New Comprehensive Advisory Service for Property Owners

Owning a real estate property is a big responsibility. To protect your rights as an owner, your property must meet all current legal and technical requirements. To give you the peace of mind that your real estate property does meet these requirements and is fully protected legally — both now and in the event of any change in the law — Tarraco Iuris law firm would like to offer you its comprehensive advisory service for property owners.

Based in Tarragona, our specialist team of lawyers and technical experts are ready to handle all your properly-related legal and administrative needs, including the handling of any mediation process and other procedures and the drafting and lodging of documents for the Spanish authorities (local councils, provincial and regional governments, the cadastral register, the Land Registry, notaries public, the courts, etc.) or any third parties (adjoining property owners, neighbour associations, the community of owners, entities involved in expropriation processes, etc.).

To legally protect your property in Spain, we offer a complete range of technical and legal services that includes:

1. Helping you obtain a NIE (foreigner ID number required for tax purposes in Spain)
2. Drafting all property-related contracts, including preliminary, option-to-buy, purchase and sale, and lease agreements
3. Verifying property charges with the Land Registry
4. Verifying property zoning with the local council
5. Verifying any debts owed by the seller to the Community of Owners
6. Verifying that all tax due on a property has been paid (municipal property tax, tax on income from real estate property, etc.) and drafting and presenting any corresponding tax declarations
7. Providing an estimate of taxes and expenses so you can budget for the cost of transferring a real estate property
8. Verifying the applicable marital or inheritance law and advising you on the legal conditions for purchasing or transferring a property
9. Drafting title deeds for executing property transactions
10. Accompanying you to sign title deeds and any other notarial instruments, acting as advisers and/or translators
11. Assisting your negotiations with the bank for using the property as loan security
12. Registering title deeds with the Land Registry
13. Informing the local council of a change of ownership for the purposes of local taxes and fees
14. For sales by non-residents, preparing and presenting declarations on tax withheld for Spanish income tax and handling the collection of any refund
15. Preparing/lodging applications for:

a. Certificate of occupancy and energy efficiency certificate
b. Building technical assessment report
c. Certificate of structural soundness and certification of construction age

16. Plans and topographical surveys
17. Undertaking boundary demarcation and mediating in conflicts with neighbours
18. Undertaking historical investigations on properties and updating the cadastral record for divided or joined plots
19. Advising you on:

a. Utility connection and the possible use of wells and springs
b. New construction, reform or landscaping projects
c. Business projects
d. Road and path refurbishment
e. Land and building assessment

Are you sure your property is fully protected legally?

Do not hesitate to contact us for further information. Please contact us for any service you require that is not listed

Tarraco Iuris global management

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Acquisition of property by non-residents: important issues that must be considered

We take a lot of risks when deciding to buy a property in Spain. If
the seller is a non-resident owner, there are specific risks that are usually not taken into account by investors.

A big part of the real estate on the Spanish coast belongs to owners who do not reside in our country and it is usually a house or apartment for holiday. If we buy this real estate to owners who are not residents, we must not forget the need to
be cautious to avoid later unexpected problems with the administrations.

The most common risk is the obligation to pay the council tax on the increase in value of urban land (the so-called “plusvalía municipal”). The law provides that this tax should be paid by the seller, and so, the buyer does not usually care about this expense when calculating the total cost of the investment transaction. However, when the seller is not a resident, the law obliges to pay this council tax to the buyer as a substitute of the seller, the one who should be actually required to pay it. This exception to the rule has its own logic, as it tries to avoid that the administration has to prosecute abroad the non-resident sellers who did not pay their taxes voluntarily, because when they sell their property in Spain, they very often do not retain any other property in the country, and, therefore, they are technically insolvent. In this case, the municipality requires the payment of the tax to the party who is closer and this is the buyer.

That is why during the registration of the purchase contract we should require the seller the corresponding provision of funds (or withhold the foreseen amount of the tax from the money that is still owed ​​to the seller for the property). If this exception to the general rule is not considered and no precautions are taken, in the case that the municipality requests that we as buyers pay the tax on the increase in land value because the seller did not pay this tax freely, we will have no choice but to undertake this payment, because, before the Spanish administration, we would be the only one who is obliged to pay. Another thing is that we can claim ourselves afterwards from the seller what we have paid to the municipality, through a civil action against him.

