lawyer | C&D Solicitors

PREFERRED SHARES: THE GREAT SCANDAL

Geschrieben von admin am 11 Juni, 2013. Veröffentlicht in english speaking solicitor, lawyer, malaga. Keine Kommentare zu PREFERRED SHARES: THE GREAT SCANDAL

By the end of 2008, Spanish saving banks and banks already had clear reports stating that current high interest rates may drop and the property bubble was about to burst. In addition, they also knew that the lucrative business of saving banks in the construction sector by means of credits for developers and mortgages for individuals, was about to go to ruin.

Regarding that their core business in the housing sector was about to finish and that saving banks could not issue shares as banks could, they “invented” the sale of a product to obtain funds known as participaciones preferentes (preferred shares). This financial term may be defined as debt securities issuances for an undetermined period of time, in which saving banks pay returns depending on their profits. But they may not even pay anything at all—although this product offered up to 7% returns—, because the payment of these returns depended on the financial entity profits. Thus, as a result of the housing sector slump and saving banks loss, there was no profit. Furthermore, these preferred shares have no voting rights and are not guaranteed by the Deposit Guarantee Fund—which covers people’s savings up to 100,000 Euros—and has no maturity, that is, they are perpetual.

Most of the investors who purchased these preferred shares were retail clients of these financial entities. Most of them thought that this product was similar to fixed income deposits. In most cases, these clients did not have any knowledge about financial risks neither any intention to risk their savings—their money was invested in fixed term deposits and one day they received a telephone call from the bank convincing them of the “advantages” of purchasing preferred shares; however, most of the disadvantages were not explained to them, because the bank employees did not probably even know what they were offering. They just followed the financial entity instructions.

Result: 300,000 people affected by the purchase of these preferred shares which may amount to 30,000 million Euros, although this sum may be higher.

Financial entities are allowed to sell this type of products if they carry out the following: study of the investor’s profile and performance of the private investor test for suitability. In most cases, it is obvious that financial entities should have not sold the aforementioned preferred shares to most of their retail clients, because they did not match the suitable profile to purchase this type of products and had limited savings to be invested only in conservative products, such as fixed income deposits.

Holders of the aforementioned preferred shares have the following options:

A) Secondary market offering, although they may be sold at a loss considering current circumstances.

B) Conversion into shares of the entity—this is the solution offered by saving banks. However, this exchange is also at a loss, as Bankia has already done two weeks ago—in this case, its clients have lost up to 70% of their investment when the preferred shares were converted.

C) Going to the arbitration offered by the Government—we sincerely have misgivings about its results and clients may also have to assume significant losses.

D) Going to court through civil proceedings to claim for the invalidity of the contract which served as a basis for purchasing preferred shares. This is the most recommended procedure for all people affected, as court orders which have been already known are pronounced in favour of these people. Although this action may imply a longer procedure to recover the invested money, the result is much more advantageous.

We finally recommend you to consult an expert before taking any decision if you are a person affected by this matter, so that all possible options are explored particularly.

Author: Gustavo Calero Monereo, C&D Solicitors (lawyers)
Torrox-Costa (Malaga/Costa del Sol/Andalucia)

MORTGAGES: THE WELL-KNOWN ECJ RULING ON THURSDAY 14TH OF MARCH

Geschrieben von admin am 13 Mai, 2013. Veröffentlicht in lawyer. Keine Kommentare zu MORTGAGES: THE WELL-KNOWN ECJ RULING ON THURSDAY 14TH OF MARCH

HIPOTECA 2 — European vs Spanish legal protection for consumers with mortgages

About a month ago, the European Court of Justice (ECJ) ruling caused a great stir among Spanish media. This court judgment has been originated from a preliminary ruling handed down by the Mercantil Court nº 3 of Barcelona, as a result of the mortgage foreclosure procedure between an individual and La Caixa Bank. This preliminary ruling intends to clarify if Spanish legislation complies with the consumer protection requirements regulated by the European Directive 93/13/ECC. This Directive was approved to ensure consumers’ protection against their disadvantageous position with respect to a professional when contracting certain services.

