Have your Bank been charging you more than they should for your mortgage?. Time to revenge its coming ...

From 2013 the spanish courts have been repeteadly considering null and void the mortgage floor clauses. You can see our note on our blog in 2013. This clauses were designed to protect banks from negative interest rates.

http://javierherrerallamas.blogspot.com.es/2013/10/mortgage-floor-interest-abolished-take.html

Last week a Spanish court ruled that the country's banks leaders can no longer sell mortgages with so-called floor clauses. All main banks are involved, including Caixabank, Barclays, Bankia, and Banco Santander. Caixabank and Bankia.

The court said banks had to repay customers what they had lost since May 2013, when Spain's Supreme Court declared these mortgages, whose rates cannot fall below a benchmark, were invalid if they had not been presented clearly. This means the ruling is only retrospective to May 2013.

This ruling by a local court in Madrid followed class action suits by customers alleging that banks had not properly explained the clauses to them, which prevented them from benefiting from the euro zone's record low interest rates.

Most of the estimated 4m mortgages affected were sold during the 1997-2007 property boom when buyers were paying top prices for their homes. When the bubble burst they were unable to benefit from falling interest rates.

It is estimated that those affected pay from €179 (Euribor +0.5%) to €213 (Euribor +1%) more on a €150,000 mortgage than they would if they didn’t have a fixed minimum rate mortgage.

As the recession set in and people were unable to meet their mortgage repayments, they were evicted in growing numbers, peaking at an average of 500 a day in 2012. Under Spanish law homeowners cannot claim bankruptcy over a mortgage as it is regarded as personal debt.

So even after the banks foreclose and repossess a property the former owner still has to pay off the mortgage, as well as associated legal charges.

Some Spanish banks  have already removed the mortgage floor . Since the third quarter of 2015, Caixabank has eliminated most of its mortgage floor clauses. Banco Sabadell, the fifth-largest in Spain which has so far refused to get rid of the clauses, said they would analyse the ruling and take a decision later.

Banks including Barclays and Santander face a €5bn (£4bn) bill after a Spanish court ruled that millions of fixed minimum rate mortgages were null and void because of the “lack of transparency” in the way they were sold during the property boom.

Last October the European Commission asked Spanish banks to remove the clauses and even repay customers over the whole life of the loan, beyond the May 2013 limit. The European court in Strasbourg is expected to rule on 26 April whether the banks’ liability should extend beyond that date. The European commission has already said it believes the payments should be backdated to the date the mortgage was signed, on the grounds that if a clause is declared null, it’s null from the beginning.

So, it is clearly time to press your bank to get some of your money back. 

Javier Herrera Llamas

New Andalusia Rental Law: Compliance and Fines

The regional Government of Andalusia, known as the Junta de Andalucía, has just passed a decree regulating tourist rentals in the region, following in the footsteps of other regions like Catalonia, the Balearics, and the Canaries. These new rules apply to any short term rental agreement which is habitually offered as accommodation at a price fixed by the owner and which is advertised through tourism channels, such as travel agencies or online platforms. According to the Junta de Andalucía, every property which is publicised on these portals and puts the owner in touch with travellers has to be registered as tourist accommodation -

This new regulation is arising a considerable amount of queries from our clients, so we have prepared these notes for general guidance:

1.-Is there a ban on short term rentals?

Many UK newspapers incorrectly reported that there was a ban on holiday rentals for property owned by private individuals. This is absolutely not true as the objective of these changes is not to protect the interests of the Hostelry Sector, but simply to set minimum quality standards that will make the whole tourism industry more competitive.

2.-Are long term rentals under this new regulation?

Not at all. The regulation exclude properties rented for more than two consecutive months by the same person, which would be governed by the normal property rental law. If the property is rented out property for weeks or fortnights during the three summer months, it is clearly under the new regulation. 

3.- What facilities does a property have to have?

