malaga | C&D Solicitors

KNOW BEFORE YOU GO: BUYING PROPERTY IN SPAIN AS AN AMERICAN OR CANADIAN CITIZEN

Written by Gustavo Calero Monereo on 8 February, 2024. Posted in andalusia, conveyancing, costa del sol, golden visa, lawyer, malaga.

The remarkable rise of property transactions in Spain by US and Canadian citizens was driven partly by the options to reside in Spain, with a favourable tax status for buyers. The real estate market in some areas as the Costa del Sol (Andalusia) has grown strongly in recent years.

Residence permits, such as the Golden Visa in Spain or the Digital Nomad Visa and favourable exchange rate plus the greater frequency of flights between Spain and the US have increased sales. According to www.idealista.com there´s an increase of 90% since 2019.

Can a US or Canadian citizen buy property in Spain?

Yes, all they need is the money to buy, the desire to do it and a good exchange rate. Otherwise, there are no substantial differences between a property purchase by a US citizen or a Canadian or British citizen compared to a European citizen.

I understand that the answer may be simplistic but it isn’t since, because of the European Directive on the Prevention of Money Laundering, the European Union (EU) publishes a yearly list of countries that represent a threat to the financial system of the European Union.

Citizens resident in the countries that appear on this list have a very hard time acquiring a property in Spain, when the funds come from these countries.

Why buy property in Spain?

The prestigious American newspaper The Wall Street Journal emphasised this growth in an article published in February this year. This article analysed that prices per built square metre in different Spanish cities, such as Marbella, Malaga and Madrid, in comparison to American cities, were still very attractive for American investors.

In Spain the province of Malaga is a pole of attraction for American property investors with a constant increase in US investors with great purchasing power. Many of them interested in exclusive and luxury properties.

Benefits of investing in real estate in Spain

Spain is a very interesting country for foreign investment in real estate. The Spanish and autonomic governments have been increasing tax benefits to attract foreign investors and encourage the purchase and sale of real estate. Also the profit in the renting, purchase and selling of properties has been increasing in cities like Malaga, Seville or Madrid in the last few years. Many people and investment companies are interested in the Spanish real estate market because of its legal security, culture, climate and lifestyle. Especially the Mediterranean coast and Costa del Sol.

Currently, the dollar vs. euro exchange rate continues to be favourable to the American dollar, so this change makes investing in real estate in Spain more attractive for North American buyers.

What is the process of buying a property in Spain?

Basically, as a very short summary, we can differentiate the following steps in the legal process to purchase a property in Spain.

Reservation contract

A small deposit is paid to the estate agent or seller to take the property off the market and a period of 2 to 4 weeks is provided to sign the private contract. On many occasions this reservation contract is prepared by the estate agent. But your lawyer can take a look at it and suggest changes, if necessary.

Private Sale Contract

This is the main document governing the purchase of a property, where the buyer pays 10% of the purchase price. All the obligations of both parties are established until the signing of the public deed of sale on the date of the sale. If the property to be acquired is under construction, i.e. if the seller is a developer, the provisions of the contract and the amount payable are different to those that would apply to an existing property.

Signature of the Public Deed of Sale

This document is signed before a notary and, when it is signed, the buyer pays the rest of the price and receives the keys to the property. From that moment, the buyer will be the full owner of the property. It’ll be very important to obtain home insurance and an alarm system to prevent squatting problems in the property. Especially if the property will be vacant at different times of the year.

Payment of Taxes & Property Register

Once the Public Deed is signed, it will be necessary to pay the Tax on Asset Transfers (ITP) or Legal Deeds (AJD) for a new property, so the property can be registered in the Cadastre and the Property Register. This last phase will entail registering to change the name of the different utilities.

Legalities of Property Purchase in Spain for Americans and Canadians

Obtaining an NIE (Número de Identificación de extranjeros)

When the reservation is signed, the buyer will have to obtain a Spanish NIE (foreigners’ fiscal identification number), as well as provide the necessary financial documentation to comply with money-laundering regulations. This documentation should be provided by your law firm and/or the financial entity in Spain where you will open a current account, as appropriate.

Getting s Spanish Mortgage for purchase a property

If the buyer needs a Spanish mortgage to acquire the property, the best option is to try to obtain its approval between signing the reservation and signing the private sale contract.

We have published a long document about the process of buying a property in Spain. Here you can find all the details about this process.

Why is it important to hire a lawyer to carry out the property due diligence?

Due diligence (legal investigation) of the lawyer in Spain

Buying a property in a country different from the one where the person is from without proper legal advice is an unnecessary risk. Especially because the legal cost of a lawyer is very low, in comparison to the other costs involved in a property purchase. Such as the price, the estate agents’ fees or taxes.

A law firm specialising in property law will give you peace of mind throughout the purchase process, giving you an explanation of all the details about the property and answering any questions that may arise.

Real Estate Due Diligence in Spain for American and Canadians

It’s important for the law firm representing you in your purchase process to include property due diligence, where the entire legal, planning and tax situation of the property is put down in writing. With this document, you’ll have all the relevant information about the property in writing and making the decision to buy it will be more satisfactory.