In short, here below are the facts intended to be disclosed before the ECJ:

First: In regard of Spanish civil procedure in the matter of mortgage foreclosures, it was intended to be disclosed if Spanish regulations fail to comply with the aforementioned European Directive protecting consumers, because in Spain the “judgment debtor” cannot claim the existence of unfair terms set forth in this contract. In Spain, if judgment debtors want to claim the existence of unfair terms in this type of contracts, they should initiate different court proceedings which may not paralyse the mortgage foreclosure proceedings; for example, a situation may arise where a property is auctioned due to the unpaid mortgage and the judgment debtor may also obtain a favourable court decision declaring that the contract of that mortgage is null and void once that the property has been auctioned. This may arise because the mortgage foreclosure cannot be paralysed despite the contract may be considered to be null and void.

Second: regarding the substance of the matter, the concept of “unfair term” of the Directive is intended to be clarified in order to assess if the terms of the mortgage contract—subject matter of the main action and undersigned between an individual and a bank, are of unfair nature; these terms are the following: early termination of long-term contracts, fixing of default interests and the liquidity agreement. These are “cut and paste” terms (similar terms) appearing in any mortgage contract which anybody may have executed with a bank.

Regarding the first issue, the ECJ is clear and unambiguous declaring that the Spanish procedural regime reduces the effectiveness of the protection pursued by the Directive, because:

a) Possible unfair terms of the main contract cannot be challenged in the same mortgage foreclosure proceedings which may finish with the property put up for auction.

b) Mortgage foreclosure proceedings cannot be paralysed by the courts, although they know that the judgment debtor has filed court actions challenging possible unfair terms.

It is worth mentioning that by virtue of a repeated European case-law, the national court is obliged to consider of its own motion the unfairness of all contractual terms under this Directive.

Regarding the second issue, the ECJ answer is not very revealing, or at least automatically, in order to know whether a term is unfair or not, as the ECJ considers that the national court is the only competent body to interpret and apply the national Law. However, the court ruling states that to decide if a term causes an imbalance to the detriment of the consumer in relation to bank—national regulations must be taken into account if that agreement is not signed between the parties, the court shall assess if this term leaves the consumer in a less favourable situation than this provided by the national Law in force in case this term exists. For example, if the term fixing the default interest in the mortgage contract (normally around 20%) is an exception and there is no other similar legal interest in national Law (i.e. default interest applicable to commercial transactions is at 7.75%), then this term may be considered to be unfair; an open-and-shut case, judge for yourself.

Finally and regarding ongoing and future mortgage foreclosures in Spain, it is worth mentioning that two rulings have been already issued in the last three weeks declaring mortgage contracts to be null and void, because default interests were unfair.

Author: Gustavo Calero Monereo, C&D Solicitors (lawyers)
Torrox-Costa (Malaga/Costa del Sol/Andalucia)

BUILDING PERMIT INVALIDITY AND CONSEQUENCES FOR THIRD PARTIES IN GOOD FAITH

Geschrieben von admin am 5 März, 2013. Veröffentlicht in english speaking solicitor, lawyer. Keine Kommentare zu BUILDING PERMIT INVALIDITY AND CONSEQUENCES FOR THIRD PARTIES IN GOOD FAITH

Invalid Andalucian building permit/licence

One of the legal problems affecting some owners of properties on non-developable land has originated in the last ten years with the invalidity of building permits, which protected these constructions on non-developable land. This invalidity has been obtained in most of the cases by means of the corresponding contentious-administrative court proceedings.

First of all, the invalidity of a building permit would imply the demolition of what has been built under this permission on specially protected non-developable land; in case of common non-developable lands (without special protection), this invalidity may imply the demolition if more than four years has not elapsed between the end of the construction and the beginning of contentious-administrative proceedings or the invalidity procedure ex-officio by the Town Council. After March 2012 six years should have elapsed.

From a legal point of view, the main problem lies in the third party in good faith, included in Article 34 of Spanish Mortgage Law, who purchases a property to the former owner who had a building permit to build, and later on, he finds out that this permit has been challenged by contentious-administrative jurisdictional courts and found null and void by final judgment before the sale execution; or he finds out that there is a contentious-administrative proceedings going on when he bought the property and has not been finished yet. Therefore, sooner or later a judgment may be received stating that the permit is invalid.