It must have its first occupation licence. The bedrooms must have exterior ventilation and means of shutting out the light. There must be coolings and heating systems at least in the lounge and bedrooms. The regulations insist on domestic appliances, a first aid kit, information about the area in the form of leaflets, maps, etc, and a complaints book. the regulations also specify that the property must be cleaned when clients arrive and leave. Bed linen must be provided, along with a spare set. Tourists must also be given a contact telephone number in case any problems rise, and must be made aware of rules set by the community of owners. The maximum capacity for a single property may not exceed 15 people.

4.- How & when can a property be registered on the Registro de Turismo?

Registration will start officially on May, the 12th, 2016 (in three months’ time, after the decree was published in the Official Bulletin of the Junta de Andalucía (BOJA). The Junta’s Tourism Department estimates that the register will be operative in May, and recommends using this interim period to prepare the paperwork and the property: find or obtain the first occupation licence, download the form, get hold of leaflets, tourist maps, etc or install air conditioning. The aim is that by the summer, properties will officially be able to continue with their normal activity. You can always to ask registration in advance.

5.- What documentation has to be presented?

It is not a complex process, but this is one of the most common concerns among owners. Prior to the presentation you will be needing to obtain your NIE number, and the details corresponding to the registration of your property in the Catastro. You will have to present a statement, that has to be filled in and signed, and then presented into the corresponding office. The registration will then be processed so the property can be rented, and a code will be assigned to identify the property. That code must be included when advertising it on online platforms. You could also authorize somebody to do it on your behalf.

6. -What are the tax implications of a property which is rented for tourism?

It is treated as an urban rental, in other words the money obtained from rentals has to be declared as annual income. It is not necessary for an owner to register as self-employed, no separate taxes have to be paid and IVA does not have to be charged if the property is being rented out by the owner. This type of tourist accommodation is treated as a service, not an establishment. 

We strongly advise to use this new regulation as an opportunity to revise your fiscal situation regarding your Spanish assets, and if necessary, regularize whatever tax statements could be pending. 

7.- Do you have to give each tourist a contract, or a bill, or ask for their ID for police registration purposes?

The rules say that you have to give each client a contract, even if they are only staying for one night. Also, that written agreement must be kept for one year in case inspectors from the Tourism authorities want to see it. The document must include the name of the person or company that is renting the property, the registration code, the number of people who will be staying in the property, the dates they arrive and leave, the total cost of the stay and the contact phone number for them to ring in case of problems. The owner can only issue a receipt for payment, rather than an invoice, and the rental price can be freely determined by the owner of the property. For security reasons, the people who will be staying in the property should provide their identity document upon arrival, but it is not yet been known whether these details need to be passed on to the police. Hotels and apartments do so online, but this process is not covered by the Tourism authorities.

8.- What happens if you want to rent out three or more properties within a 1,000 metre radius?

This is the most controversial point about these new regulations, because it states that people who rent out three or more properties in the same building or in blocks within a radius of one kilometre must register as Apartamentos Turísticos and are governed by this different regulation, which has been modified for this purpose. It is more demanding because it insists on an opening licence and certain requirements which include minimum measurements in different rooms of the property. Also, properties that are considered to “apartamentos turísticos” are treated differently for tax purposes. According to the Junta, anybody who owns three or more properties has to register as self-employed, and will be taxed in the same way as those who are running a business.In this case, they will come under the section of ‘apartamentos turísticos’ as far as Hacienda, the Spanish tax agency, is concerned.

Anyhow, it must be also mentioned that the rules, under the title Decreto 28/2016, de 2 de febrero, de las viviendas con fines turísticos y de modificación del Decreto 194/2010, de 20 de abril, de establecimientos de apartamentos turísticos, has failed to elaborate on two important aspects: what does compliance really entail and what are the fines for non-compliance.

