Tag Archives: purchase

New comprehensive Advisory Service for Property Owners

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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 that your property does not run any legal risk?

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

Carlos Prieto Cid – Your legal adviser in Spain

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Is it a good time to buy real estate in Spain?

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After a continued drop in prices and sales from 2006, the Spanish real estate market has been on the up and up since 2016. The current international climate might even encourage us to invest in property in Spain.

The energy crisis, inflation and the instability caused by the Russia-Ukraine war are causing a contraction of the economy and an ongoing devaluation of the euro, and all indicators suggest that this trend will continue. But there is an upside to this gloomy news. Whenever currencies devalue, smart investors seek to put their savings in safe assets, and the safest place to invest has always been real estate.

Spanish people have inherited from their parents and grandparents the idea that you should always own you home, no matter your age or stage in life. This conservative mentality has traditionally had a huge impact on the real estate market, creating a higher demand than would be expected given the economic climate. Added to this are the hundreds of thousands of foreign nationals looking to retire or spend their summer holidays in Spain who jump at the chance to buy property here. Spain is also number two in Europe for people owning a second residence, at nearly 15%, this further straining the real estate market.

All this takes us back to where we started: buying property in Spain is a safe investment. The major crises of recent years should not let us forget that, for decades now, property has been the best and safest way to invest in Spain. And the current crisis has put prices back at a reasonable level after they hit rock bottom in 2016.

Carlos Prieto Cid – Your legal adviser in Spain

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A legal change improves the position of buyers of inherited real estate

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On this blog, we have commented in the past on the risks of purchasing from a seller who acquired a property by inheritance from a non-immediate family member. Buyers were often not aware of this situation, which entailed legal risks that fortunately have been removed.

The most typical example of this type of inheritance is a single person or widow with no children who, via a will or by law, ends up leaving their estate to a non-immediate family member (under Spanish law: a sibling, nephew/niece, cousin, etc.) or even someone with no family ties. When these heirs accept the inheritance and become the owners of the property of the deceased they, logically, often want to sell it. To sell the property, they first have to register their ownership of it in the real estate register. Until now, this registration recorded with it a charge in the form of a restriction on the owner’s power to sell the property for two years. This restriction existed to protect the rights of any heir with a preferential right to inherit who appears later on (e.g., a child that had not previously been acknowledged).

The buyer, who was unaware of how the seller acquired the property, may have committed to purchasing it via an earnest money agreement, only to later find out that the banks will not finance the purchase owing to the restriction on the property. The legal provision providing for this restriction has recently been repealed with retroactive effect. This means that property buyers can rest a little easier from now on.

However, we still recommend seeking the assistance of a lawyer when purchasing a property to obtain the proper legal advice and avoid the other risks that buying real estate entails.

Carlos Prieto Cid – Your legal adviser in Spain

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Doing business abroad via a representative

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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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Legal restrictions affecting the purchase of inherited real estate

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Buying a property is always a risky proposition. Especially when the seller inherited the property. This entails additional risks for the buyer, depending on the relationship the seller had with the former owner.

In a previous post, we spoke about the risks of buying real estate inherited by an immediate family member. These risks have to do with tax as the inheritor is entitled to fiscal benefits that place restrictions on the sale of the property. If these restrictions are not met, the tax office will make any claim against the current owner of the property.

In this post, we look at another type of risk that arises from a slightly different situation — when the seller acquires the property by inheritance from someone who is not an immediate family member. The most typical example is a single person or widow without children who, via a will or by law, ends up leaving their estate to a non-immediate family member (under Spanish law: a sibling, nephew/niece, cousin, etc.) or even someone with no family ties.

When the seller registers the inherited real estate in the land registry, a restriction is placed on their power to sell the property for a given period. This restriction exists so that if an heir with a preferential right to inherit appears (e.g., a child that had not previously been acknowledged), their rights are protected.

