Tourist rentals and homeowner associations

We’ve written before about the administrative requirements for renting properties to holidaymakers:
Today we look at the legal issues that can arise with homeowner associations

As we stated in our previous post, the government has established social, economic and tax controls in the tourist rental market. It did this because holiday letting can affect housing prices, the make-up of districts and the good relations between neighbours. Politically, these are highly sensitive issues. Recently, there have even been very divisive campaigns by neighbourhood and social groups against tourism, a phenomenon referred to as “tourism-phobia” by some in the media. These groups say that the boom in holiday letting has caused social problems, especially in the historic centres of cities and in communities in tourist areas.

Thus, the government now requires various things if you want to rent a property to tourists. First, the property must have a special registration number. This number, issued by the Tourism Register of Catalonia (Registre de Turisme de Catalunya, RTC), starts with the prefix HUT, which basically stands for “property for tourist use” in Catalan. Second, you must register the property with the regional police so you can register the details of the people who stay overnight in your property. Lastly, you need to pay the Catalan tourist tax (the IEET tax) on an ongoing basis.

As well as having to comply with these administrative requirements, you also need to take into account whether the property you want to let out is affected by a homeowner association. If you have an apartment in a building with common areas or a house or duplex on an estate with common services (pool, sport facilities, etc.), you and your property may be affected by the decisions of a homeowner association on what your property may be used for. Homeowner associations are increasingly voting to prohibit certain uses of properties. This often includes prohibiting owners from renting their properties to holidaymakers.

What can you do to protect your property rights in such cases? You need to seek professional advice to analyse exactly what options you have. We would be more than happy to provide you with this advice. Please contact us if you find yourself in this situation or have any questions.

Carlos Prieto Cid – Lawyer

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Avoid causing problems between your heirs over the inheritance you leave them

A common cause of family rifts is the distribution of inheritances. Before we die, it is our responsibility to take one of the many measures available to make sure such conflicts don’t happen.

Joint ownership is by far what creates the most problems we encounter on a daily basis at our law firm. Joint ownership of real estate, bank accounts, vehicles, etc. can tangle the associated financial, administrative and fiscal red tape so much that the property loses just about all profitability and may even lose value.

People rarely enter joint ownership arrangements voluntarily, which shows how undesirable they are. They normally arise out of an unwanted event of legal significance: a divorce, a company winding up or someone passing away. In this post, we look at joint ownership arrangements arising from inheritances.

The most straightforward and economical way of distributing an inheritance is by making a will. To guarantee the effectiveness of the will, first you need to get your lawyer to check its content. Second, you need to execute it as a notarial instrument (done with a notary public).  In a will, an inheritance is usually distributed by means of “legacies”, i.e., the universal heir to the entire estate is required to distribute certain property to certain people. To ensure the heir complies with this obligation, an executor can be appointed.

Another way of sidestepping problems between successors is to make gifts while you are still alive. A similar amount of tax is paid when property is transferred as a gift to when it is inherited. The advantage is that you can finalise everything while you are still alive. The disadvantage is that, unlike with a will, if you change your mind, you can’t change the situation without the help of the beneficiary.

Either way, if we want our memory to live on in a harmonious family, it’s worth distributing our inheritance in the most impartial way possible prior to our death. Our heirs will thank us for it.

Carlos Prieto Cid – Lawyer

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Doing business abroad via a representative

When we have interests in a foreign country we aren’t residing in, we usually manage them by distance. To do this, we normally grant power of attorney to someone we trust. Given the important legal implications in giving someone power of attorney, the process is subject to strict formalities.

These formalities are even stricter if the document empowering our representative is to be used for managing business interests in a country different from where it is issued. At our law firm, we come across cases like these every day. For example, an Englishman wanting to purchase a property in Spain and have a Spanish legal professional represent him in the sale. Or a Russian on holiday in Spain who realises she needs to take care of something at a Swiss bank and wants to give someone in that country power of attorney for representing her at the Swiss bank. Or a German resident in Spain who needs to settle an inheritance in Germany and wants someone he trusts to handle it for him. In situations like these, the document granting the power of attorney to our representative, which will be issued in one country and used in another, must be legalised.

Documents granting powers of attorney that can be used internationally must be officially authorised to be valid. This means that an authenticating official (normally a notary public or a public servant) must certify the document. This authenticating official attests that the person signing the document is who they say they are and is of sound mind (or at least states they are). This certification converts the power of attorney into a notarial instrument. However, for this document to be recognised in other countries, the person who officially certifies it must be recognised by another authority in the same country that is in turn recognised by the authorities of the country in which the document is going to be used. For example, a power of attorney granted before a Spanish notary public to be used in Germany must be recognised as an authentic notarial instrument by the German authorities. In most European countries, this international recognition of the local official is done via an Apostille stamp. In the above example, the power of attorney granted by the Spanish notary must bear an Apostille stamp from the Spanish Association of Notaries Public, which is the body recognised by the German authorities for authorising the signature of a Spanish notary public.