Carlos Prieto Cid – Lawyer

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Planning your succession by setting up a company

One of the most important legal topics for owners of apartments or houses in Spain is how to transfer this property to their heirs with minimal tax and handling cost. An interesting option is to set up a trading company (or other type of legal entity) and transfer the property to it

The following pattern is very often repeated in many families, who spend their holidays every year in Spain: a couple buys a property by the sea to come here every summer with their children; the children grow up, create their own family and continue spending the holidays with their own children in the house of the parents. The grandparents, often pensioners, keep the property in stand and handle all related processes, while the children spend with the grandchildren their holidays there. This situation persists without any problems until the moment where the grandparents can no longer take care of the property for reasons of age. From this point on, and especially after the death of grandparents, the new co-owners have to face, if no precautions have been taken, apart from the usual problems of handling an inheritance, the problems of the management of the property, which is alternately used by the heirs. In addition, the summer residence of the family is often not used exclusively, and the time periods in which the family does not use it personally, is rentes to tourists, thus creating rental income from property.

One way to simplify the procedure of inheritance and, above all, to allow easy control of the house and the income it can generate, is to create a commercial company, which eventually becomes the owner of the property. It would be ideal to set up the company before the acquisition of the property takes place. In this case, the company would already would be the owner of the property from the beginning and the cost of the transfer of the property from the previous owners (the grandparents in the above example) to the company does not arise. But even if this is not the case, the tax costs of this transfer are lower than that of the transfer to the children through inheritance or gift. Shareholders of the company may change over time (you can include other children and even their spouses) without change of ownership, which would imply costs and taxes on the transfer of property.

Carlos Prieto Cid – Lawyer

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Under the new Entrepreneurs’ Law, a residence permit can be obtained by purchasing a property in Spain

In enabling this, the Spanish government is attempting to reinvigorate the property market by attracting foreigners from outside the European Union with the granting of a residence permit for investing in Spain, which brings the added benefit of being able to move virtually freely around various member states under the Schengen Agreement.  

Here, too, there is a danger that an investor will view the purchase of a property as an opportunity to do business in Europe.  This can mean that they fail to check sufficiently thoroughly as to whether the purchase of the property is safe and reputable, as they want to take advantage of the opportunity to gain legal residency in Spain.  The risk is the same as for the tourist who wants to enjoy their holiday rather than attending meetings with lawyers.  In this case, too, the investment is a means, not an end, for just as the tourist sees the acquisition of a property as a means that secures them their holiday in Spain, the entrepreneur sees their opportunity to obtain a residence permit by purchasing a property, which then enables them to move freely around the Schengen area.  Both view getting adequate protection for their purchase as unnecessary.  If any problems subsequently arise, they find themselves compelled to find a lawyer to solve the problems arising from their failure to seek independent, professional advice.  However, by then it is often too late, and if there is a solution, it will involve much higher costs than if they had sought advice at the right time.  Well-advised investors can avoid making such mistakes.

Carlos Prieto Cid – Lawyer

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Purchasing property in Spain as an investor, not as a tourist

Each year, many of the millions of tourists who spend their holiday in Spain decide to buy a property in their destination country.  However, when investing their savings in Spain, they often act whilst still in a holiday mood, and make major decisions without due care and attention.

In almost any language, the term ‘tourist’ leaves a slight aftertaste in the mouth.  Airlines offer their cheapest tickets under the heading ‘tourist class’, while in every country that survives on tourism – and Spain is no exception – tourists are seen as easy prey who are only in town for a short period of time and can easily be taken for a ride.  This image of the typical tourist, whom it is easy to hoodwink and escape unpunished, is largely down to their poor language skills and lack of knowledge of the local customs, but also because tourists are on holiday, of course, and want to enjoy their short time away from home and are therefore relaxed and less vigilant.  As a result, they do not act with the same amount of care as they might in a similar situation at home.