The third party in good faith is not able to know about these facts because until the 1st of July 2011 it is not compulsory to register in the Land Registry the invalidity of the building permit ordered by final judgment or resolution ex-officio by the Town Council. This modification was incorporated by the Spanish Royal Decree-Law 8/2011 approval modifying some articles of Spanish Land Law. For this reason, this third party purchaser is not able to know about this situation, becausethe Land Registry has not recorded in most of the cases the decisions taken on building permits which may affect their property rights.

The abovementioned Royal Decree-Law approval has set the compulsory registration in the Land Registry of the legal condition of the property, so that the Public Administration bodies will be responsible if this notification is not served to the Land Registry when contentious-administrative proceedings are affecting the building permit granted to the property. Articles 51 and 53 of Spanish Land Law (Royal Decree-Law 2/2008 of 20th of June) set forth this compulsory registration, so that the third party in good faith may be able to know about the legal situation of the property by looking up the Land Registry and then decide about buying or not this property knowingly and intelligently.

However, regarding the abovementioned information, a problem arises when considering the facts previous to the 1st of July 2011—whether the proceedings are finished at this date or they are not resolved yet, because the abovementioned compulsory registration in the Land Registry was not in force as to this date as former regulations were applied.

In my opinion, the main problem of Spanish legislation in this field and its most frequent interpretation by Spanish case law, lies in the fact that the third party in good faith accessing the Land Registry is not protected by the Registry certification and the legal certainty that the Land Registry must provide, prevailing the planning legality support over the registry certification. We understand that is not abiding to law, because the third party in good faith, legal owner and unaware of the legal situation concerning the building permit, shall not be subject to the negligence of Public Administration. In the interest of legal certainty, the rights of the third party in good faith should prevail over the planning law enforcement.

Apart from the abovementioned situation of the third party in good faith, the core problem lies in the fact that the property right in Spain does not enjoy a special protection. It is also worth mentioning that Spain is subject to comply with the Rome Convention, which considers the property right to be a fundamental right with a special protection. Concerning its interpretation of property right, The European Court of Human Rights (ECHR) itself has demanded the following:

1) Those affected by administrative or court proceedings which may imply the loss of their assets shall have an effective and real opportunity to defend their situation.

2) Any deprivation of a property to his owner due to the general interest—as the enforcement of planning law, requires a previous compensation for this deprivation. In fact, a recent resolution of the ECHR of the 31st of January 2013 by cautionary measure has cancelled a demolition in Cañada Real (Madrid) until the Town Council provides an alternative accommodation to the family occupying the property and the outlined underlying matter is resolved. In this case, we refer to the demolition of a property in a shanty-town located in specially protected land and without building permit.

Therefore, the Spanish legal system should reconsider certain substantive decisions providing the property right with a fundamental nature and protecting it. As a result of this, the protection of the third party in good faith should be one of the cornerstones of this protection, because this third party must not bear the damage of the unlawful conduct of Public Administration when granting these building permits, both in these cases where the invalidity proceedings were not entered in the Land Registry and were not available and those cases where proceedings are initiated against the building permit once the third party in good faith is the new owner.

In addition, these owners, who built their properties with the corresponding building permits granted by Town Councils, should not be deprived of their property right by means of the property demolition without compensation to cover their loss, as this demolition is originated by the negligence of the Town Council and not by the owner.

Spain should ensure compliance with its obligations as an EU Member State, as the property right concept of the Rome Convention and the European Court of Human Rights (ECHR) case-law is obvious in this regard. Therefore, we understand that this Convention is being infringed by Spain, apart from the fact that the current situation contribute to legal uncertainty.

Author: Gustavo Calero Monereo, C&D Solicitors (lawyers)
Torrox-Costa (Malaga/Costa del Sol/Andalucia)

NEW TAX LIABILITY FOR RESIDENT TAXPAYERS

Geschrieben von admin am 23 Januar, 2013. Veröffentlicht in lawyer, malaga. Keine Kommentare zu NEW TAX LIABILITY FOR RESIDENT TAXPAYERS

New tax liability for resident tax payer in Spain

The Spanish Government passed on the 15th of November 2012 a Royal Decree providing the liabilities to inform about assets and rights located abroad. This information is available at http://www.boe.es/boe/dias/2012/11/24/pdfs/BOE-A-2012-14452.pdf.

