexity of legal issues and driving licenses -that turn out to be fake- is one of them.

This same paper reported some months back that a US national was fined €500 for carrying a ‘bogus’ international driving license, a lucky escape I should say considering that a middle-eastern businessman is facing prison time for using an “International Driver’s License” issued by an entity named as International Automobile Alliance (IAA), purportedly based in New York.

According to the State Prosecutor’s writ of accusation, the license was deemed “fake in its entirety, having a photograph affixed by the owner or a third person” and, based on those findings, requested the Court that the alleged offender is sentenced to a minimum prison term of 19 months for forging a public document and plus an additional criminal fine of 12 euros/day for a period of 18 months if the offender is unable to show evidence that he did have a valid driver’s license from another country (it now appears that only U.S. officially-approved “AAA” and “AATA” associations can issue such international licenses).

The are tens of online ‘businesses’ selling fake driving licenses, along with passports and IDs. One advertises its business offer as having […] year of experience producing original quality real/false passports, ID’s, drivers’ licenses.

Alongside these obvious clandestine operators, there is second tier of businesses that -purporting to have a specific Government official approval- state they can issue valid international driving licenses pursuant to Annex 9 of the Geneva Convention and Annex 6 of the Vienna Convention.

To sum up, a) international drivers’ licenses are generally only issued by officially recognized agencies to drivers who already have a valid license from the country and b) the agencies issuing them must be approved by the specific Government.

Antonio Flores Legal Practise Driving in Spain, Spain Driving license, Spain passport

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

We often hear statements relating to the implication of contracts and other legal documents that are in a language different from Spanish. One of those statements has, by its own right, risen to the category of legal myth/urban legend: I am referring to the belief that a contract signed in Spain in a language different from official Castilian (or for that matter regional languages) is null and void and thus, does not create rights or obligations.

There is an evolution of the above far more twisted: that if a person that does not understand Spanish signs a legal document in this language, they can challenge it in Court where, incidentally (according to a minority of expats) the Judge should -at the very least- know English but if not, a translator should always be provided at to ensure his/her rights are protected.

The following notes should help dispel any potential confusion as to what is correct from what not, “language-wise”:

• A document of a contractual nature can be drafted in any language for which an official translation service is available. This implies that contracts in any language that is official somewhere in the world is legal, since a valid translation can be provided.
• Not understanding the content of a contract is not an excuse, as much as ignoring the law excuses no one, as the principle goes (save for some exceptions, notably in financial or investment contracts).
• Pursuant to art. 142.1 of the Civil Procedure Law, “In all judicial procedures, the Judges, Senior Judges, Public Prosecutors, Court Clerks and other civil servants in courts and tribunals shall use Castilian Spanish, the official language of the State.”, but it also adds in 143.1 that “when a person who does not know Castilian Spanish nor, in the event, the own official language of the Autonomous Authority has to be questioned or make a declaration, or when it is necessary to personally let him know a decision, the Court Clerk may issue an order authorizing any person who knows the language concerned to act as interpreter, in which case the said interpreter shall be required to swear or promise that the translation is true to the original.”
• And finally, in accordance to art. 144.1, “any document worded in a language other than Spanish or, as appropriate, the official language of the Regional Authority in question shall have a translation of such document attached thereto.”

Antonio Flores Legal Practise Contracs spain, Law in Spain

Back in February 2016, the Tax Office in Andalusia divulged interesting IHT data: only 7% of all inheritors in this region had had to pay tax following the demise of their loved ones, at a time when maximum allowance per beneficiary was of €175,000.

Of the 7% who had to pay IHT, only 2.1% were beneficiaries classed as next-of-kin of Group I (children -natural and adopted- and other descendants under 21) and Group II (children and other descendants aged 21 and over; parents and other ascendants, and spouses, with the remaining 5% being more distant relatives or beneficiaries with no family ties with the testators.

In 2017, the exemption was increased to €250,000, thus reducing even more the overall impact of this annoying tax.

In 2018, a further tax cut has increased the exemption by €1,000,000 -provided the beneficiary does not have savings or assets of up to the same amount-. This exemption, which applies to residents of Spain but also, any inheritors -foreign or not- who at the time of death of the testator were residents of the European Union or European Economic Area (EEA), means that pretty much nobody will pay IHT in this region, except of course if the inheritor happens to be a resident of the UK and Theresa May sets Britain on course for a hard Brexit (if she has not already done).