Purchasing a property always involves a large outlay.  In many cases, sums are invested which represent many years of saving.  Such a decision should be given the appropriate degree of protection and made with as much information as possible on the potential legal and financial risks.  Sadly, as lawyers, every day we see how foreigners are conned when purchasing a property and lose their money as a result of failing to seek advice.  Often, people think they don’t need any advice, but then comes a rude awakening.  The cost of an independent consultation is minimal compared to the often hidden dangers when signing a contract of sale for a property; and such advice can only be independent if it has no connection with any other professionals involved in the sales contract.

Carlos Prieto Cid – Lawyer

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Building Energy Efficiency Certificate: a new requirement for the sale of real estate

The Spanish Royal Decree 235/2013, of 5 April, has just come into force. It approves the basic procedure for the certification of energy efficiency of buildings. Under this new regulation, from June 1st 2013 on, you cannot validly formalize contracts for the sale or lease of property without the submission of such certification.

Real estate selling management has become a very difficult task in the last years, but not only because of the crisis: the continued imposition of new legal requirements has also hindered this sale management, with the excuse to increase the guarantees for the buyer. For example: recently, we have found that it has become impossible to record a property purchase contract in the Registry of Deeds if the transfer of ownership has not been previously communicated to the municipality concerned, so that the tax popularly known as “plusvalia” could be calculated and paid. Previously we had also found that, in the case of sale of dwelling, it has become necessary to prove its habitability by filing a document that, in many cases, costs a lot to get (or at least, a long time). And in most cases, in which such statements only come to ratify the existing factual situation, its demand has only served to slow processes and increase the costs and the bureaucracy around the sale of a property, which are already excessive.

The last obstacle to be overcome by sellers of property is the obligation to provide buyers or tenants the BEEC energy certificate confirming the energy efficiency of the house. This document will describe how the house effectively consumes electricity and will include objective information on the minimum energy requirements so that future owners or tenants of the building (or a part of it) have the opportunity to compare and evaluate its performance with other similar proposals.

The purpose of this regulation, allowing consumers to compare the energy efficiency of buildings, is to promote energy saving investments and also more energy efficient buildings in the housing market. In addition, this guideline helps to report information about carbon dioxide (CO2) emissions from the residential sector, which will facilitate the adoption of measures to reduce emissions and improve the energy rating of buildings. Laudable goal, of course, but in a very long term, if there is something new to be built in this country. Nowadays, what we have is a huge offer of buildings that do not find a buyer and selling them has become with the new directive even more difficult.

Carlos Prieto Cid – Lawyer

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The risk in buying inherited real estate

Buying real estate is always an important decision because it involves a significant investment. Thus, you should always think about the consequences and know exactly what you risk in your case.

Each case has its own set of problems. Today I want to consider a very specific situation: the children or the surviving spouse inherit a house or an apartment, where the deceased person had his or her permanent residence. During the signing of the necessary notary documents, to reduce the high Spanish inheritance tax, heirs are happy to listen to the proposal for including a declaration in the document of acceptance of the inheritance saying that they have no intention of selling the property in the next five years: this way, it will save quite a large sum for payment of the tax or even pay nothing, and the instrument of acceptance of the inheritance may also be registered in the land registry without problems.

As time passes, the heirs forget that at the time of the acceptance of the inheritance they have signed this declaration to take profit of this exemption from the tax, which was notarized, and then someone appears offering  a very reasonable price for the property (it has happened often so in the golden days, long before the crisis began). Then the heirs decide to sell, and therefore the buyer acquires the property and agrees to pay a high price. It can even be possible that a bank finances the operation with the warranty that the property the buyer is going to acquire is theoretically free from encumbrances. But this is not quite true: there are responsibilities in respect of the property, which are recorded in the register of deeds but of which very often no one thinks (nor the buyer who acquires, nor the notary who certifies the transaction, neither the bank who risks his money): State tax authorities have the right to review the tax declarations filed in each transfer of ownership, and if they do not agree with the calculation and the amount paid at the time of the acquirement, they can unilaterally make a new calculation of the tax, having the warranty, that the property is encumbered in any case to cover potential liabilities to tax authorities, regardless of who nowadays the owner is.