Likewise, it is ideal for the due diligence to take place before the private sale contract is signed. So when you pay 10% of the price, you’ll have all the relevant information about the property, reducing the risk of problems arising during the purchase process.

Tax Considerations for Americans and Canadians Buying Property in Spain

A law firm specialising in property and tax law will also adapt the due diligence of the property investment, depending on whether the buyer is an individual or a company. This as well as on whether the buyer intends to make an investment to operate a business activity, such as holiday lettings. Good tax advice to reduce taxes paid and maximise the returns on your investment is essential in the process of buying a property in Spain.

The purchase of a property and the Golden Visa for US citizens

The Golden Visa is a special visa for non-EU citizens to reside in Spain. The main requirement of which is to purchase one or more properties, for a minimum total price of 500,000 euros without a mortgage.

There are other requirements to obtain a Golden Visa but generally meeting these requirements isn’t a problem or isn’t generally one. The important thing is to make a financial investment in buying a property.

Qualifying for the Spanish Golden Visa

A Golden Visa enables holders to reside in Spain and move freely throughout the Schengen area, without being considered tax resident in Spain just for having this visa. A person with a Golden Visa will not be considered tax resident in Spain and will continue to pay taxes in the country of origin. Being considered tax resident in Spain will only happen when the person remains in the Spanish territory for over 183 days per year.

The visa for digital nomads for non-EU citizens

This visa allows holders to work remotely in Spain, either for a foreign company or as a freelancer, provided that at least 80% of the income comes from foreign clients.

The greatest tax advantage is that digital nomads are considered non-resident in Spain for tax purposes, i.e. they will only be taxed in Spain for income obtained from working remotely in Spain for a foreign employer or for a foreign client, if they are freelancers. For administrative and immigration purposes, digital nomads are resident in Spain.

These workers will not need to file form 720, will not need to file Wealth Tax and, for the purposes of other Tax Agencies, they are considered tax resident in Spain.

The Spanish tax for income obtained for digital nomads

The tax for income obtained from working remotely will be taxed in Spain at a flat rate of 24% on the first 600,000 € for a period of 5 years. Without a doubt, this flat-rate tax is very favourable, as a tax resident would pay up to 47% for such earned income.

Double Taxation Treaties with the US and Canada

The key question that may arise on this point is whether this income received by working remotely in Spain, on which a tax rate of 24% is applied in Spain, would be subject to taxation in the country of origin. The answer will depend on whether there is a double-taxation agreement between Spain and that country, and on the contents of the agreement.

Since a digital nomad is tax resident in Spain and can obtain a certificate of tax residence, these international agreements can be applied. Spain currently has 99 double-taxation agreements in force, including the EU-countries and:

USA
Canada
United Kingdom
Saudi Arabia
Switzerland
Morocco
Rusia
China
South Africa
Mexico
United Arab Emirates

Additional Tips for a Smooth Property Purchase in Spain

The team of C&D Solicitors Malaga, Spain

If you are planning to change your life and thinking about residing or working remotely from Spain or simply invest in the purchase of a property in Spain, don’t hesitate to contact us. Our lawyers will help you throughout the entire buying and selling process.

At C&D Solicitors we specialise in providing property advice to foreign clients. Whether individuals seeking to buy a second home or an investment property in Spain, as well as investment companies or investment funds seeking to grow their asset portfolio and take advantage of the capital gains they can obtain in the property market and in property operation.

We offer “full service” advice throughout the process in your native language: English, Dutch, Swedish, French and German. You can call us at +0034 952 532 582, send us a WhatsApp message at +34 639 54 16 02 or write to us at info@cdsolicitors.com. We’ll look into your case, we’ll send you information about the process and a cost estimate for this, with no commitment whatsoever.

purchase, property, coronavirus, private contract

Purchase contracts in Spain and the COVID-19 Corona crisis

Written by Gustavo Calero Monereo on 23 April, 2020. Posted in Andalusian, conveyancing, coronavirus, costa del sol, english speaking solicitor, judgment, lawyer, legal advice, malaga, mortgages, nerja, Property law, purchase process, Sin categoría, solicitor, torrox.

Purchase or sales contract during COVID / Corona crisis

It is clear that the healthcare crisis caused by the Coronavirus (COVID-19) has had a huge impact on all areas of our daily lives. The state of alarm decreed by the Spanish government, as well as many other governments in foreign countries, has caused movement restrictions and limitations, the closure of the airspace, the paralysis of the business fabric and government agencies, etc. People’s everyday lives have been severely affected from a social and economic standpoint.

With this article, we would like to respond, as much as possible, to the doubts and uncertainties of foreign clients buying homes in Spain, as well as their sellers. We are referring to sales between individuals that were already underway with signed contracts but which were ‘surprised’ by the COVID-19 crisis and the measures adopted by the Spanish government decreeing the state of alarm.

At the end of the article, we will comment briefly on the legal situation of sales of new homes or off-plan sales from developers.

What does Spanish law say on the fulfilment of purchase contracts?