This liability only affects resident taxpayers; non-residents are not liable for submitting this tax return.

Any account in financial institutions and any kind of real property or real property rights of ownership shall be declared, as well as any securities, interests, insurances and incomes, which are deposited, managed or obtained abroad.

Taxpayers shall inform about these assets and rights which they own abroad as at 31st of December 2012.

This tax return shall include any kind of assets and rights provided that the individual value for each of them exceeds EUR 50,000. This includes the following:

– All accounts in financial institutions—account balances as at 31st of December and average balances for the last quarter.

– Real property, indicating the purchase date and acquisition value.

– Real property rights of ownership, indicating the opening or cancellation date.

– Securities, interests, insurances and incomes which are deposited, managed or obtained abroad as at 31st of December of each year.

The submission of this informative tax return in successive years is only compulsory when the established limit have increased more than EUR 20,000.

The requirements of this tax liability shall be met between the 1st of January and the 31st of March in the following year to which this information refers.

This tax liability refers to both individual residents and bodies corporate which are liable for corporate tax in Spain. Tax form 720 shall be electronically submitted to fulfill the requirements of this tax return.

The recent approval of this tax liability to inform about assets located abroad represents a new control method for liable taxpayers in order to uncover informal economy, tax evasion and money laundering.

Fines are significant and they do not refer to the legal o illegal way of obtaining those assets, but to the fact that they are declared or not. The failure to submit the informative tax return will be considered a very serious infringement and the corresponding sanctions will be applied. This implies the payment of a EUR 5,000 set fine for each point of information which is not declared and the minimum fine amounts to EUR 10,000. The fine for individual taxpayers amounts to EUR 100 for each point of information and the minimum fine amounts to EUR 1,500, where the informative tax return had been submitted after the deadline without previous notification from the Spanish Tax Authority.

It is worth stressing the heavy fines, including for declaration of imprecise information. The above mentioned Royal Decree does not allow misunderstandings. A single mistake may result in a heavy fine. The declaration of incomplete or imprecise information entails the same sanctions. The fact that these assets are correctly declared in the country of origin will never be considered a ground for excluding the liability to pay the fine.

It is also determined that the tax liability to inform shall not be time-barred in respect to the date of origin of the assets and the application of this rule.

If this is your case, please do not wait any longer and prepare all the necessary information for submission to the Spanish Tax Authority in the following days. If you have any doubt or enquiry regarding this issue, please do not hesitate to contact us.

Author: Francisco Delgado Montilla, C&D Solicitors (lawyers)
Torrox-Costa (Malaga/Costa del Sol/Andalucia)

PROPERTIES ON NON-DEVELOPABLE LAND AFFECTED BY RECENT FIRE IN COSTA DEL SOL

Geschrieben von admin am 6 September, 2012. Veröffentlicht in english speaking solicitor, Featured, lawyer, malaga. Keine Kommentare zu PROPERTIES ON NON-DEVELOPABLE LAND AFFECTED BY RECENT FIRE IN COSTA DEL SOL

As a result of the terrible fire initiated last Thursday 30th in Coin, an estimate of 100 to 200 properties built on non-developable land within the municipal area of Coín, Mijas, Marbella, Ojén and Alhaurín el Grande were severely damaged and some of them completely ruined.

In this year 2012 the Decree 2/2012 for the regulation of buildings and scattered rural settlements on non-developable land in Andalusia was passed by the Andalusian Regional Government in January to put a stop to the problem of thousand of properties on non-developable land. However, this Decree does not currently apply nor does it mean the legalization of these properties, as it was already discussed on once of our previous article

According to the above mentioned Decree, most of these fire-affected properties are considered assimilated to out of ordination housing, as they were built without construction permits or infringing their condition and the municipal General Plan for Urban Planning PGOU. Therefore, no measures can be adopted to recover their legality, which has been disrupted over time and they cannot either be legalized. The only permission authorized by this Decree is “…works for the repair and maintenance which may require the strict maintenance of the security, occupation and health standards of the property” (Article 8.3 of the Decree).