This would mean in our example that the tax authorities could present to the buyer a nasty surprise if it turned out that the conditions for exemption at the time of acquisition of the property by inheritance have not been met: as the real estate acquired by inheritance using the tax deduction should now be charged with a liability to which the current owner has nothing to do. And the tax, which is calculated by the tax authorities unilaterally to be paid by the children or the spouse of the deceased person, the former owners of the property, may represent a high percentage of its value.

That is why we always recommend not signing any contract or pre-contract of sale without first checking with the lawyer the problems that may arise in each case. This case is just one example of the many troubles, lying in wait for buyers at the time of signing the contract without diligence. However, there are many other cases, which include a big risk. The tax authorities are currently in need of resources due to the crisis and have at their disposal a large number of idle officials, who are currently engaged in audits of all types of legal transactions in the last four years (inheritance, sale, donation, etc.), looking for an excuse to be able to submit payments of additional taxes that are still enforceable, and require the additional appropriate amount.

Carlos Prieto Cid – Lawyer

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Incoherent land information systems in Spain

In Spain, it is often the case that entries recorded in the cadastre and the land register (register of deeds) are not identical and the two registries can often contradict the actual plots on the ground.

The reason for this is that the sources of the information differ: in the land register, only information contained in official documents is recorded (e.g. notary certified contracts or judicial decisions); however, the information in the cadastre is submitted and recorded by municipality officials or the tax office.

The function of the information also varies: in the land register, a private individual enters the information which he wishes to defend with the guarantee of the official register; in the cadastre, the administration prepares the information necessary for the calculation of taxes and the enforcement of its own demands.

This potential contradiction is not the only difference between the Spanish and other foreign land registers: another and very important difference in the Spanish land register is the mandatory recording of a building’s description, including details of the construction areas, with a notary certificate, while in other foreign land registers (like in Germany, for example), only the explicit size of the plot (without any description of the buildings) is recorded.  Significantly, this means that if alterations are made to the building, its altered condition must also be updated in the land register with a retrospective notary “New Works Declaration”. However, this is often not done, either through ignorance, a reluctance to pay the notary, tax and registry costs, or more usually because (new) building has not been granted.

Nearly all contracts of sale for property are dependent on the funding of the buyer.  This funding is usually granted by a bank, but always with the guarantee that it is recorded in the land register as a mortgage on the purchased property.  It is therefore very important that the information recorded in the land register does not conflict with reality because any information missing from the land register can mean that the financing bank will not cover the purchase price agreed for the property (this price is agreed irrespective of what is actually stated in the land register). Therefore, if you are intending to put a property on the market as a seller, it is advisable to find out all entries in the land register and cadastre and compare them with the actual plots.

Providing that the correct measurements are recorded in the cadastre, it is relatively simple to amend the land register.  With existing (or older) valid building permission and construction final approval documented by the municipality, things can move forward quickly.  It becomes difficult however when a building or part of a building exists which has not been recorded and for which there is no official approval.  Then only the lengthy and expensive route of gaining planning and building permission through an architect remains.

The situation is different when not only the factual information, but also the legal information recorded is incorrect: this often occurs in the case of inheritances which have not been formalised or when the buyer has not notarized the signed contract of sale.  Because only information contained in official documentation can be recorded in the land register, private contracts of sale cannot be registered.

Carlos Prieto Cid – Lawyer

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The european order for payment procedure

The tardiness of debtors is a well known and frequent problem for business players. Naturally this problem increases in times of crises. An instrument which is not used very often to enforce a debt is the European order payment procedure. When clients consult a lawyer they often believe that if a debtor moved into a foreign country and didn’t leave any asset in Spain there is no possibility to assert the claim. On these grounds they write off their receivables. But there is always a possibility to enforce the debts. It exists a especially easy method if the debtor lives in another country of the European Union.

The european order for payment procedure is legally regulated since 2006. The European regulation 1896/2006 of the counsel and the European Parliament is released in the Official Journal Nr. L 399  dated 30.12.2006. As usual in european procedural law this is a communication system between juridical authorities and parties based on a mutual confidence of the member states of the European Union. Part of this basis of trust is the belief that all courts of justice of the European Union’s member states are credible and that the systems of public communication particularly post are credible as well.