1. In respect to compliance, the rules obliges owners to offer clients –among other requirements- the following: license of occupancy, rooms with adequate ventilation and darkening devices (shutters or similar), sufficient furniture and necessary appliances, touristic information whether in hard copy or electronic, of data for the area (bus schedules, close-by parking facilities, medical facilities in the vicinity and a plan of the town), complaint form, first aid kit, bed linen, cutlery and crockery adequate to the size and requirements of the property (and a replacement set for each). As if not enough, the law says owners will have to have a telephone number available to tenants where they can call to resolve any incidences, an instruction manual for kitchen appliances, details of the use of communal facilities and property equipment, as well as details on access of pets to the property and information on potential restriction for smokers and a few other requirements.But whilst some of the above are clear, the meaning of ambiguous words such as “adequate”, “sufficient” and “necessary” can widely differ depending on who you ask. Attending these grey areas is a pressing requirement.
2. The fine system is also not clear. The 2016 Act refers to a 2011 Rural Accommodation Act for elucidation of what fines are applicable. Some scaremongers have enjoyed spreading the belief that if you do not register, you will be fined up to 150,000 Euros. The reality is that failing to register their properties can “only” be fined between 2,000 and 18,000 Euros, the heavier monster fine of “up to 150k” being reserved for other contraventions i.e. unlawful discrimination or obstructing inspectors on duty.

Interestingly, the Act does not address the fines for failing to comply with one or more elements within the the long list on point a), for instance: missing spoons, dirty linen or insufficient first aid kit.

Previous experiences in other Spanish regions, where similar rules apply, shows us that lack of registration is attracting the vast majority of fines, with little or no precedent in respect to the degree or correctness of compliance.

So, if you are planning to rent out your property in a short term basis in the next future, we strongly suggest that you arrange in advance your registration. Also, should be wise to use this opportunity to check that you are fullfiling all fiscal regulations for your property in Spain. 

Javier Herrera Llamas

Have a look at your spanish will !!!! (Before August 2015)

If you live in spain and do not state on your will that you wish english law to rule your inheritance, your estate will go to your children and not your spouse.

Certainly, is now essential that people retired in a country different of their country of nationality within the European Union revise their wills. What is all this fuss about? An European Regulation (eu) 650/2012 will come soon into force and have important consecuences on how your will is going to be construed by the Spanish Authorities. 

We recommend you ask your solicitor about how it may affect your inheritance in case you need to make changes to your wills. Changes must be in place before 17th of august of 2015, the sooner the better.

Particularly. English citizens need to look at their will because of this new Regulation of the EU establishes that:

1. When a person dies resident in one country of the European Union but national of another, the law applicable to his/her inheritance will be the one that he/she has established expressly in his will and not the one established by the International Norms of each country (which may be in conflict). 

This is good news because an English national living in Spain can establish that he/she wishes English Law to rule his/her inheritance and this will avoid any possible risk of claims from children against the spouse on the basis of the system of obligatory heirs established in Spanish law, which has always caused worry and concern in the case of children from previous marriages etc.

2. If a person passes away after the 17th of August of 2015, unless he has said differently in his will (as explained above), the legislation applicable to his inheritance will be that of his country of last residence . This is very important for English people living in Spain, because under Spanish law you cannot leave everything to your wife as 2/3 of the estate have to be left to children. In other words if you are resident of Spain, have children and do not establish on your will that you wish English Law (your national law ) to rule your inheritance your Spouse will not be allowed to receive his/her full inheritance as it would contradict the Spanish rules of obligatory heirs which would be applicable automatically because of the new regulation.

Consequences:

1. If you have children but have made a will leaving all assets to your spouse, make sure that you have clearly stated on your will that you wish your national law (English law) to rule your inheritance. If you have not, you need to speak to a solicitor about this new European directive and add this statement to your will.

2. If you are married and you have been concerned with possible claims by your spouses children against your estate this risk can be completely removed by your spouse stating on her/his will that it should be English law that rules the inheritance.

Conclusion:

The new regulation has given much more strength to the testators /testatrix, letting them choose between English or Spanish Law, which is good, but precaution is a must because under the new regulation if nothing is said and you are a resident in Spain automatically the law applicable will be Spanish law which does not permit that spouses leave everything to each other if there are children.

To avoid nasty surprises visit your solicitor and ask if you need to change the wording of your will due to the new Regulation of the EU. 650/2012.

Javier Herrera Llamas

No more Offshore Companies holding spanish Assets !!!

