Tag Archives: real estate

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 The legal provision providing for this restriction has recently been repealed with retroactive effect.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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Structural soundness certificate for old buildings

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In Catalonia, owners of over 45 year-old buildings must obtain a structural soundness certificate from the Catalan Agency of Housing to show that the building meets all the legal requirements for building safety, health and aesthetics.

This obligation affects both owners of single-family detached houses and units in a commonhold building (in this case, it is the responsibility of the commonhold association). To obtain the certificate, the owners must get a specialist to draft a report on the state of maintenance and conservation of the building, the improvement in its sustainability and eco-efficiency, and the assessment of basic accessibility conditions. The report must state how often these actions are performed.

This certificate is not required in only two cases: 1) detached houses where the main building is at least 1.5 metres from any roadway, public-use area and neighbouring property, 2) detached houses that have a certificate of habitability that was in force when the building reached 45 years of age (until the certificate of habitability expires). The term of 45 years starts from the date of construction or any comprehensive refurbishment of the building.

The owners of the building pay for the technical inspection. However, there is currently no fee for applying for the structural soundness certificate. If you as an owner do not have this certificate when you should, you may be fined.

If the certificate states that the building is structurally unsound, the owners must agree to a refurbishment plan within one year, six months if the defects are serious. This plan must be overseen by qualified specialists. If no serious defects are found, the structural soundness certificate is valid for 10 years. After this period, it must be renewed.

Carlos Prieto Cid – Your legal adviser in Spain

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Spanish residents required to declare foreign assets

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For some time now, residents in Spain have been required by law to declare the assets they hold abroad to the Spanish Treasury. This includes everything from real estate and bank accounts to shares and insurance held or managed outside of Spain.

This declaration must be made online with an electronic signature. You have from 1 January to 31 March to make a declaration for the previous year. In the case of bank accounts, this declaration must include:

  • Full name of the bank or credit entity
  • Full details of your accounts
  • Dates accounts opened or closed, or, if applicable, dates the authorisation that gives rise to your obligation to declare was granted or revoked
  • Account balances as of 31 December and the average balance for the last quarter of the year

You do not have to make a declaration when the total of the account balances does not exceed €50,000 on 31 December. And you only need to make a declaration in following years when the total balance of all your accounts (as of 31 December and the average for the last quarter) goes up by over €20,000 compared to the balance reported in a previous declaration.
Similar rules apply for securities, stock-market shares, investment fund shares, life and disability insurance, and life and term annuities.

What is the purpose of this declaration? It allows the Spanish Treasury to check if the annual income and property tax declarations that you must file as a resident before 30 June take into account foreign assets and income. Because, as a resident in Spain, you must declare your income worldwide.

This obligation to declare foreign assets came about when the tax authorities of EU countries started working more closely together and assisting each other, as we have mentioned in other blog articles.

Carlos Prieto Cid – Your legal adviser in Spain

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Why you should make a will where you invest in property

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From the moment you register your property in a state’s land registry to protect your rights as a property owner, you are subject to that state’s regulations. If the state that rules on your inheritance is not the same as the one governing your property, you can help your heirs by making a will in the state where the property is located.

When you buy a house, you want your property rights to be protected by the law of the land. This is why you register your title to the property in the corresponding land and property registers. In exchange for this protection, you pay taxes. After your death, your heirs will want the same protection, but their title to the property will not be a property deed. It will be an acceptance of inheritance document. This is a document issued by the authorities of a country that may be different from where your property is located.

The differing legal approaches in different countries create the biggest headaches in international inheritances. Who is the heir? What percentage do they inherit? Who has a right to inherit? Such questions can only be resolved by the competent public authorities. As a rule, these are the authorities of your country of residence or nationality. When you have foreign investments, the documents issued by the authorities in your home country have to be interpreted by the authorities in the country where you have assets. This creates additional problems that can be tricky to resolve. You can resolve these problems by making a valid will in the country where your property is located. By doing so, you stop foreign authorities from getting involved in the processing of your estate.