Carlos Prieto Cid – Lawyer

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The importance of legal advice

If you have to go to court, you obviously need the services of a lawyer. You can’t usually bring any legal action or even defend yourself in court without a lawyer. However, the services of a lawyer are not limited solely to when you’re summoned to go to court. Indeed, in our experience, the main reason clients have to go to court is because they didn’t seek advice from a lawyer beforehand.

If many such clients had sought legal advice before entering into legal transactions, they probably would have avoided the courts altogether. Very worthwhile because a court case is always an unpleasant experience — even when you win!

Many people think they don’t need a lawyer. Perhaps they think they don’t require a doctor, a painter or a mechanic either. But when you’re seriously ill, you go to a doctor. Why, then, don’t you go to a lawyer when entering into an important transaction? How many times in life will you buy a house? How often will you receive an inheritance or make a will? Are such transactions not important enough to consider seeking advice from a lawyer?

Because the most important function of a lawyer in society is not to initiate legal proceedings. To the contrary, our job is to avoid court cases through providing help and legal advice. (In fact the Latin term for lawyer, ‘advocatus’ or ‘advocate’, refers to a person you go to for advice or turn to for assistance when entering into a contract or legal transaction.)

For example, during the sale of a house, both the buyer and the seller come into contact with a number of experts. At the very least when you buy, you come into contact with a real estate agent, perhaps even a developer and an architect if you’re building your own home. You will also need a notary.

Each of these professionals have their own function. The real estate agent finds a buyer for the property, the developer and the architect build the house, and the notary formalises the contract so you can prove ownership of the property and register it with the land registry.

None of these people, though, has an exclusive obligation to give you independent advice. Each has their own interests but none has a duty to look solely after your interests (as the buyer or seller). If the house is not sold, the estate agent receives no commission. If the contract is not notarised, the notary receives no fee.

However, you pay the lawyer to do nothing more than protect your interests. They are, therefore, the only person you can really trust in the whole process. They are the only person who can freely say to you — without it having any effect on his bank account, ‘you shouldn’t sign this contract!’

Many clients come to us after they’ve signed contracts and problems have arisen. At this late stage, all we can do is try to salvage the situation through an agreement or legal proceedings. Often in such circumstances, the client shouldn’t have signed the contract in the first place. But you can only know this — when to sign and when not to — if you have a lawyer, your advocatus, by your side when you sign.

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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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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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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International Judicial Assistance

The increasing internationalization of economic activity and therefore of our society is causing a widespread outbreak of international issues in daily life and therefore also in the life of the local court proceedings. It is nowadays very common that in a judicial procedure one or both parties are domiciled abroad, or that it is necessary to obtain judicial evidence beyond our borders along the process.

When the lawyer has to formalise a power of attorney or an affidavit to certificate the validity of foreign law, or when a judicial warrant is necessary for a notification to the parties abroad or for evidentiary purposes in another country, all stages of judicial proceedings may have an international element that complicates the whole procedure or, in extreme situations, makes it virtually impossible to implement.

In Europe, cooperation between member states on justice and internal security is one of the three pillars of the European Union, along with the economic community and the common foreign and security policy. Moreover, since the entry into force of the Amsterdam Treaty, the Community provisions can be applied to each of the areas concerning police and judicial cooperation as contained in Title VI of the European Union Treaty, although this “communitarisation” of the rules for police and judicial cooperation has to be agreed unanimously by the Council and ratified by all Member States.

Although common European justice has never come to be developed as much as the economic and monetary union or inter-governmental coordination on foreign policy and security policy, in recent years developments in this area have become more popular and it is no longer so strange that the courts use these resources to carry out their daily activities. However, we find many difficulties to achieve that court officials use the European way of judicial cooperation effectively. The principle underlying the European regulations of these matters of judicial cooperation is to enable judicial officers of the member states to cooperate with each other using simple pre-established protocols, provided that, ex officio or at request, that international action is considered necessary by the judge. However, without proper coordination between lawyers experienced in international litigation and the attorneys and the court officials involved, today the international judicial cooperation would be very inefficient, because the existing protocols are not always known or respected by the court officials, what provokes an avoidable waste of time and resources during the process.

If we find such a lot of inefficiencies in the framework of the European Union, what could be said about the problems caused by international judicial assistance outside the scope of European cooperation? Therefore, the procedural experience of international law firms with European or global orientation, such as the ones joining the network EUROJURIS INTERNATIONAL can be of great help when planning international processes, not just for the parties involved, who can enjoy a much more efficient service of representation in court, but also for other lawyers, who are eventually in these situations and can count on their support and specialist external advice to avoid being caught in unexpected procedural problems when entering the complex field of judicial processes initiated in their own country, but that require the processing of incidents abroad.

Carlos Prieto Cid, Lawyer

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The role of the lawyer in the sale of property

In the glorious years of the housing bubble, when everything was easily bought, lawyers played an essential role in advising buyers to purchase property with all guarantees. Now that everything is being sold, our role is still essential to prevent a sale from being frustrated by legal reasons.