For some time now I have been advising on the dangers of owning assets in Spain through an offshore company.


Over the last twenty years many thousands of foreign investors have channelled their property investments in Spain directly or indirectly through offshore companies. This has enabled many individuals to avoid the payment of many Spanish taxes such as capital gains tax and inheritance and gift tax.

From 2007 these tax avoidance measures came to an end and owning assets in Spain through an offshore structure could have no commercial or fiscal benefit. Continuing to hold assets in an offshore structure could now increase exposure to taxation.

From there onwards, the offshore company must pay annually a tax consisting of 3% on the Value of the Property for Rates Purposes (Valor Catastral). The Valor Catastral has no resemblance with the real value of the property and normally does not exceed 50% of this.

Just very receinlty Tax Authorities are now considering that the transfer of the capital shares of the company is taxable under transfer tax, and this will be based on the market value of the real estate, regardless of the property price declared or the shares face value.

In line with the rest of Europe, the Spanish authorities have been continously (and will be) trying to introduce legislation that will lessen the amount of tax evasion and money laundering that is perceived to be enjoyed by entities located in offshore tax centres. The tax office does not want to leave any stone unturned in its quest to eradicate all investments channelled through tax haven countries.

The main thrust of the legislation is aimed at forcing such companies to demonstrate beyond reasonable doubt that their underlying activities are truly carried out in their respective offshore centre, and that these are indeed normal business activities.

Finally, if all this was not enough, there has been also cases for chriminal prosecution against the lawyer, the ultimate beneficiary and the director of the offshore companies, by which were all sentenced to jail terms.

So we can really say that the times offhsore companies were easily used to avoid the taxation on spanish assets are gone. Now, this requires a much more careful approach.

Javier Herrera Llamas

Christmas in the Air

Christmas is feeling in the air....


Even at the Courts now you can hear singing and, from time to time, a bit of "Christmas turmoil"

So, also your Lawyers wish you a very Merry Christmas and properous 2014.

Even from the Court ...

Javier Herrera Llamas

Nie Frequently Asked Questions

The spanish NIE has provided quite a lot of unpleasent last minute surprises, since is compulsory to show it on any important act made in Spain. 

You will find here the most frequently asked questions, so you save yourself a few  problems:

What is a NIE?

An NIE Number is a tax identification number to be used in Spain. Prior to purchasing a property, selling a property, obtaining a mortgage, starting up a business or working in Spain, it is a requirement by law that every individual possess an NIE Number. The application process is laborious and time consuming, and without the use of a service such as ours, would require normally two trips to Spain, and over 10 hours of waiting in queues, along with the filling out of complex application forms.

The actual NIE Number, when produced from a National Police Station in Spain is printed out on a piece of paper, and this sheet of paper is often used as a form of identity. Once you have been issued an NIE number, it is yours for life.

Everywhere on the internet it says that you have to apply in person for your NIE Number? Is this true?

Yes, this is certainly the case. Without question the Spanish law states very clearly that the person must apply for the documents in person. However, the Spanish law also clearly states that a legalised, Spanish power-of-attorney document enables any individual to be represented by another for all legal purposes in Spain (as long as it is declared as such within the power-of-attorney). Therefore through virtue of these combined laws, we are able to apply for a NIE number on your behalf without the need for you to be in Spain.

You should also note that, regardless of the clearly stated laws, many local branches of the national police throughout Spain choose not to allow this, which is why some lawyers are unable to act on your behalf for this purpose.

How long does the procedure take?

Once we have received your documents (POA and copies of passports - both legalised) the NIE number is obtained within 10 business days (which equates to normally 2 weeks, exceptions made for public and bank holidays).

Prior to sending the documents to us, they must be notarised (by a Notary Public in your area) and then stamped with the Hague Apostille. 

Do I need to send photos for my NIE number card?

No you do not need to send photos to apply for the NIE number.

The NIE number is in fact not a card at all. Rather it is a sheet of A4 paper bearing your details (as outlined on your passport) as well as an official stamp from the National Police of Spain. This original document is an extremely important item of identification in Spain, even though it does not include any photo. Your passport and/or eventually your residence card used in conjunction with your NIE number is generally sufficient for most functions to do with government & taxation in Spain(such as purchasing a property in Spain, paying taxes, selling a property in Spain, etc.).