In the event of some fire-affected properties considered out of ordination—properties built in accordance with the municipal PGOU, but considered “out of its ordination” after the PGOU modification, the permitted construction works shall be provided by the municipal PGOU, which is currently under development in most of the municipalities. The Andalusian Town Planning Act L.O.U.A. shall be also considered as it provides that “…only repair works for the strict maintenance of property occupation or usage…” as well as “…exceptionally partial and circumstantial works may be permitted for the property consolidation…”. It is worth mentioning that only a few of these properties may be under the “out of ordination” condition.

This restriction or limitation to alter or renovate properties on non-developable land is provided by the definition on the Decree for “scattered rural properties”, which are included within the “out or ordination” concept and its variant “assimilated”. In accordance with the case law, this concept has been defined as “constructions to disappear once their useful life possibilities finishes—the “out of ordination” condition aims the usage of property until it finishes over time, ends up as a ruin and naturally disappears. For this reason, the Andalusian regulation always provides the granting of permits for this type of constructions for the strict maintenance and under exceptional circumstances.

The Decree does not provide the legalization of these properties. In fact, part of the status for these “assimilated to out of ordination” properties considered as illegal, makes them to be given a definition and their use limited, since no measures can be taken to protect their legality, so that they are “attacked”, as too much time has elapsed since the were built.

In the event of a disaster as fire, flood, earthquake, landslides, etc…, in which a property is in ruins or very damaged and cannot be used again for the purposes to be occupied as a residence, if we abide by the current regulations on these events, it would be very complicated to grant a construction o repair permit for these properties, since it is against the concept of “out of ordination” and “assimilated to out of ordination” provided by the Decree.

The problem lies in a Decree which does not give any solution to the current legal condition of these properties, which have been tolerated by the Andalusian Regional Government and Town Councils for many years. During all these years, nobody has done anything at all on this matter and for that reason no legal measures can be legally adopted to restore their legality.

According to the first political reactions read on the papers about the burned properties, it seems that each particular case may be studied. In some cases, a forced and exceptional interpretation out of the legal framework would be adopted, so that those families with just one house would be allowed to rebuild and live on their non-developable lands as they did before the fire. The problem of this “shortcuts” to implement what the legal regulations do not provide is that a precedent is set, so that in the future event that any of the owners of the more than 100,000 properties built in non-developable land in Andalusia had a disaster of this kind, aren’t they also entitled to receive a similar treatment from the Public Administration? For this reason, the problem lies in a Decree for appearance’s sake, which does not solve the problem and is currently open to doubt in this type of situations.

Author: Gustavo Calero Monereo, C&D Solicitors (lawyers)
Torrox-Costa (Malaga/Costa del Sol/Andalucia)

TAX EXEMPTION WHEN SELLING YOUR PROPERTY IN SPAIN

Geschrieben von admin am 12 April, 2012. Veröffentlicht in lawyer. Keine Kommentare zu TAX EXEMPTION WHEN SELLING YOUR PROPERTY IN SPAIN

The Spanish Constitution and the regulations (tax and social) developed thereof, regarding the protection of the elderly, guarantee that the elderly will receive a comprehensive system of care and protection that promotes and enhances the wellbeing of this section of the population, within which this article highlights the area of economic protection.

The purpose of this type of protection is to formulate a system of regulations that provide the elderly with the necessary economic resources, which will contribute towards their independence and improve their quality of life.

As principle provisions or benefits within this economic protection of the elderly, we can highlight, among other things: retirement pensions (contributory and non-contributory), supplementary economic provisions, various subsidies and aid, which is granted within the scope of Social Services, as well as certain tax benefits.

In relation to this matter, this article will focus on the exemption from capital gains tax, which, for those over 65, occurs at the time that their habitual residence is sold.

Gains derived from the transfer of immovable property are taxed, for non-residents, at a fixed rate of 19%. For residents, the first €6,000 is taxed at 19% and the rest is taxed at 21%.