This restriction, which is often not taken into account, can lead to surprises as the banks may decline financing the property purchase in such cases. As always, we recommend seeking the assistance of a lawyer when you purchase a property to obtain the proper legal advice.

Carlos Prieto Cid – Lawyer

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New Comprehensive Advisory Service for Property Owners

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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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Holiday homes: Practical problems through urban bureaucracy

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Everyone agrees that one of the main problems of Spain is the bureaucracy. In 2012 we reported expectantly on the regulation of the market of holiday rentals in Catalonia (https://blog.tarracoiuris.com/en/?p=66) but we were already afraid of the risks caused by the proposed intervention of the municipalities.

Unfortunately, our worst predictions have now come true, as expected. Bored officials of municipalities have begun to abuse their statutorily granted powers of control, not only to charge fees that increase the cost of renting holiday villas and appartments, but also and even worse to block rentals with unnecessary  requirements which have nothing to do with the legally foreseen inspections.

According to the Decree 159/2012 of 20 November on vacation rentals and holiday homes, the holiday home rental of individuals should be encouraged through quality controls. The communities were empowered to establish a register of these accommodations and the only formal and statutory requirement to register a property in such a register was, logically, to certify its habitability in the moment when the owner wanted to offer the apartment or the house for renting.

The city officials have tried to exploit the information obtained from these communications relating to the rental activity, to examine the urban situation of the holiday homes, and now begin to threaten with penalties for possible violations of urban development. Although these violations probably existed for years without the officers had endeavored to do something about it and they have nothing to do with the activities of tourists, which the law was intended to normalize. Once again, the behavior of officials is actually stimulating the shadow economy, as has always happened in this country: they are active only when the work is easy because all the information is already on their table, but are unlikely to pursue infringement on their own initiative.

Carlos Prieto Cid – Lawyer

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The difference between purchase price and fiscal value when buying or selling real estate

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Anyone who wants to invest in property in Spain could imagine that the price at which he acquires the property must coincide with the value declared in the official document the acquisition is drawn up with. However, throughout history, we have been faced with a variety of situations, depending on the economic environment and the changing behavior of the tax authorities.

Those who bought property before the explosion of the housing bubble in 2008 have surely heard at some point in the process of acquisition a proposal about the possibility to declare in the official title deed of sale (in the „Escritura“) a value for the property lower than the price actually paid for it. This practice was very common in order to reduce the tax for both seller and buyer: the buyer pays less for the property transfer tax (Impuesto de Transmisiones Patrimoniales), he has to pay as the purchaser, as the basis for calculating this tax is the declared price of the transmission; the seller also pays less, since the gain on the sale becomes less, and the lower the profit, the lower the income tax (Impuesto de la Renta de las Personas Físicas), he has to pay as the transferor.

Today, times have changed and, surprisingly, we find ourselves in the reverse situation. The current catastrophic situation of the property market may lead to buyers and sellers to specify a higher value than the value actually paid in order to avoid undesirable inspections by state tax authorities. Regardless of the price we pay for real estate, the reference value for the State Tax Agency is a fixed a priori value, the so-called “taxable value”. This value can be calculated for each case, based on the value assigned by the Cadastre, depending on numerous objective factors. In the Golden Years prior to 2008, some municipalities have updated the cadastral value of the property in its territory, raising it under the spectacular rise in prices in the housing market. Once the cadastral values of a community are changed, a new modification is not so simple, and, in addition, legal deadlines must be respected, which can delay the update for many years. For this reason, now we meet occasionally with cadastral values updated before the bubble burst in the housing market, and therefore, the minimum taxable values obtained from them are higher than the average market price.

If these taxable values are not considered at the moment of the formalization of the purchase contract in a public document with tax transcendence, the risk to face a tax audit is very high and it will be difficult to prove that in fact we did not have to pay more for the property which we have acquired, although the price we have indicated in the title deed was really the one we paid for.

Carlos Prieto Cid – Lawyer

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

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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

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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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