What happens if I have lost my NIE Number?

Applying for a duplicate NIE number is the same process as applying for the first time. One thing to watch out for however, albeit most of the time this goes without saying, is that the same details are put on the second application form as the first because if not, they police will have problems in issuing the same number if they cannot prove 100% that it is the same person.

I am an EU Citizen, what documentation do you need from me?

As an EU citizen, in order to obtain an NIE Number on your behalf, we will require only a notarised, legalised power of attorney document and a notarised, legalised copy of your passport. There is nothing further required.

I am an NON-EU Citizen, what documentation do you need from me?

As a non-EU citizen, in order to obtain an NIE Number on your behalf, we will require a notarised, legalised power of attorney document, a notarised, legalised copy of your full passport, a full copy of your passport (all pages - email or fax is fine for this purpose), documented evidence (or proof of) why you require an NIE Number. In the case of a property purchase, a private purchase contract, a letter from a mortgage company, or similar type of document will suffice. 

I've been told I can apply for my NIE card through the Spanish consulate. Is this true? If yes, what benefits does your service offer over applying through a Spanish consulate?

Yes, this is entirely true. The primary benefit of using our service as opposed to applying through a Spanish consulate is speed. The average time required for an individual to obtain their NIE number via applying through a Spanish consulate is 16 weeks. This varies from one country to the next, we encourage people to contact their closest Spanish consulate first and enquire about their turnaround time.

Can I get a temporary NIE number at the consulate to sign the deeds of my property?

This is not possible. The NIE that you are issued initially is the same NIE for the rest of your life. Even if you lose the document and apply for a new one, the same number will be issued to you again. Therefore there is no such thing as a temporary NIE.

If you need the NIE for signing title deeds in Spain, as soon as we have submitted the application, we can send a stamped copy to the sellers, mortgage broker, lawyer or whomever is demanding the NIE as proof that the NIE is on the way. This usually pacifies the situation until the document is issued.

Javier Herrera Llamas

Foreing investment in Spain duplicates in 8 months. Why?

Recently, the Economy Minister Luis de Guindos has revealed that foreign investment in Spain has doubled between January and August 2013. Until August had reached 19,000 million in direct investments, compared with 9,000 million recorded in the same period last year.

When he was just saying that, Microsoft co-founder Bill Gates has made a big bet on the recovery of Spain’s construction sector by becoming the second-largest shareholder in FCC,  a Spanish builder hit hard by the collapse of a decade-long property bubble five years ago. He has acquired 6 per cent of its treasury shares for €113.5m.

What are the reasons for this increased investment?. Apart from the classic reasons that have made Spain the 2nd most popular holiday destination in the world (Tapas, 300 days of sun every year, cheap and simple acces via low cost airlines, solid infraestructures, security, etc), it does seem that there are new ones that are setting  this trend.

The audit Ernst & Young positioned Spain  in the fourth place of the classification of the Europa´s most attractive.  The reasons they outlined were 10:

1. Falling housing prices

The housing bubble that spurred an entire country exploded in 2008 and since then prices collapsed in a steady decline is not yet known whether it has bottomed out with a "Bad Bank" which brings more toxic assets at bargain prices.

According to an "investment guide" of BNP Paribas, there are several reasons to invest in real estate in Spain successfully, including the own price of real estate assets located in its lowest level in recent years and represents a "unique opportunity" and just for the future return on investment in terms of economic recovery cause a spike in prices.

2. Competitive salaries

In Spain, labor costs, according to Eurostat, is down since 2008 while in the other European partners increased between 5 and 10%. A workforce 30% cheaper than the average of the Eurozone it is very tempting for foreign companies .

3. Residence permit for two years

The purchase of properties from more than 500,000 euros by foreigners will entitle them to a residence permit for two years. This clause is designed to "avoid embarrassment" to these foreign citizens having to leave the country every ninety days to renew their visas.

