Buying property =Residence in Spain?. Looking into details…

Recently the Spanish government announced its intention to offer resident visas to wealthy overseas investors spending a minimum €160,000 on a property purchase.

The measure is expected to imitate agreements already established in Portugal and Ireland. Jaime Garcia-Legaz, Secretary of State for Trade, insisted that the law change is necessary to reduce Spain’s unsold housing stock.  He told a conference in Madrid: “In coming weeks, we will start to reform the law regarding foreigners to reactivate demand abroad and contribute toward reducing housing stock.” The Prime Minister Mariano Rajoy stressed that the plan has not yet been finalized, but added that Spain ‘‘needs to sell these homes’’ and that getting them off the market could help revive the nation’s devastated construction industry.

The reason for that is quite simple: Spain has more than 700,000 unsold houses following the collapse of its real estate market in 2008 and demand from the recession-hit domestic market is stagnant. In the mean time, Spain is in the midst of a double-dip recession with 25 percent unemployment, though Rajoy said he believes Spain has managed to avoid a financial implosion and will start growing again in late 2013 and in 2014.

This is not something completely new in Spain. 

In fact, if you own a property in Spain you are granted a multiple entry visa permit allowing you to visit Spain more up to 90 days each 6 months. 

If that is not enough, you can today apply for a non lucrative residence permit. This allows the foreign national to reside in Spain, without carrying out labour activities, provided always that you can show a yearly income of more than 25.560,52 € per year, and other 6.390,13 € per year per each member of the family.

Is, anyway, not enough to show that the applicant has financial resources to live in Spain without working, but also will require: 1) not being found in Spanish territory illegally, 2) no criminal record in Spain and in the former countries where has resided for the past five years, 3) not listed as objectionable in the territorial space of countries with which Spain has signed an agreement to this effect, 4) Having a public or private insurance with a concerted health insurer authorized to operate in Spain, 5) not being previously deportated from Spain or any other EU country. and 6) not having any of the diseases that may have serious public health implications .

So, as you can see the proposal is not such a big change !!!.

Legislation can take some months to pass through the Spanish parliament. However, the Prime Minister has insisted that this programme will be accelerated to help deal with the problems within the Spanish economy.

The details of the Law has not yet being made public, so very little information is existing.  but we can make some well founded guessing

Will the Visas Apply to a family?

At this stage we still don't know but it is likely that close family members may be included.

Is it limited to Russia and China?

We expect not. Since Russia and China were expressly mentioned in the initial brief,  but the intention is to cover most countries that are not on the Spanish governments' list of high risk countries for terrorism.

Will the visas allow to work?

There are no details at this stage. And quite probably will not. However the measure could pave the way for buyers to eventually obtain a Spanish passport and then be eligible to work anywhere within the 27 EU states.

Will the visas grant access to schools and hospitals?

We expect it will not be a general opening of the public welfase system, but will be allowed for residents contributing to the Spanish welfare system. And quite probably, some form of medical insurance still may be necessary.

Will the visas allow residency elsewhere in Europe?

This is likely to meet some disapproval with other member states within the EU. But the legal aspects of this within the EU framework could be complicated and may have to allow freedom of movement. We will have to await further details

Can you take a mortgage?

We expect that the visas will only be granted to investors bringing a minimum of €160,000 investment into the country. Borrowing the money from a Spanish bank doesn't really achieve the aims of the government. A likely no on this.

Conclusion:

With the Spanish property market at bottom prices, with clear signs of prices being recovering for 2014 – 2015, I think is a very good time for those interested in setting residence in Spain to start looking into some properties to buy in 2013. 

Do not hesitate to ask any question you may have on this. We'll help you confirm to all the legal formalities, prepare the documents and submit them to the Spanish embassy, and to the federal body in charge of these issues (Gobierno de España, Ministerio del Interior). Our competence in this area will significantly reduce the waiting time and risk of problems. 