The first thing that must be said emphatically is that, under Spanish law, the clauses agreed in a contract have the force of law and, therefore, the parties are required to fulfil them. In other words, the impossibility of fulfilling what has been agreed in a contract is an exception and is interpreted very restrictively.

The Spanish Supreme Court, when dealing with potential breaches of contract and to avoid the loss of the money paid, has established that the party in breach has to evidence and argue the reasons behind said breach, as well as prove that it did everything possible to perform the contract.

However, even after establishing the impossibility of complying with the contract, if it is possible to amend or adapt it so it can be fulfilled, the parties must seek to modify the contract in that way, to solve the problem arising from the situation caused by the state of alarm and the COVID-19 Corona crisis. In other words, when faced with the potential avoidance of the contract by one of the parties, they must always attempt to reach an agreement to fulfil it.

Which property sales could be affected by the state of alarm?

In my opinion, the conveyance contracts that may be affected are those that required either of the parties to fulfil a requirement or condition agreed in the contract before the execution of the public deed of sale and that condition is affected by these months of paralysis.

Due to the paralysation of activities and movement limitations, it is very possible that some of the requirements established in a conveyance contract cannot be fulfilled, as the estimated time to process or manage these were calculated based on a normal situation, which has not existed since 13 March. As an example, we can mention the following:

Purchase contracts in the state of alarm:

For the conveyance contract to establish the condition of being granted a building permit or the record for legalisation of a home, such as DAFO in rural homes in Andalusia. As city halls are paralysed or working at minimum levels, it is very possible for these applications not to be processed until the state of alarm is brought to an end.
For the condition to be obtaining a Spanish mortgage. If the appraiser cannot travel to visit the property or the bank’s risk department is not operating, this process will be paralysed, making the average resolution time much longer than initially expected.
For the date of signing the conveyance contract and recording it as a public deed to coincide with the period of the state of alarm and/or the restrictions on commercial flights, making it impossible for either of the parties to attend the notary office.
The impossibility to obtain an NIE (foreigner’s identification number.), which is necessary to sign a conveyance contract before a notary and pay the corresponding taxes. The processing of these documents is currently suspended. The national police stations in Malaga that we asked don’t know when they’ll be able to open to accept new NIE applications.
Either of the parties being admitted into hospital or in quarantine.

What should the seller and buyer do in this situation?

Well, the first thing is to see if the private contract contains any clause that governs these situations since, as I’ve mentioned, the sales or purchase contract has the force of law and binds the parties. However, in conveyance processes where the deed cannot be signed for reasons arising from the coronavirus crisis, what both parties should do would be to amend the contract and extend it, to give time to the party that needs it in order to complete the sale. In most situations, it is only a matter of time for that circumstance or condition that is currently impossible to fulfil to be fulfilled later on.

Likewise, in the event of inflexibility and the refusal of either of the parties to grant such an extension to the conveyance contract, in most cases there would be no legal grounds to terminate the contract and/or claim damages. As mentioned above, the parties must always attempt to reach an agreement to comply with the contract.

Is it possible for the buyer to terminate the contract due to the COVID-19 crisis?

Withdrawing from a conveyance contract due to a sudden drop in house prices and in the face of an economic crisis is a complex issue. In this case, we are referring to the buyer having to accredit meeting one of the requirements established in case law for terminating purchase contracts, this being that there has been an extraordinary change in the circumstances leading to the execution of said contract.

In other words, the buyer would have to evidence that the current economic crisis, resulting in a deep and prolonged economic recession, could be openly considered an economic phenomenon able to generate a severe disruption or change in the circumstances leading to the execution of said contract.

In Spain, the courts have been rejecting the possibility to terminate a sales or purchase contract based on this circumstance. However, this possibility should not be ruled out and individual factors should be analysed, such as whether the home will be a primary home or a holiday home, if the buyer was in need of mortgage financing, if the financial situation of the buyer has changed significantly, etc.

What is the buyer’s situation in the sales process?

With this question, what we want to address is the situation of a buyer who made a decision to purchase a home at a specific price a few months ago, based on an economic situation that is in no way similar to the current one.

Let’s imagine Dutch, Belgian, English, Swedish or other foreign people who wanted to invest in property in Malaga or the Costa del Sol, either to obtain a profit or to let it. Clearly, the sales price they agreed was based on the value of that property under the earlier economic situation. For instance, let’s imagine a home in the historic centre of Málaga or Nerja, highly sought-after areas with tourist attractions before COVID-19, with great possibilities for letting in the tourist market, which is currently suspended.

Well, as a buyer, in the event that continuing with the purchase of the property would lead to incurring significant levels of debt, the first thing to do would be to analyse two things:

The amount of money paid to the seller (usually 10% of the purchase price). Whether the buyer is willing to lose that money, essentially due to thinking that it is better to lose the money and not buy the property.
The content of the purchase contract clauses agreed in terms of what happens when the buyer breaches the purchase contract. This is an important issue because a breach of contract could lead to different legal situations. The usual process is to execute an earnest money contract, which entails losing the money paid to the seller, leading to the termination of the contract, this being the clause that our firm usually agrees in conveyance contracts. However, if this is not properly drafted in the contract, it is possible for the seller to be entitled to require the buyer to comply with the purchase contract and sign the public deed, even if the buyer agreed to lose the earlier money paid. Obviously, this claim from the buyer would have to be addressed in judicial proceedings, which would take years before the parties get a resolution and usually sellers settle for keeping the money paid as a deposit.