As always, we recommend that our foreign clients, from as soon as they own property in Spain, make a Spanish will to govern their Spanish inheritances as they see fit. Thus, limiting the involvement of non-Spanish authorities in the processing of their estates.

Carlos Prieto Cid – Lawyer

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Why you should check that the details on your property in the Land Registry and the Cadaster match

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As we have commented previously on this blog https://blog.tarracoiuris.com/en/?p=118, there are two systems for registering and guaranteeing titles on real property in Spain: the Land Registry and the Cadaster. Having two systems means inconsistencies in the data registered can arise.

The details registered can differ from one system to another because both the information source and purpose differ in each system. The Cadaster provides property details to the Spanish Tax Office for collecting tax. This information comes from tax declarations and inspections. In contrast, the purpose of the Land Registry is to guarantee and protect property titles. Titles can only be registered by submitting public instruments. The information in the Land Registry is therefore more rigorous than that contained in the Cadaster as the information source is subject to stiffer requirements.

To help make the data stored in each system consistent and so this data better reflects reality, the Spanish government introduced in 2015 a straightforward procedure for coordinating the data in both systems. This procedure has been further extended. You can now update the data registered to make it consistent in both systems and ensure it reflects reality. The procedure is quite automatic and gives rise to numerous advantages. If the data registered is coherent and faithfully reflects reality, selling your property or transferring it in any other way (by mortgage, gift, etc.) becomes far more straightforward. These advantages affect the property’s market value.

So I encourage you to check that the details on your property in the Cadaster and the Land Registry are the same and do reflect reality. If you find otherwise, get in touch. We can help you rectify the problem. By fixing the problem, you will have peace of mind that your property rights are fully protected by the Land Registry and that you are only paying the tax you lawfully owe.

Carlos Prieto Cid – Lawyer

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Tax obligations for owners of real estate in Spain

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Owners of real estate in Spain must pay tax on their properties regardless of their place of residence. In practice, resident and non-resident property owners pay the same taxes in Spain, although the names and collection mechanisms of these taxes differ.

A real estate property can generate earnings, either through renting or because of sale. Also, under tax law, just owning a property generates a notional income that is taxable. All these incomes must be declared in Spain, and Spain is the competent state for collecting any tax due. This is according to all the double taxation treaties signed by Spain. These treaties follow the general OECD model under which income from real estate property can be collected in the country it is in, regardless of the country of tax residence of the taxpayer.

In addition to paying any income tax due to the national Spanish tax agency, the property owner must also pay all other taxes due to other agencies. This includes, for instance, the municipal property tax collected each year by the local council. And, when you sell your property, the capital gains tax you also should pay to the council.

Lastly, in Catalonia and some other autonomous communities, there is a further tax on an activity widespread among foreign investors in coastal properties: the short-term leasing to tourists. The tax is a small amount due per night for every person staying in the property, which must be registered for tourist use with the local council.

Carlos Prieto Cid – Lawyer

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Tax obligations for owners of real estate in Spain

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Owners of real estate in Spain must pay tax on their properties regardless of their place of residence. In practice, resident and non-resident property owners pay the same taxes in Spain, although the names and collection mechanisms of these taxes differ.

A real estate property can generate earnings, either through renting or as a result of sale. Also, under tax law, just owning a property generates a notional income that is taxable. All these incomes have to be declared in Spain, and Spain is the competent state for collecting any tax due. This is according to all the double taxation treaties signed by Spain. These treaties follow the general OECD model under which income from real estate property can be collected in the country it is located in, regardless of the country of tax residence of the taxpayer.

In addition to paying any income tax due to the national Spanish tax agency, the property owner must also pay all other taxes due to other agencies. This includes, for instance, the municipal property tax collected each year by the local council. And, when you sell your property, the capital gains tax you also have to pay to the council.

Lastly, in Catalonia and some other autonomous communities, there is a further tax on an activity widespread among foreign investors in coastal properties: the short term leasing to tourists. The tax is a small amount due per night for every person staying in the property, which must be registered for tourist use with the local council.

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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