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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The time has come to buy again real estate in Spain

After several years of continued declines in prices and sales volume, statistics finally start reporting positive results. Very small, but that break the downtrend. The international situation could perhaps encourage investment decisions in real estate in Spain.

A significant reduction in the number of Russian tourists is expected this year on the Spanish coast. The reasons for that are instability due to the crisis between Russia and Ukraine and especially the collapse of the ruble. But also the euro is undergoing a gradual devaluation, and it seems that this trend will continue in the future. However this news, apparently negative, may have another reading: every time it came to the devaluation of a currency, conscious citizens sought to invest their savings in goods, a kind of “safe haven”, and throughout history, the most common safe haven for money savings has always been investing in real estate.

In addition, the mentality of the Spaniards in this area is rather conservative and therefore the opinion prevails that every ordinary citizen should be owner of his living room in his life. This approach has a significant impact on the real estate market, as this has always led to a higher demand than expected at every economic stage. And, moreover, hundreds of thousands of foreigners dream of a quiet retirement or at the Spanish coast or a summer residence to come to it every year, and they do not hesitate to purchase a property where safely enjoy Spain in their own home. All of these factors bring us back to the beginning: it has always been assumed that investing in real estate in Spain is a reliable investment.

Despite the severe crisis of recent years, we must not forget that real estate has always been the best and safest way to invest our savings in Spain. And just because of the crisis, prices at back at a rational level and , according to the monthly statistics, gradually begin to rise.

Carlos Prieto Cid – Lawyer

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Risks of buying real estate from banks

In these times of severe economic crisis, thousands of properties are sold at auction every month in Spain because their owners can no longer pay their debts. In most cases, the creditor is a bank and if no bidders participated in the auction, the creditor himself receives ultimately the contract.

Although the government related institutions in recent months insist on pointing out that the economic situation of Spain is improving, the reality is that the seizure of property and evictions due to debtors’ failure to pay their own liabilities have no end. The banks are the biggest creditors nationwide. In the judicial auction they usually get the property, without being able to recover the outstanding loans, because of the lack of interest of potential buyers for the seized property. After the bank has become the owner of the property, it passes it to a real estate agency, which is often established only for the purpose of selling this type of property. For the same reasons that the property could not be sold at auction, it often takes months or even years before the agency finds a buyer on the almost at a virtual standstill housing market.

During this period, the attitude of the banks is far from what is expected of a correct owner. For example, in the case of apartments or houses in settlements with community facilities, the banks often do not pay the contributions to the community of owners required for maintenance, swimming pools, gardens, etc., until a buyer is found, thus bringing the condos in financial difficulties, as these depend on the contributions to cover the general expenses for cleaning and maintenance of the common areas. Furthermore, neither the agencies nor the banks take a minimum care about the conditions of the building and so, leaks, pigeon nests or all sorts of other problems that affect the neighbours remain unresolved.

These risks should be considered when investing in Spain. Investors are normally interested in such kind of real estate because they believe that their price might be below the average price. However, it should not be forgotten that the banks have more than enough capacity to hold on as long as necessary until its real estate stock is sold (after all, they were helped for that with a lot of public money). Investors must convince themselves that the banks won’t reduce the price more than other owners who might need the money urgently.

Carlos Prieto Cid – Lawyer

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The new European Certificate of Succession

If at the moment of our death we still have property assets located in Spain, our heirs are obliged to fulfill a number of formalities requirements in order to register this property on their name. These processes will be facilitated in 2015 through the creation of a European Certificate of Succession.

We all want to be together with our beloved ones at the time of our death. And in most cases, these people close to us are going to be also our heirs. Therefore, during the registration of inheritance, it is desirable that the authorities our heirs will have to address to, were not too far away geographically from the place where we spend our last days with them.

Until now, for example, in the event of a German couple who had moved to Spain to spend his retirement in a property house, their heirs had to apply to the authorities in Germany for a certificate of succession, because according to the present laws only German authorities are competent in determining who the heir is. This led to the fact that  the spouse of the deceased, who had moved to live with him or her in Spain, and probably had no longer residence in Germany, was forced to travel to Germany to apply for the certificate of inheritance or had to entrust someone to get it .

A new European law, which applies in all the countries of the European Union, will try to lighten things up in this case we have just described by the new European Certificate of Succession, which is automatically recognized in all member states and may be issued by the authorities of the State  where the deceased had his habitual residence. But, on the other hand, we must take into account that the law of the State of habitual residence becomes the general rule of law applicable to the succession. It is therefore advisable to consult and be be aware of how this law will govern our inheritance and, if necessary, avoid unintended consequences through a notarized will.

Carlos Prieto Cid – Lawyer

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Further increase in the final costs of the transfer of property in Spain

The costs associated with the transfer of ownership may affect the decisions of both parties, buyer and seller, as the net price that the seller receives after deducting expenses and taxes may be much less than expected in the beginning, and the final price to the buyer by adding costs and taxes may be much higher than previously thought.