What is the seller’s situation in the selling process?

For sellers, they are most likely the most interested in completing the sale of the home as, certainly, the price set in the sales / purchase contract signed before COVID-19 will be higher than what they can obtain in the short or medium term. Without a doubt, the current situation will lead to a general drop in house prices, even though no one knows how long this will last.

That said, it is possible for sellers who already have a signed contract and who see that buyers are hesitating to complete the conveyance to be interested in making it easier for buyers to complete the purchase. In other words, in this context, negotiating a lower price so that the seller can sell doesn’t seem far-fetched. In the end, the price drop would depend on whether it is very important for the seller to sell right now or they can wait, or whether the money already paid by the buyer is enough compensation for the seller to agree to keep that amount as a penalty instead of negotiating.

What is the situation when purchasing new builds or off-plan homes?

In sales of this type, in terms of the performance of the contract by the buyer, the situation is the same as explained above, in terms of both compliance with the contract and its termination clauses. In my opinion, the buyer’s potential doubts would be determined by the progress of the works and the expected completion date of the development, also thinking about the financial solvency of the developer.

If the buyer signed the sales contract over one year ago, when the market was experiencing a good time and prices were rising, it is very likely for the price agreed at that time to be lower than what they could find at the beginning of this year, for instance. On the other hand, if the works are close to completion, there would be little doubt as to whether the developer will complete them, as they would be almost completely sold and few buyers would be thinking about terminating the purchase contract, since they would have already made significant payments on account for their homes. In this case, the scenario for the buyer is safe.

In the case of developments where construction has not yet started but which were already being marketed, with expected completion likely coming in a year or two, the scenario is different. In this case, buyers who are in doubt and recently signed the private contract must assess the price of the property and its completion date, as well as find out the number of homes with signed contracts sold by the developer, in order to make a decision. However, if the private contract has not yet been signed and only a reservation had been agreed with the developer, they can withdraw from it and recover the amount paid. They can also wait longer, as developers are likely to lower prices, depending on how long the crisis lasts.

In terms of the solvency of developers, due to the obligation to guarantee all the amounts paid during construction once the private contract has been signed, the buyer would have complete legal certainty in the event that the developer is unable to complete construction. This situation is in no way similar to the 2008 crisis, where many buyers lost their payments on account.

Individual review situation purchase contracts

However, these sales processes starting prior to the COVID-19 crisis can lead to complex situations that should be analysed individually and always with the advice of a lawyer. This is not the time to make decisions without the appropriate legal knowledge, taking into account that a private conveyance contract has already been singed. Rushing is never a good idea.

Author: Gustavo Calero Monereo, lawyer at C&D Solicitors, (Málaga, Andalusia)

malaga, costa del sol, sewage, properties

MALAGA AND COSTA DEL SOL: GREAT TOURIST AREA, WORRYING WASTEWATER PURIFICATION

Written by Gustavo Calero Monereo on 11 March, 2020. Posted in AFO, Andalucia, andalusia, asimilado fuera de ordenación, assimilated out of ordination, conveyancing, costa del sol, lawyer, legal advice, malaga, malaga, nerja, non developable land, NON RESIDENT, solicitor.

With this article, I am detracting from the usual ones of a more legal nature, aimed at foreigners, resident or non-resident, who own a home in Malaga. In this post, I attempt to analyse the situation of wastewater purification in terms of the most significant tourist municipalities in Costa del Sol, as well as the financial and environmental consequences that lack of purification entails for municipalities like Nerja and Coín. I also focus on properties on rural land and the purification required for homes wishing to obtain a DAFO.

Introduction wastewater purification

With environmental sustainability or the environmental impact of our lifestyles being such an important issue in our times, I would like to speak my mind about the great problem of faecal water purification in the province of Malaga in general, even through it is sadly extensible to most regions in Spain, in population centres both large and small. However, Malaga, as a top tourist destination and due to its population density, especially along the coastline, should have an infrastructure that mitigates the environmental impact caused by all of us who live on the shore.

Many of our clients, both resident and non-resident, who are thinking about purchasing a home in Andalusia and that we provide advice to, are attracted by the Mediterranean Sea that bathes our shores but on which we indiscriminately dump millions of litres of unpurified wastewater. A recent article in La Opinión de Málaga on 5 January stated that Malaga dumps 123 million cubic metres of wastewater into the sea every year, a real atrocity.

National problem, million-euro fine

On 15 February, El País national newspaper published an article informing that, until that date, Spain had paid about 32.70 million euros in fines due to not complying with the wastewater treatment directive in municipalities with over 15,000 inhabitants. This has been the highest fine paid by Spain to the EU in history.