Moreover, in the case of the transfer of property by a non-resident, the purchaser shall be obliged to withhold and pay 3% of the sale price as payment on account of taxes which should meet the requirements of capital gains for non-residents and that should be paid directly to the Tax Authorities. Said retention from the sale price is not incurred if the seller has the right to tax reduction for the transfer of property that is their habitual residence, for those over the age of 65.

Article 31.4 b) of Law 40/1998, which regulates personal income tax, establishes that those over the age of 65 shall be exempt from capital gains in the event that the property transferred is their habitual residence.

The only two requirements for eligibility for this tax exemption are the following:

The taxpayer must be over 65 at the time that the transfer takes place.
The transferred property must be their habitual residence. In order that the property be considered a place of habitual residence for the purpose of this tax, two temporal limits are established: 1) it must be effectively occupied by the taxpayer within a period of 12 months from the date of acquisition or from the termination of any building work; 2) it must constitute their place of habitual residence for an on-going period of at least three years prior to the date of sale.

Author: Francisco Delgado Montilla, C&D Solicitors (lawyers)
Torrox-Costa (Malaga/Costa del Sol/Andalucia)

HAVE YOU ALREADY PLANNED YOUR INHERITANCE TAX?

Geschrieben von admin am 27 Februar, 2012. Veröffentlicht in Inheritance Tax, lawyer, wills. Keine Kommentare zu HAVE YOU ALREADY PLANNED YOUR INHERITANCE TAX?

Residency avoids Andalucian inheritance tax

The Inheritance tax imposes taxes on an inheritance received because of death. This tax is paid after a person’s decease and the heir is the taxpayer legally bound to pay it. It shall be paid within the following 6 months since the person deceases. Here below we present an example in order to obtain a better understanding on this tax:

Mr. Smith deceased last January 2012; once he retired and sold his home in England in 2003, he moved together with his wife to Andalusia. Then, they bought a small semi-detached house with very nice views to the sea, which they enjoyed together for all these years.

After Mr. Smith’s decease, his wife initiated the testamentary procedures and she was surprised when she found out that she had to pay 15,490.82€ for the Inheritance tax when inheriting her husband’s estate.

Why did she have to pay such an amount?

Assessed value of the 50% of Mr. Smith’s property__125,000.00 €

Money in Mr. Smith’s current account____________10,000.00 €

Total amount of Mr. Smith’s estate______________135,000.00€

Mrs. Smith’s Inheritance tax payment total account: 135,000.00€ minus 15,956.87 € (reduction allowed because of the beneficiary’s relationship), equals 119,043.13€ (taxable income). According to the current assessment scale, the result is a total tax due of 15,490.82€. That is to say, the widow had to pay 13.01% of the estate total value awarded.

How could this payment have been reduced? First of all, Mr. and Mrs. Smith should have been registered as residents in the municipality of the Town Hall, called in Spain Padrón Municipal, when they bought their home because heirs are allowed to benefit from some tax reductions for Inheritance tax purposes when proving their residence in Andalusia for at least two years and a half during the last five years. A certificate of registration as a resident in the municipality is required to prove this fact.

If Mr. and Mrs. Smith had been registered as residents in the municipality, the widow would not have had to pay any Inheritance tax, because the heirs-residents in Andalusia next of kin of spouse are tax exempt from paying Inheritance tax when the value of the awarded estate does not exceed 175,000.00€, and the heirs pre-existing wealth is less than 402,678.11 €uros.

Apart from this tax exemption, other tax exemptions are applied, as for example, 99.99% reduction when the transferred home has constituted the habitual residence of the deceased. The certificate of registration as a resident in the municipality is required one more time to prove it.

In Spain, Inheritance tax is administrated and collected by regional governments, so that they establish their own regulations to be applied within their own region. In this case, the above mentioned tax exemptions are applicable in Andalusia.

Mr. Smith’s example has been presented above, because many of the foreign citizens who are resident in Spain declare in their Last Will that the survivor spouse inherits the whole of the deceased’s estate. Then, we wanted to provide a simple and practical example related to Inheritance Tax, taking into account that it is essential to make one’s will in Spain only for the estate placed in Spain in order to make the legal procedures easier.