For if the UK do not negotiate a separate agreement with the EU to maintain the status quo currently enjoyed all EU/EEA residents, the negative impact in inheritance tax will become particularly visible for thousands of potential inheritors from the UK, for whom the maximum deductible amount will be -on average- €16,000 per inheritor, just as any non-EU citizen.

The negative effects will equally translate to income obtained in Spain, which will be taxed with 24% -as opposed to 19% now- and without the possibility to deduct costs and expenses, and CGT relief when reinvesting in a habitual domicile, which disappears.

Antonio Flores Immigration, Inheritance Buying Property Spain, Inheritance Spain Brexit, inheritance tax spain allowance, Spain and Brexit

The criteria for residence for tax purposes varies considerably from jurisdiction to jurisdiction, and “residence” can be different for other, non-tax purposes. For individuals, physical presence in a jurisdiction is the main test. Some jurisdictions also determine residency of an individual by reference to a variety of other factors, such as the ownership of a home or availability of accommodation, family, and financial interests.

New criteria in Spain to establish tax residency for 2018

The Spanish Supreme Court, in a recent ruling of the 28^th of November 2017 (only released now) has departed from the traditional understanding of the concept of physical presence the Spanish Hacienda was using to determine the place of effective residency for tax purposes.

According to the Spanish Tax Office, the main criteria of physical residence -more than 183 days spent in Spain- would not take into account what they called “sporadic” stints in another country, as it was necessary then to prove effective residency in another country. In addition, the Tax Office was introducing the subjective criteria element -what was the real intention of the taxpayer (?)- to determine effective tax residency.

The Supreme Court has now altered this notion and stipulated that residency for tax purposes, if determined solely in accordance to the effective time spent in Spain, will no longer be influenced or linked to an element of will or intention to reside abroad but to a simple day-count exercise (number of days in Spain vs. abroad), thereby eliminating the subjective component of the reasons for residing abroad in favour of the mathematical criteria.

Antonio Flores Taxes 720 form spain tax, Spanish Hacienda, Spanish Tax Residency

The collapse of Continental Wealth Management (CWN), an Alicante-based advisory firm, has left tens -possibly hundreds- of investors worried sick.  CWM was not regulated to provide investment advice in Spain and was loosely regulated to provide insurance advice, through German-based Trafalgar international (who also does not appear to be registered in Spain).

In the world of the investment ‘smoke and mirrors’ expat business, where few things are what they appear to be and what`s real is often portrayed to be something else, clarifying concepts becomes a necessity.

So, let’s get under the bonnet of these clandestine firms (this article does not allude to properly regulated advisory companies) to know what are the real chances of victims caught by the lack of scruples of runaway bogus consultants:

• Most of the IFAs currently operating with the expat market in Spain are not regulated.
• Equally, some of insurance or pension providers have never been regulated to operate in Spain (Old Mutual Isle of Man, Premier Group Isle of Man, Generali Worldwide Insurance Guernsey, RL 360º etc.), thus falling foul of Spanish laws that declare all such policies in violation of national laws and consequently, null and void.
• Very often, investments are carried out via ‘life-insurance/assurance companies’ that provided wrappers, whole-of-life or unit-linked policies. These policies are linked to an investment portfolio.
• Whether offered validly in Spain or not, life insurance policies linked to an investment are being declared void by the Spanish Supreme Court because they do not consider them life insurance policies. The reasons? Well, the calculation of the premium and payout lack ‘actuarial’ methodology, there is no transfer of risk from insured to insurer and it is irrelevant for the insurer if the insured party lives over a certain date, or dies.
• Courts ruling on the nullity and voidness of a life insurance policy will order the company to reimburse the premium in full (minus any surrenders made), plus annual legal interest and without detraction of fees or commissions charged.
• Financial or insurance mis-selling can be said to be automatic where the agents are not regulated (nobody can provide valid advice if not regulated). This violation of mandatory laws implies the responsibility of the principal (i.e. insurance or pension providers).
• Claimants should aim for Insurers, Investment Funds and Pension Providers.
• Lawyers should be able to identify the best way forward, always aiming for compensation (and not retribution).

Antonio Flores Litigation Generali Worldwide Insurance Guernsey, Irish Life SPanish Investment Bond, Old Mutual Isle of Man, Premier Group Isle of Man, Prudential wealth management, RL 360º, Skandia

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