This breach of the directive led to a conviction from the European Court of Justice and the resulting fine being imposed by the European Commission. This fine continues to grow for as long as those 17 municipalities fail to treat their wastewater, an obligation that came into force in 2001, which means almost 19 years have passed since that directive was enacted.

Nerja, beautiful beaches with faecal waters

One of the many municipalities that have been fined and do not have a sewage treatment plant is Nerja. It is striking that this municipality, which such beauty and such great beaches and cliffs, in 2020, is still dumping the sewage it generates directly into the ocean, through a collector located 1,200 metres from the coast.

Nerja has spent over 20 years on the project for its sewage treatment plant and even though it seems that this year may finally mark the end of the works, according to an article in Diario Sur on 6 January (fingers crossed), this does not detract from the sloppiness and lack of interest of the local and regional government have displayed about this project.

The situation is so obvious from an environmental standpoint that, following several complaints, the prosecutor’s office brought judicial proceedings against senior officials of the Nerja City Council for the illegal dumping of this untreated wastewater. One of the toxicology reports certified that all samples taken from five beaches in Nerja contained faecal organisms according to their tests.

Construction of the Nerja treatment plant was declared to be of public interest by the Government in 1996 but, 23 years later, it has not yet been completed. If you visited Nerja and the surrounding areas in 1996, you could see the large number of works that did get started and completed because there were many years with large capital movements but the faecal water purification plant was not so lucky. Other municipalities on the eastern coast, such as Torrox, Vélez Málaga and Rincón de la Victoria, do have a sewage treatment plant in operation.

Mouth of the Guadalhorce, a natural site with a “faecal” river

Another area that also presents a high degree of pollution due to illegal dumping is the mouth of the Guadalhorce river in the city of Malaga. This enclave is the last unspoiled beach in the city of Malaga and is home to a very significant ecosystem of flora and fauna, with a network of trails to move through it. However, in this river, municipalities as large as Alhaurín el Grande and Coín dump their untreated faecal waters, which also led to a fine being paid by the government of Spain.

The city of Malaga has reinvented itself as a multicultural European city, currently highly appreciated by foreign tourists due to its many urban development projects, mostly in real estate. But Malaga is unable to commit to a project in the mouth of the Guadalhorce, which could affect this unique space –as it is the last unspoiled one– to preserve its environmental value.

It is non-profit associations that are reforesting and trying to preserve this space altruistically, as our firm was able to witness during the conference we held with some of them last November.

The municipality of Coín, a peculiar case

For the town of Coín to be able to connect to the treatment plant in the lower Guadalhorce, it is necessary to build the 3 kilometres of collectors that were destroyed by the torrential rains in autumn 2018 but the Andalusia Council, along with the contracting company, continue to fight to decide who will pay for these repairs. Coín is also immersed in legal proceedings due to its failure to treat its wastewater. While the administrations argue, this collector continues broken and the faecal water from Coín is dumped directly into the Guadalhorce river.

Isolated homes and their regularisation through DAFO, a bad focus of faecal waters

Even though compared to large population centres, the impact of these homes is lower, it should be noted that there are many isolated homes existing in Malaga. In La Axarquía, municipalities such as Alcaucín, Viñuela, Competa, Periana and Torrox have thousands of rural homes, as well as towns in the Guadalhorce valley, such as Coín, Alhaurín el Grande and Alhaurín de la Torre. Likewise, municipalities such as Mijas or Ronda also have many houses on non-urban land.

Among the positive aspects of the DAFO these homes are required to have an individual and autonomous treatment system. It should be noted that this procedure is important for foreigners who buy and sell homes in the province.

What is the problem?

I see that one of the negative aspects is the requirement from the Andalusia Council for properties subject to DAFO to have a watertight septic tank, forbidding septic tanks with a biological filter. This guideline is a serious mistake and its effect is contrary to what is intended, which is to prevent these homes from polluting the land on which they are located.

Properties with a watertight tank habitually require (monthly or more frequently, depending on their use) a tanker to visit the property and empty the contents of the tank, which are then transferred to an authorised waste facility.

What is the alternative?

Allowing the use of septic tanks with a biological filter as a treatment system, as it would not be necessary to empty the tank and water would come out clean and purified. It may be necessary to request authorisation for the discharge point of this clean, filtered water, which could even be used for irrigation but, with this treatment system, a company would only need to clean the tanks once a year, which represents significant savings for owners.

What is happening?

The problem that we find with watertight septic tanks is the economic cost of each emptying, which leads many homeowners to resort to other illegal methods, to avoid inconveniences and economic costs. In many cases, they choose to install a watertight septic tank and, once the technician certifies it, a small hole is drilled at the bottom, through which faecal water is poured into groundwater, thereby dispending with the need to have a truck empty it and making it very difficult for this to be sanctioned.

It is appalling that, in some cities, it has been accepted or assumed that owners will not empty their watertight septic tanks and will drill a small hole in them. I would even dare to say that owners are given such a “solution” to prevent the inconvenience of emptying, as the DAFO only requires having a technician certify the installation of the watertight septic tank and, if a hole is drilled later, no one will notice.