In addition, the Inheritance Tax in Spain is considered a progressive tax; therefore, the higher the value of the inherited estate, the bigger the tax burden for the heir. Furthermore, the heirs’ degree of kinship may be also penalized, so that the deceased’s cousins or friends may pay more than his wife or children for the same awarded estate. For example, if the total value of the inheritance is 400,000.00€, the deceased’s wife or child non resident may pay 27%-28% approximately of this amount for Inheritance Tax, that is, 112,000.00€; on the other hand, the deceased’s cousin or friend, resident or not resident in Andalusia, may pay the double—about 224,000.00€.

Some financial products, as Life Insurances, are very interesting in order to reduce the tax effect for heirs—pursuant to legal provisions, this type of products are firstly planned to pay the heir’s Inheritance tax and any residuary estate may become part of the heir’s estate.

A good tax planning is important to minimize the fiscal effects of the Inheritance tax. Most of the times, it is a question of looking at the figures and analyzing what is the most interesting decision depending on each particular case.

Author: Gustavo Calero Monereo, C&D Solicitors (lawyers)
Torrox-Costa (Malaga/Costa del Sol/Andalucia)

LEGAL COUNSELING: “IF YOU BUY CHEAPLY, YOU PAY DEARLY”

Geschrieben von admin am 5 November, 2011. Veröffentlicht in lawyer. Keine Kommentare zu LEGAL COUNSELING: “IF YOU BUY CHEAPLY, YOU PAY DEARLY”

Some months ago, a foreign prospect client, who we have come to know as “Mr. X”, came in our offices. He requested some information regarding sale procedures, legal work and our professional fees.

After the first free appointment, in all honesty he commented to us that he had contacted a professional offering a 40% cheaper fee than ours. However, he would be interested in contracting our services provided that we could offer him a discount.

At that moment, we considered which option to adopt; naturally, we wanted to win this client, but we also knew that the rural property, which he wanted to buy, required a quite complex searching process.

At the end, Mr. X was offered a “courtesy” discount in our fees, which was not close to the low price offered by the former professional. Finally, Mr. X decided to contract the other professional’s cheaper services.

Regarding the current market and low circulation of clients, some solicitors offer great discounts to stand out from competitors and then win a client. Then, considering the aforesaid, why our legal firm did not offer a higher discount to win Mr. X as a client?

The answer is obvious; because such low fees proposed by Mr. X could not pay for the time of commitment for the searching process to buy the above mentioned property in a rural land and then providing full legal certainty to the client.

Within our professional environment of legal services, you may and shall be flexible and capable for adapting to win a client, considering the current situation of financial difficulties and increase of competitors in our sector. However, you should NEVER compete with lower fees, because if the fees for your services are reduced so much, then the quality of your services becomes also poorer.

Furthermore, if we are realistic, no professional may work with the same intensity neither commit the same time when their fees are so low, because production costs and ideal profits would require much more cases which may not be properly and professionally handled, and as a result, a poorer quality counseling service may be provided.

Later on, we knew that Mr. X hired an agent’s services for the legal counseling instead of a solicitor’s. We do not know how his case finished or whether he received a good counseling service. Similarly, if I do not feel physically well or fell pain, I would contact a doctor for a diagnosis and the prescription of a solution, instead of contacting a person who is not a doctor and claims to know a lot about medicine. As a qualified general practitioner, the doctor is better trained and has a legal responsibility. As a result, the patient-client receives more security and reliability, although he or she may pay more for these services.

In all honesty, an agent will never provide the same legal service as a solicitor will, because a solicitor has been exclusively trained by and for law. Solicitors’ training is eminently juridical; this full time commitment and the responsibility of the practice of law—because of the rules and the professional ethics code and good practice; shall always result in a higher quality legal counseling and greater commitment to the client. But I do not go against agents, as I personally know some of them and I am aware of their worth. However, they are not solicitors.

In short, although we were really looking forward to winning Mr. X as a client, we could not afford to reduce our fees so much in order to avoid a poorer quality service. The fact of highlighting our professionalism and tailor-made customer service in our law firm implies a commitment of time and this commitment implies some costs that the client should pay.

Author: Gustavo Calero Monereo, C&D Solicitors (lawyers)
Torrox-Costa (Malaga/Costa del Sol/Andalucia)