4. Unique opportunity

Large companies believe it is time to invest in Spain because the activity will start to grow in 2014 and foreign investors can purchase prices opportunities that will best when the economy strengthens.

5. Prime position on the map

Its privileged position makes it an ideal platform for conducting international business: it belongs to the European Union, is the gateway from the north also with South Africa because of our close historical and economical.

6. Starting business is easy 

Starting a business in Spain is not difficult. The types of companies are in line with those in other OECD countries and there is also a wide range of possibilities, which meet all requirements. We must also emphasize almost total liberalization that governs foreign investment and exchange control, in line with EU rules.

7. Recovery confidence

The reformist path, the announcement of the European Central Bank's plan (OMT) to buy debt in the secondary market, or the defense of the euro (in its irreversibility) by eurozone partners have reduced uncertainty and recovered confidence of investors in our country.

Since the suspicion touched last summer background with a runaway premium that exceeded 600 basis points, now it remains at levels around 300 points and interest paid on the debt are therefore lower. A Matter of Trust recovered reflected in the increased investment.

8. Room for improvement at European level

Most global investors rely on increasing the attractiveness of Europe. "60% of executives from BRIC countries and 45% of Americans are confident that Europe will be a more attractive destination for investors in the coming years," noted in the document.

Moreover also stressed that the imminent risk of rupture in the Eurozone, which, as mentioned in the previous point, weighed heavily in the past year, has now been diluted. "Although the eurozone crisis persists, the international business community believes in the strengths of the area and consider that Europe is a reasonable long-term bet," argued Marc Lhermitte, Partner Consulting and author's own report.

9. Greater labor flexibility

Labor reform alone will not create jobs but  introduces the basis for international companies have more ground to present their policies and decide to come to Spain. Economy Minister Luis de Guindos, considers labor reform, in addition to the adjustment measures, are able to attract foreign investment, and in this sense the minister pointed out the example of Ford's decision to increase its production in Valencia or Renault and Nissan decided to reinforce its commitment to Spain.

10. Modern patent and trademark law

Spain has one of the most modern legislation on patents, trademarks and industrial designs, according to the Observatory defends Mark Spain.

An example of this is that our country is the world's second most renewable energy patents per capita, only behind Germany and ahead of the United States, and especially noted for his innovation in the sun, which focuses 43% of the total, according to the latest report by the Spanish Patent and Trademark Office (SPTO).

The country is also the fifth most renewable patents absolute number, behind the U.S., Japan, Germany and the UK, while investment volume ranked seventh

On top of that, the economy numbers in Spain shows that the recovery is not far away. 

Since 2009, the divergence between Spain and the core countries of the euro zone has been to a large extent corrected: inflation, which peaked at 4.3 percent in 2008, was negative in 2009 and is less than 3 percent today, despite sharp increases in indirect taxes; the spread in unit labor costs with respect to the euro zone average, which was 19 percent, is now 9 percent, both across the whole economy and in industry. The current account deficit, 10 percent of GDP in 2007, was less than 2 percent in 2012.

While public servants have had pay cuts of between 10 and 25 percent, cuts of 20 to 40 percent are not uncommon in the private sector. In short, Spain has regained competitiveness and is in a position to benefit from growth in her trading partners. Lastly, the restructuring of the banking system is nearly completed (partly at the cost of a higher public deficit), and de-leveraging of the banking sector is slowly proceeding (from 19 in 2007 to 16.7 in 2011)

Sources of growth exist, however: first, a healthy export sector that has increased market share throughout the recession; of these exports, steel and chemicals make up for 26 percent of the total, followed by capital goods (20 percent) and automobiles (17 percent); food products, Spain's traditional source of foreign exchange, are now only 16 percent of the total. Second, there is a return of confidence in the stability of the Spanish economy and in the resolve to pursue reforms.

So is not only the government and the Bank of Spain are saying it. 

Authorised voices confirm that, in short, in 2013 Spain may start to get out of the slump. If so, it will be slow progress, but progress. A long way, but upwards.

Javier Herrera Llamas