However, with thousands of homes in the countryside, thinking that a truck would need to go empty the septic tank in each of them on a frequent basis, requires being naive or means that the Andalusia Council cares little about these discharges (I lean more towards the latter). I am also not very sure of where these trucks discharge the faecal waters they do collect.

Do not pollute the environment if you process the DAFO for your property

To prevent the situation above, which is absolutely filthy, in some of the DAFO we have processed, we have found this problem and, to prevent faecal waters from being discharged directly into the ground, we have advised owners that, once the watertight tank is installed and certified to process the DAFO, they install one with a biological filter next to it. This way, at least, the water they dump will be clean and not pollute the ground, while the owner will avoid all the financial cost and disruption entailed by emptying the tank periodically.

At least, with the second option, despite not being accepted officially by the Junta of Andalusian and many municipalities, faecal discharge is prevented, which is the main goal when it comes to the environment.

Conclusion

As you probably understand, this issue goes a long way but I believe that, with these few brushstrokes, you can see the general lack of environmental awareness in the administration as well as among many citizens. This is the sad reality.

Tourism in Malaga and the entire Mediterranean area is also not viewed with a perspective for the future, as we live in the short term and do not care for essential things for investors and tourists to continue to come to Malaga, as well as foreigners wishing to purchase a home to enjoy a high quality of life or just spend their holidays in Span.

Meanwhile, those of us who reside and live here most of the time are unaware of the large amount of pollution we generate and the damage we cause to the sea, rivers and streams (which are increasingly polluted). I do not see many complaints or movements among citizens protesting this situation.

Some of the damage is already irreparable but there is some that can be fixed.

Author: Gustavo Calero Monereo, lawyer at C&D Solicitors Torrox (Málaga, Andalusia)

LOWER TAXES ON GIFTS IN ANDALUSIA

Written by Gustavo Calero Monereo on 23 May, 2019. Posted in andalusia, Capital Gains, conveyancing, english speaking solicitor, gift tax, judgment, malaga, nerja, Property law, purchase process, tax liability.

On 9 April, the Andalusia Council approved, through a Decree Law, an amendment of the tax on inheritance and gifts, which, in particular, entails great tax savings in terms of the tax on gifts. This legislative amendment introduced a bonus of 99% of the tax liability due in inheritance and gift tax, that is to say only 1% of what was previously paid would be due.

Needless to say, the Tax on inheritance and gifts is devolved to the different Autonomous Communities that make up Spain so this bonus is the one in force in Andalusia. But, depending on the location of the property or residence of the recipient (for movable assets) –the person receiving the asset–, legislation will be different on the matter of inheritance and gifts.

Example: A father gifts his son 200,000 euros

With the previous legislation, the tax liability on this gift would have been 31,621.21 euros, which meant that the son would have had to pay 31,621.21 euros in taxes after receiving this money from this father. With the new regulation, this tax liability of 31,621.21 euros can benefit from a bonus of 99%, which means that, now, the son would pay a tax of 316.21 euros. Without a doubt, it represents huge tax savings. When money or other moveable property is donated, the applicable regulation for this purpose will be that of the residence of the recipient.

Who can benefit from this bonus on the gift tax?

Those people included in groups I and II established in the regulation governing this tax can benefit. This means that the recipient must be the spouse, child, grandchild or parent of the grantor; the person who gives away the asset.

What other requirements need to be met for gifts in Andalusia?

Besides being included in groups I and II mentioned above, it will be necessary for the donation to be made effective in a Public Deed before a Notary and, if money is gifted, its source must be justified. In case of donating a property, this Deed will be used to inscribe the property in the new name of the new owner in the Land Registry.

What happens with the Capital Gain Tax and Plusvalia?

From the perspective of the tax on gifts, there is no problem with a parent donating a property in Andalusia for the child to apply the 99% bonus and pay a very small amount for the tax on gifts. The problem in the case of properties affects the grantor because, even if the property is gifted, the Tax Agency equates that transfer to the sale of the property –for the Treasury, there is no difference between donating and selling–. For this reason, the grantor must pay Capital Gains Tax calculated on the difference between the original value paid in the purchase of the property and the value of the property when gifted.

It is important to note that if the grantor is a tax resident in Spain, over the age of 65 and gifting their habitual residence, no capital gains tax would be paid for gifting or selling the property.

Lastly, as the city where the property is located also interprets a gift as a sale, it will ask for its piece of the pie in the form of capital gains tax – Plusvalia in Spanish-. This local tax is calculated according to the number of years that the grantor has owned the property, with a maximum of 20 years, and is paid on the increase in value experienced by the plot/land of the property.

What if I value the property at a low price to pay less tax?

You may be tempted to set a very low value for the property gifted and thus pay less Capital Gains tax when it is gifted. This is perfectly understandable but it is very important for this value not to be below the minimum taxable value, which is the taxable value that the Treasury deems properties in Spain to have. That is to say, the value of the property being gifted should not fall below the minimum taxable value to prevent an inspection by the Tax Agency. The minimum tax value in urban properties is based on the cadastre value of the property multiplied by a factor that varies from town to town.

Does this bonus apply to everyone, regardless of whether they are resident in Spain?

