Helping Brother-in-Law

[Emnick]

Hello All,
I am new to the forum so hope you can help;
My brother-in-Law is spanish and is a property developer. It appears that he is some financial trouble and has asked me for a loan of about £85k.

He says that he will sell me one of his apartments for this amount. Its an apartment of three bedrooms and three bath rooms and IMHO well in excess in value of the £85k.

I get the impression that he is stopping the bank from re-possing the apartment and by selling it on they cant get it. For all purposes the apartment will remain his, and he will pay me interest on the'loan' which I will pay tax on in the UK.

If the property is sold off too cheap can the spanish bank 'take' the property from me anyway.
I know that in UK the land registery would see if a property was under valued is it the same in spain and could I get into any legal issues if I help him
Thanks for any info

[Patricia]

Hello Emnick,

It is a somewhat complicated situation as you are taking a risk and there are personal interests involved. It would be convenient to make sure that your brother in law had no other debts with that bank, and you will see why:

As long as the bank received their money and the mortgage was cancelled, there would be no risk, but just if the only debt that your brother in law had with the bank was related to the mortgage that is on the property.

If you only declare the 85.000 Euros, you must take into consideration various things that can affect you as you will hold ownership of the property for all purposes ( even if not in reality ):

• The 7% of income transfer for the purchase ( or the 1% of the AJD - Stamp Duty - if it is the first property transfer ) will need to be paid for the price that the tax office establishes and not for the price that will be declared on the public deeds; if you pay on the value to be declared you would most probably be exposed to get a supplementary demand for tax.
• When you wish to sell, you will have to pay a great amount of CGT ( Capital Gains Tax ), as you are buying for a much lower amount that the selling price ( you will be selling for its real market value, say a minimum of 200.000 Euros for a 3 bedrooms apartment, increasing the CGT )
• Each year of ownership, as a non-resident, you will need to pay the Income Tax, as well as IBI ( Council Tax ), Waste tax and Community fees.
• You will receive the plusvalia in your name.

If your brother in law had more debts, we advise you not to make that transaction as you could be considered accomplice of a crime of concealment of property. It seems that your brother in law may be trying to become insolvent and get all assets out of his estate, and it is better not to collaborate to avoid taking risks. An option is that you could then cancel the mortgage with the 85.000 Euros and then he gets a new mortgage on the property in your favour, so the property would remain in your brother-in-law´s name, though this is only possible if the property is free of any other mortgages or embargoes.

Regards,