Javier Herrera Llamas

Your Solicitor´s Christmas Greetings

From us ("the wishors") to you ("hereinafter called the wishee"):

Please accept without obligation, explicit or implicit, our best wishes for an environmentally conscious, socially responsible, politically correct, low stress, non-addictive, gender neutral, celebration of the winter solstice holiday, practiced within the most enjoyable traditions of the religious persuasion or secular practice of your choice, with respect for the religious/secular persuasions and/or traditions of others, or their choice not to practice religious or secular traditions.

Please also accept, under aforesaid waiver of obligation on your part, our best wishes for a financially successful, personally fulfilling and medically uncomplicated recognition of the onset of this calendar year of the Common Era, but with due respect for the calendars of all cultures or sects, and for the race, creed, colour, age, physical ability, religious faith, choice of computer platform or dietary preference of the wishee.


By accepting this greeting you acknowledge that:

This greeting is subject to further clarification or withdrawal at the wishor's discretion.

This greeting is freely transferable provided that no alteration shall be made to the original greeting and that the proprietary rights of the wishor are acknowledged.

This greeting implies no warranty on the part of the wishors to fulfill these wishes, nor any ability of the wishors to do so, merely a beneficent hope on the part of the wishors that they in fact occur.

This greeting may not be enforceable in certain jurisdictions and/or the restrictions herein may not be binding upon certain wishees in certain jurisdictions and is revocable at the sole discretion of the wishors.

This greeting is warranted to perform as reasonably may be expected within the usual application of good tidings, for a period of one year or until the issuance of a subsequent holiday greeting, whichever comes first.

The wishor warrants this greeting only for the limited replacement of this wish or issuance of a new wish at the sole discretion of the wishor.

Any references in this greeting to "the Lord", "Father Christmas", "Our Saviour", or any other festive figures, whether actual or fictitious, dead or alive, shall not imply any endorsement by or from them in respect of this greeting, and all proprietary rights in any referenced third party names and images are hereby acknowledged.

Sincerely,

Javier Herrera Llamas

Voluntary Repossession of Spanish Property

Are you suffering for repaying your spanish mortgage?. 

No despair, there is still some hope to get out of this situation...

As a direct result of the economic downturn many non Spanish nationals who purchased property in Spain have been unable to keep up the mortgage repayments. In many cases there is no hope that the property owners will ever be able to repay the mortgage debt that they owe. In these cases, voluntary repossession may be an avenue to consider.

The Spanish banks are able to proceed in three ways in order to realise their security.

The bank may foreclose on the mortgage, which is a procedure not dissimilar to that used by other countries´ banks, other than that the final stage of the procedure is a court regulated auction at which the bank becomes the legal owner of the property, unless a third party purchaser buys the property, increasingly unlikely in the currant climate. At this stage a shortfall may be created, that is the difference between the value of the property as at the auction date, and the level of debt as at that date. The bank may either pursue the debtor for the debt itself, or sell the debt to a third party, who in turn may either collect the date himself, or instruct debt collection agents to do the job. The debt collection agents may be based in the debtor´s country, sometimes even in the same region as the debtor.

Given that the cost of foreclosing on a mortgage is an expensive and lengthy process, a bank may ask the debtor for a power of attorney, whereby the bank can act on behalf of the debtor to sell the property to one of the bank's clients. The selling price may be above or below the current level of debt, and arrangements may be agreed with the bank to ensure that no shortfall remains. However, it is very unlikely that there will be any surplus to distribute to the debtor at the end of the process. Moreover, there is no certainty as to how long it will take to sell the property.

From the perspective of the debtor the best solution is to agree with the bank what is commonly referred to as a voluntary repossession (in Spanish a "Dación en Pago"), whereby the debtor agrees to transfer his/her interest in the property to the bank in exchange for the bank cancelling all of the debt secured against the property. In order to agree to a voluntary repossession the bank will need to know that someone acting on behalf of the debtor and located in Spain is in a position to sign the necessary documentation before a Spanish Notary. The bank will then value the property and consider whether according to its current policy it is prepared to write off any shortfall. Once the bank is happy to proceed it will arrange for documentation to be signed completing the transaction.

Clearly there is an obligation on the debtor to repay the debt, whereas the banks are under no obligation to accept a voluntary repossession. 

It is for that reason that the approach to the banks is best handled by professionals with experience of dealing at branch level and at head office level with the debt recovery departments of Spanish banks.