As explained in several previous articles, the most recent from March, different judgments have ruled that both residents of the European Union and residents of third countries must be treated the same as residents in Spain for the purposes of the Tax on Inheritance and Gifts. Based on this, anyone who meets the requirements explained in this article can benefit from the 99% bonus in Inheritance and Gift Tax introduced in Andalusia or any other regulation of the relevant Autonomous Community.

Example of a property being gifted

Let’s imagine a Swedish homeowner who bought a property in Almuñécar (Granada) for 200,000 euros and decides to gift it to his son who lives in China, with the current minimum taxable value being 300,000 euros. Since the home is in Andalusia, the son-recipient can benefit from the 99% bonus in the tax due and would only have to pay 554.68 euros for the tax on gifts, of the total tax amount of 55,466.81 euros.

Since the father-grantor obtained capital gains of 100,000 euros from the gift, he will have to pay capital gains tax on this 100,000-euro “profit”, which currently stands at 19% of net profit (after certain possible deductions). However, as the owner is 64 years old, resident in Spain and is gifting his habitual residence, we recommend that he waits until he turns 65 to avoid paying capital gains tax. The son will surely understand the reasons.

What happens to taxes where the recipient resides?

Before accepting a gift, it is important for the recipient to get information, from his or her country of residence, regarding which tax will have to be paid on this, if any. Lastly, it should be said that this amendment of the Tax on Gifts in Andalusia means that the construct of gifts may be attractive in situations where a couple wants one of the spouses to own 100% of the property –only for married couples under separation of assets– or if they want to leave the property to their children or grandchildren during their lifetimes. Previously, from the standpoint of tax savings in Andalusia, the only options were to terminate co-ownership or sell the property but now, with this new amendment, in many cases it will be better to gift it as more taxes will be saved on the transfer of the property.

Read more about the subject of selling your house in Andalusia in the video below:

Author: Gustavo Calero Monereo, lawyer at C&D Solicitors Torrox (Málaga, Andalusia)

NON-MARRIED LONGEST LIVING PAYS HIGH INHERITANCE TAX

Written by Gustavo Calero Monereo on 29 January, 2018. Posted in Andalusian, costa del sol, english speaking solicitor, heir, Inheritance Tax, lawyer, legal advice, malaga, nerja, Sin categoría, solicitor, wills.

THE CURRENT SITUATION OF INHERITANCE TAX

On 1 January 2018, a new reform of Inheritance Tax entered into force in Andalusia, the main change of which was to raise the tax-exempt amount to one million euros. This new reform changes the reform introduced a year ago, which we explained in our post of November 2016.

Which heirs would be exempt from Inheritance Tax?

Heirs that meet each one of the following requirements would be exempt:

For the heir to be included in groups I and II as established in the regulation governing this tax, the heir needs to be the spouse, child, grandchild or parent of the deceased
For the value of the estate to be inherited per heir does not exceed one million euros
For the pre-existing assets of the heir to be less than one million euros
For the heir to be a citizen of a Member State of the European Union or, if they are citizen from outside the European Union, both the deceased and the heir must reside in Andalusia

What happens with other family members who inherit?

All other heirs, such as siblings, nephews, nieces, uncles, aunts and cousins of the deceased are included in groups III and IV of the Inheritance Tax and will continue to pay the same amounts.

In other words, these heirs will pay inheritance tax from the first euro they inherit except for heirs in group III, who are able to deduct an amount of 7,993.46 euros. This means, for example, that if John leaves his nephew his Nerja property valued at 240,000 euros as inheritance, his nephew will have to pay about 63,000 euros in Inheritance Tax.

What happens if you inherit from your best friend?

You would be included in group IV of this regulation. This means that if John, instead of leaving the 240,000-euro property to his nephew leaves it to his best friend, he or she will have to pay about 80,000 euros in Inheritance Tax.

How are property values calculated for Inheritance Tax for non-married longest living?

Every year, the Regional Government of Andalusia publishes a regulation that establishes certain coefficients to update the values of urban properties located in Andalusia. These coefficients are applied to the cadastral value of the property; this you can find in your Property Tax receipts. The result of applying these coefficients to the cadastral value is what we call the minimum taxable value.

The regulation explained above deals with the minimum taxable value of urban property but, in the case of rural property, this isn´t applicable. Therefore it is necessary to obtain a valuation from the technicians of the Regional Government of Andalusia to calculate the minimum taxable value. However, the Regional Government of Andalusia in the province of Malaga uses the coefficients published every year by the College of Architects of Malaga to calculate the value of rural properties.

Regarding the means used by the administration to calculate the minimum taxable value of properties in Andalusia –as well as other Autonomous Communities–, there is much controversy in general and there is the possibility to challenge those values in the event that the person liable to pay the tax deems them excessive or not adjusted to reality. This topic is complex enough to be covered in a whole new article.

NON-MARRIED LONGEST LIVING OR UNREGISTERED COUPLES IN ANDALUSIA

Who are we talking about?