An ordinary person takes only very few times during his life the decision to buy or sell a property. However, there seems to be no awareness in the society that, before making this fundamental decision is wise to consult with an attorney. All the contrary, the general idea is that one should only go to a lawyer to solve legal problems and not, as it should be, to try to avoid them. That is why we lawyers often find customers that come to our office once they have already signed a contract, thinking that with a magic wand we can resolve a problematic situation, which would never have happened if they had consulted us on time.

Among the professionals involved in the decision making of a real estate purchase contract, the lawyer is the only one who can give advice with the warranty that this is only his role and that is why he gets paid, with the absolute independence of the one who knows that is going to collect his fees whether the operation is performed or not. In short, the lawyer is the only professional who can calmly tell his customer: do not sign! That’s why taking advice from a lawyer before signing a contract for purchase and sale of real estate is essential and the sooner you come to him, the better.

In real estate market intermediaries tend to avoid the intervention of lawyers, because they think it increases the costs of the transaction and therefore it reduces their room for maneuver. But the reality is quite the opposite: the costs of our intervention are very profitable. We can actually give many examples of real estate transactions that would have failed if there had not been an immediate intervention of lawyers. The most common problems that we solve are:

• problems with the matrimonial regime applicable
• a necessary formalization of an acceptance of inheritance,
• buildings awaiting a declaration of new construction (even if they have been legal built, but not registered)
• fiscal and money laundering control problems specific to non-resident sellers or non-resident buyers,
• special powers necessary to formalize the operation, when the contract parties cannot be present at the formalization of the purchase contract…

But the range of possibilities is enormous and each of these issues can cripple sales management until making it impossible, especially at the present time, because of the lack of buyers and the oversupply of housing available to the market. Furthermore, experience in international operations with nonresident buyers or nonresident sellers is at the moment crucial, as the housing market mainly offers its stock to potential foreign buyers from countries increasing their capacity and interest in purchasing property in Spain (Russians, Swiss, Indian, Chinese, etc.)…

The failure of a real estate transaction means for the real estate brokers involved an effective cost in time, dedication, displacements and risk analysis, and these costs have no compensation if the operation is not actually performed. The causes of such a failure are often legal issues that only an attorney skilled in the art would have foreseen early enough to provide possible solutions and avoid the loss of the buyer. Or, if not feasible any of the proposed solutions, the lawyer could advise to abandon the operation on time, before incurring further unnecessary costs. Working with real estate agents or other intermediaries in the housing market is an important opportunity for business and the synergies it generates are very helpful both for lawyers and for the agencies involved, providing their common customer the benefit to be able to buy or to sell with guarantees and to mature his decision with all the necessary information.

Carlos Prieto Cid, Lawyer

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The risks of giving power of attorney

The event often arises when we would like to sell our Spanish holiday home or freehold apartment but we are unable to be there at the time of the required notarial certification of the contract of sale because we are only there occasionally on holiday.  A common solution in such cases is to authorise someone to represent us in the notarial proceedings.

InSpain, the transfer of a property only becomes valid once the person giving the authorisation has notarially submitted a letter of attorney.

Simple handwritten authorisation is not sufficient as there must be a notarial letter of attorney for such transfers, i.e. one prepared by a notary to make it legally valid and enable it to be entered in the land register.

This letter of attorney must be signed in the presence of a notary to allow them at that moment to verify our identity and legal status in their capacity as a representative of the state.  They are also obliged to inform us of the risks of giving power of attorney.

This formality is a guarantee for the person granting power of attorney, but it can also pose a risk because the document being officially issued by the notary is really a key with which the authorised person can do anything which is written in it when exercising the power of attorney.  Later, with the letter of attorney in their hand, they can act without the knowledge of the person giving the power of attorney, or even against their will, because the validity of the letter of attorney does not depend on the actual wishes of the person giving power of attorney, but on the officially declared wording of the certified wishes which is contained exclusively in the notarial declaration of authorisation.  This gives the third party, who is conducting business with the authorised person in good faith, the guarantee and security that the transactions are as far as possible valid, irrespective of what the person giving the authorisation might think, and Spanish law therefore does not provide any opportunity to restrict authorisation in the internal relationship, provided the letter of attorney is not notarially revoked.  It is therefore recommended that power of attorney should only be given for the benefit of a person we completely trust or that the authorised person is preferably a lawyer whose area of expertise is continually monitored by a relevant authority, such as the Colegio de Abogados (Bar Association).

It is also possible for a lawyer to simply represent us during the notarial sale without documented and express power of attorney, with the person represented confirming the legal transaction afterwards in the presence of the notary.  However, this approach attracts additional costs and can also have further drawbacks.  The transfer to the buyer is provisionally invalid, i.e. the transfer is not valid until the notarial confirmation has been entered in the land register.  This always presents difficulties if the buyer of the property has to bankroll the purchase price and requires a loan guaranteed by a mortgage, for example.  In such cases, the sale cannot take place because the mortgage only counts as a guarantee if it is entered in the land register.

Carlos Prieto Cid, Lawyer