Do I really need write an Spanish Will?

If you live in your country and own property in Spain it is advisable that you have a Spanish will as well as a will dealing with your national assets.

 

Here you will find the reasons why non Spanish nationals make Spanish wills and the procedures you must follow in order to do so.

 

 

The best reason to make a Spanish will is that it will make it much easier & cheaper to administer your Spanish estate upon your death.  In fact a well drafted will in your own country  can have the same results, but if you have the option it is always better to deal with your Spanish assets in a Spanish will. If your national will is straightforward, and you engage a specialist lawyer then any complex issues will be dealt with as a matter of course. However, very often the will is drafted in such a way that its effect can only be determined by an solicitor specialising in will trusts, or where the estate is handled by a Spanish lawyer who has never dealt with a similar cross border matter. This can lead to unnecessary costs and delays.

Unlike in other countries, wills made in Spain must almost always be signed before a Notary who will ensure that the document complies with all legal requirements. Once the will has been signed, the Notary sends information relating to the identity of the testator and the place at and date on which he made a will to a centralised registry of wills at the Spanish Ministry of Justice. The will signed by the testator does not leave the Notary’s office, but is bound into a volume of documents signed before that Notary and in due course, when the Notary retires, dies, or leaves the municipality, is passed to another Notary in the same municipality for safekeeping.

The helpful result is that upon the death of the testator a certified copy of the will can be obtained from the relevant Notary’s office, a document that can then be used by the beneficiaries to administer the estate.

If you were to die without leaving a will, or if your will under your national law was the last will to deal with your estate in Spain, the Spanish authorities need to be satisfied as to who has the right to administer the estate. In certain instances an application may need to be made to the Spanish court in order to proceed, but usually matters can be handled before a Spanish Notary. One is then reliant upon the expertise and prior experience of the judge or the Notary in relation to such cross border matters. It can be particularly difficult to explain the effect of  certain trusts, for instance.

When presented with an English will in relation to Spanish assets, a common error made by lawyers lacking the necessary experience is to treat the executor in the same way as he/she would be treated in other countries (i.e England or Ireland), so that the entire Spanish estate vests in the executors. In certain circumstances this can mean that inheritance tax is payable at a much higher rate.

It can be more effective for the final beneficiaries of the Spanish assets to inherit directly, with the agreement of the executors. This is permitted by the rules, and avoids reference to the executors from a financial perspective, thus minimising the inheritance tax liability. An error relating to inheritance tax may be difficult or impossible to correct, but in order to avoid such errors altogether the best advice is to make a Spanish will that dovetails with any other will that the testator may make in relation to the rest of the estate.

Whatever the content of other wills, it is most sensible to ensure that the Spanish will is limited expressly to assets situated in Spain. Further, it is possible to appoint someone as administrator of the will (in Spanish, “albacea”) who can administer the Spanish estate. Unlike executors, the estate does not vest in an administrator of a Spanish will, although the administrator usually is a legal or other professional, expressly authorised in the will to charge for his work.

Probably the most frequently asked question relating to Spanish succession is whether forced heirship rules will apply. The simple answer is that Spanish law provides for your national law to apply, meaning the law of the country of which you were a national as at the date of death. So, as an example, a British national from England will have testamentary freedom according to English law. The most effective way to ensure that English law applies to an estate is for you to make a Spanish will in relation to your Spanish assets, specifying that you wish your law to apply to your estate in Spain.

Spanish nationals do not use lawyers to write their wills. They simply attend at the Notary’s office and set out what they want to happen to their assets when they die. But this is not a sensible route for the non-Spanish national, whether resident in Spain or otherwise. While the Notary will consider his knowledge of Spanish private international law to be sufficient for the purpose, he may not have a correct understanding of all the issues relevant to your individual circumstances. You can have your Spanish will drafted by an independent adviser in your country and then signed before a Notary during your next visit to Spain.

Writing a Spanish will is the best way to ensure that your Spanish assets are dealt with according to your wishes. However, you need to consider the best approach for your specific circumstances. The best way to do this, with no doubt,  is to seek specialist advice from an expert. 

Javier Herrera Llamas