The parties of a contract for the transfer of property (usually a purchase contract) can decide freely about these matters. However, we are going to analyze now what the laws say when the parties do not achieve an agreement among themselves:

  • The municipality tax on the added value of the property sold, in the case of urban land, is one of the costs to be paid by the sellers. This is a percentage of the difference between the declared value at the time of purchase and the estimated value of the property at the time of acquiring it by the seller.
  • The income tax on the increase in value is also an expense of sellers. If the seller is non-resident, the buyer must submit a deposit (3% of the price) as an insurance tax directly to the tax office. For this reason, this amount is usually subtracted from the purchase price. Subsequently, we have to calculate the payable tax, which also consists of a percentage of the difference between the declared value at the time of acquisition and declared value of the property at the time of sale.
  • The tax on the transfer of property is the buyer’s responsibility. The tax has been raised again in Catalonia and other regions of Spain, and now the buyer has to pay 10 % of the selling price for this concept.
  • The account of the notary (exclusively for the purchase contract) is according to the law at the expense of buyers, unless the parties agree otherwise. The role of the notary in Spain (unlike other countries) is only a formalization, converting the final contract in a public document. This contract has been issued in advance by the parties with the assistance of a lawyer. The notarization of the contract of sale in accordance with Spanish law is not absolutely necessary, but it is very appropriate, because a contract that is not contained in a public document cannot be registered in the registry of property. And such recordation of the change in ownership is not only a guarantee for the buyer, but also a prerequisite when the buyer has to finance the price with a mortgage.
  • What we have just commented justifies as well that the cost of recording the change in ownership in the registry of property has to be paid by the buyer.
  • The costs of preparing the documents to be submitted along with the case, is to be paid by the seller (these documents are normally processed or checked by lawyers). The cost of a lawyer could be common to both parties, as well as the lawyer provides the following services:
    • To provide consulting and legal assistance during the whole process of transfer of ownership.
    • To translate the will of the parties to the legal and technical language.
    • To make a final agreement of sale and prepare it to be notarized by a notary.
    • To foresee the tax consequences of the transaction for both parties and to prepare and submit formally and in time the tax returns in the most convenient manner.

But it is always better for the parties to agree in advance (even in an oral form) the main terms and conditions of the contract, so that the lawyer is able to represent the interests of both parties without any kind of conflict, simply because he develops the sales agreement already adopted by the parties.

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 donatio mortis causa

The death is not predictable, but in certain cases we should be aware of the end, for example in cases of high age or severe disease. In Catalonia the law gives us an almost unknown possibility of partitioning our heritage and foreseeing its costs in advance.

This method is called donation mortis causa and it has many advantages compared to a common donation. The donation mortis causa is a kind of donation which could always be used if the object of the donation is real estate in Catalonia. It has many advantages in comparison to a common donation or the regular heritage. But you have to keep certain rules to ensure its acceptance by authorities.

Mainly it is a donation where the transfer of property at first does not occur but it takes effect in the moment of the donator’s death. The Spanish common law (that is the civil law of the regions of Spain with no own law, such as Catalonia) doesn’t really regard it as a donation: it is simply considered parallel to a legacy. But in Catalonia there is an own legal instrument which admits the donatio mortis causa under the following conditions:

  • Free revocability for the donator, which also means that the transfer of property at first doesn’t occur.
  • Its ineffectiveness if the donee predeceases, which means that the expectation is ineffective if the donee dies before the donator. In this case the property remains at the donator without any limitations.

The most important advantage in comparison to the common donation is a fiscal one. In case of the common donation the tax becomes due in the moment of the property transfer. In case of a donatio mortis causa the due date is not before the death of the donator.  And, on the other hand, the common donation is liable to the gift tax. At this kind of tax there is no amount of exemption allowed. But the donatio mortis causa is treated by authorities in the same way as a legacy, which means that it is liable to the inheritance tax. Here we can take profit of the legally alllowed amount of tax exemption.

But there are even more advantages in comparison to other possibilities of property transfers in the occasion of death, especially the simplicity of handling. It is neither necessary to define the successor exactly, nor to constitute who has to pay out for a certain legacy nor has the efficacy of the testament to be confirmed. This is especially important in cases of property transfers in case of heritage by foreigners. Here the law of the foreign country is always applicable. This is a point where foreign authorities come into play and make things more complicated. With the donatio mortis causa we avoid this in the moment of the formation of the contract and also in the moment of the enforcement of the property transfer as well. The title of ownership is created according to the rules to the lifetime of the donator. And for the enforcement  of the property transfer only the death certificate is needed (and no other documents else).

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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The reintroduction of Spanish Wealth Tax

A few months ago, US President Barack Obama announced to Congress: ”This is not class warfare, it’s math.” If the crisis leads to a fall in revenue for public authorities, spending must either be cut or taxes increased.

If we assume that governments cannot cut back on social services because the social rights they have achieved should not be touched due to the crisis, then new tax increases become necessary. Instead of raising existing taxes, the former Spanish government had preferred to try to maintain the level of revenue it needs by reintroducing a recently-abolished tax: the IMPUESTO DE PATRIMONIO, or Wealth Tax.  This tax was never actually abolished, although the full rate was indeed scrapped in 2009 with a 100% rebate. The government has therefore simply done away with this rebate in order to reintroduce Wealth Tax.

The tax applies from 18 September 2011, although the concession is scheduled to increase once more in 2013. This means that Wealth Tax declarations need only be submitted for the years 2011 and 2012 (due on 31 December each year). It is important to remember that non-residents are also obliged to pay this tax. Declarations must be submitted to the tax office each year together with the income tax declaration.

The most important changes to the rules on Wealth Tax introduced in the Real Decreto-ley 13/2011 are the following:

1. Tax allowance on residences: the maximum rate for tax exemptions on the value of the own residence (for residents) has been raised to €300,000 (previously €150,253.03).

2. General tax allowance: unless the autonomous communities rule otherwise, the general tax threshold is €700,000.-

Whether these new rules and the reintroduction of the tax will have any real impact or affect public authorities’ revenues is debatable. It appears that the Socialist Party intended to make political capital through the reintroduction of a ‘tax on the rich’ (elections took place in a short time after de tax reform and they were a spectacular failure for the Socialist Party anyway ), but the real impact of the tax’s reintroduction will not be able to solve the difficult situation surrounding the public finances.

Carlos Prieto Cid, Lawyer

This article in German