Joint Ownership

[Unregistered]

Please can you give me some advice on the following:

A friend, and his wife, own a finished property in Spain which they use for holidays, they do not have the Escritura for it yet but are in contract with the developer who will at some point complete this process.

My friends wife is very ill and he has approached me to ask if I would replace her on the contract with the developer as joint owner. This would involve me getting a NIE number and signing the contract once his wife has been removed from it.

He has said that the developers office has said its a simple changeover of names but reading some of the information available online I think this is maybe not the case and that there may be some significant taxes involved.

Also I assume this would only give me a 50% holding in the property although his intention is that on his death I would own the property outright.

Any advice on any problems and costs with this would be gratefully received.

Tim

[Lawbird Lawyer]

Dear Sir,

This can be arranged providing the developer agrees to it. If there's a clause in the Private Purchase Contract whereby assignments are forbidden you will not be able to do it.

On you doing this, you have to pay 7% Transfer tax to the Tax office so that 50% is now under your name.

Regarding the remaining 50% it will be under your friend's name. You can later on buy him out of his share (the 50%) and pay only 1% Stamp Duty on the full property value, thus waiving the hefty 7% Transfer tax as you are already a joint owner of the property.

The VAT is going to be raised for new builds (off plans) from 7% to 8% as from July 2010.

We have a specific thread on this webiste covering the topic of Deeds of Dissolution of Joint Property Ownership:

Dissolution of Joint Property Ownership in Spain - 14th November 2007

Yours faithfully,
Raymundo LarraÃ*n Nesbitt

[Unregistered]

Thank you very much for the response, this is as I thought with regard to the tax.

As the property is only under a contract and strictly speaking still belongs to the developer would this cause problems with my friend's desire for the property to pass to me in total when he dies?

I also assume that the 50% my friend would still own would have to be left to me in a will or it would go to his estate/family, as I would only be a joint owner and not related to him.

Tim

[Lawbird Lawyer]

Dear Sir,

You're welcome.

Your friend can indeed bequeath you his 50%. However you will be liable to pay Spanish IHT. As you are a non-relative then depending on many factors you are going to pay much more than if you just purchased outight the property from him through a DJPO as explained in my prior post.

Please read our article on the matter of the IHT sliding scale dependant on the value of the estate bequeathed:

Spanish Inheritance Tax: How much is it? - 1st February 2000

Yours faithfully,
Raymundo LarraÃ*n Nesbitt