Furthermore laws like this always want to simplify the communication between the administration of justice and the party of the proceedings in the different cultures, tongues and countries. This would be done with publishing officially translated forms in the official journal of the European Union. Because of this further costs and interpretation issues could be avoided.

It should not be forgotten that this European law is directly applicable and there’s no need to transfer it into common law.

In any case this is a possible procedure to the creditor of recovering receivables. However the creditor is free to use the old fashioned way as well, if he prefers it. The european order for payment procedure pretends to be significantly easier and quicker and it avoids any procedure leading to a judgment as well as an allowance of existing deeds between the different countries.

The creditor only has to present the official form to the competent court of the originating country which has to fulfil different requirements and will be sent by the court without further analysis to the debtor to his new residence. The court only checks the compliance with the formalities.

If the court doesn’t accept the form there is the possibility to appeal against this decision at the same level of jurisdiction in accordance with the national law. If the court releases the default summons the debtors has two possibilities, either he fulfils the requirement or he oposes. If he does neither of them the court of the originating country releases an executory title which accepted in every country of the European Union.

Carlos Prieto Cid, Lawyer

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Legalization of buildings outside the law

Traditionally it has been possible in our country to legalize buildings outside the law through the mere passage of time. However, the Law 8/2011 has added new requirements when recording new buildings in the register of deeds, giving more legal security to the system.

When selling a property, the buyer usually requires financing. To obtain financing is not only very difficult nowadays, due to the current banking situation, but also virtually impossible if the buyer can not offer a mortgage to the bank that lends him the money. To make it possible for the bank to register the necessary property mortgage, the real value of the estate to be charged should be reflected in the register of deeds. This is only achieved when the elements that provide greater value to the property, that is, the existing buildings on it, are properly registered. To register these edifications, a notarial declaration of the new building is always been necessary and this document must be submitted to the register in order to be recorded, accompanied by many documents to control its urbanistic legality.

Despite this, there was always a back door to buildings that violated the law, which could end up sneaking in urban registration of the property, with the economic and financial consequences discussed above. The mere passage of time with no reaction of the relevant planning authorities, the municipalities, leads to the possibility of regularization of these illegal edifications. As the deadlines for the sanctioning procedures passed and the planning authorities could no longer prosecute these buildings, they could end regularized, if certain conditions were met. But in the present days, the last reform of the Land Act we mentioned above, has added a key requirement, prior to the possibility of recording the irregular building in the register of deeds: we should show a municipal certification defining the content of the situation outside the law of the building we intend to record.

Article 20.4 of the Act indicates that
“4 …. in the case of constructions, buildings and facilities for which no appropriate measures to restore legality involving urban demolition can be taken, because the relevant limitation period has passed, the registration record of the completion of the work shall be controlled by the following procedure:

  • a) the notary deeds with the statement of a new building can be recorded in the Land Registry if they are accompanied by a certificate issued by the City Council or by a competent technician, or a descriptive notarized certification of the property or a cadastral descriptive and graphic certification of the property, when these documents confirm the completion of the work in a specified date and the description coincides with the title. For this purpose, the Registrar shall verify if there is a notation in the Register of Deeds because of the initiation of an urban discipline procedure for the property subject of the construction, building and installation in question and that the site is non demanial or affected by easements for public use.
  • b) The registration entry will record the outside-the-law position of all or part of the construction, building and installation, in accordance with applicable urban management. It will be necessary to provide the administrative act by which the situation is declared outside management, with the proper delimitation of its contents.
  • c) The Registrar shall report to the City the respective entries in the cases included in previous issues, and such notification will be recorded in the inscription”

This new regulation, in force throughout the state, which requires prior to registration the provision of a municipal certificate on the content of urban illegality is coherent with the goal to be reached with the law of passing “registration measures designed to ensure and strengthen certainty in the real estate contracts and business, through the Land Registry” and “emphasizing on register protection measures which aim to prevent and prosecute in the future situations that occur today and that are impacting very negatively on investment in real estate, both domestically and internationally“.

Let us hope that eventually these legal measures have the desired effect and strengthen the security image as necessary to encourage property investment, especially by foreigners.

Carlos Prieto Cid, Lawyer

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