In the event that a couple is not married –either in their country of origin or in Spain–, if one of them dies and leaves the other member of the couple as an heir, for the purposes of Inheritance Tax this person would be considered to be in group IV. In other words, in this case the partner is considered to be just a friend putting the person in the group with the highest rate of Inheritance Tax.

What happens to common-law partners registerd in Andalucia?

In Andalusia, couples registered in the Registry of Common-Law Partners of Andalusia are equivalent to married couples for the purposes of Inheritance Tax, for which reason they would benefit from the deductions for spouses explained above.

What happens to common-law partners registered in another Member State of the European Union?

In this case, the Regional Government of Andalusia does not recognise such registration for the purpose of Inheritance Tax, for which reason those couples would pay tax as though they had received inheritance from a friend, leaving them in the group taxed at the highest rate.

If John leaves his partner Mark 50% of the property they both purchased in Almuñecar in 2005 and if the fiscal value of that 50% is 120,000 euros, Mark, the heir, would have to pay about 30,000 euros in Inheritance Tax for inheriting 50% of that property.

If John and Mark had been married or registered in the registry of common-law partners of Andalusia, Mark would not pay a single euro for inheriting 50% of the property from John.

What should be done in this case?

If you have property in Spain with your partner and you would like him or her to inherit your part and you are unmarried, we advise that you get married (either in Spain or in your country of origin) so that you can benefit from Inheritance Tax reductions. Those who don´t want to get married, can register themselves in the Registry of Common-Law Partners of Andalusia (Registro de Pareja de Hecho) and then the status would be equivalent to that of a married couple.

Property owners who are not citizens of a Member State of the European Union

In this case, heirs may not benefit from reductions for spouses, children, grandchildren and parents of the deceased, so they would pay Inheritance Tax in the event that they inherit. They can only avoid this if both the deceased and the heir are resident in Andalusia.

Author: Gustavo Calero Monereo, lawyer at C&D Solicitors Torrox (Málaga, Andalusia)

HOMEOWNERS ACTING IN GOOD FAITH, MORE PROTECTION IN THE ADMINISTRATIVE FIELD

Written by Gustavo Calero Monereo on 1 July, 2015. Posted in conveyancing, costa del sol, english speaking solicitor, lawyer, legal advice, malaga, Property law, solicitor, solicitors Nerja.

Compensation Andalucian home owners in good faith — Compensation demolition Andalucian home owners in good faith

Last 24 June, the Senate approved an amendment that provides greater protection to third-party homeowners acting in good faith in administrative proceedings. This amendment was approved with the favourable votes of the main political groups and introduces a third paragraph in article 108 of Law 29/1998, of 13 July, which regulates contentious-administrative proceedings in Spain.

This new third paragraph provides that: “The Judge or Court, in the cases where, in addition to declaring the construction of a property to violate regulations, it issues a reasoned order to demolish the works and restore the physical reality altered, shall require, as a condition prior to demolition and unless a situation of imminent danger prevents it, the provision of sufficient guarantees to respond to payment of compensation due to third parties acting in good faith.”

In other words, with this paragraph, it is guaranteed that the judge ordering the demolition of a building in administrative proceedings must ensure, prior to the demolition, that third parties acting in good faith that will be damaged by the demolition of their homes will receive compensation. This means that, what this new subsection regulates is that a home may not be demolished if the homeowner cannot be compensated in advance, as it is understood that the homeowner has no reason to suffer these damages when the party responsible for the unlawful act committed by building the home was someone else.

The approval of this new subsection equates the handling of the enforcement of judgments on buildings, which entail their demolition, in administrative and criminal proceedings since, as we explained in our article from March, the criminal code has also been amended in this sense.

The amendment in the administrative field, which gives greater protection to third parties acting in good faith, is even more logical, from a legal standpoint, than the one in the criminal field and, needless to say, represents the correction of a regulatory mistake that resulted in great injustice.

It should be noted that, in contentious-administrative proceedings, courts examine building licences granted by the City and which have been unlawfully granted due to being contrary to the plan of the municipality.

Before this amendment, when a judgment nullifying a licence of this type was handed down, usually, one of the consequences of this nullification was the obligation to demolish the works completed under the licence declared null, without compensating homeowners acting in good faith at the time of demolition in these proceedings. The only option for these homeowners was to start different judicial proceedings either against the City or against the seller of the property, which could take years to be solved and provided no certainty of recovering the investment made. We can thus prevent cases as regrettable as that of Mr and Mrs Prior.

We can affirm that, in judicial proceedings related to buildings, both in the administrative and criminal fields, thanks to these legislative amendments, homeowners who purchase or will purchase a property in good faith, not being responsible for any unlawful act, will enjoy greater protection of their assets and property rights.

Part of what we denounced and explained in an article published in 2013 has been addressed by these changes, even though there is still some way to go and more legislative changes are expected.

This legislative amendment, as the one introduced in the criminal code in March, has been made possible thanks to the work of several associations of people affected from many different areas in Spain, including: AUAN, AMA and SOHA. The continued and persistent work of these associations, their representatives and the lawyers involved have made it possible for all homeowners in Spain who are third parties acting in good faith to enjoy greater legal certainty.

Author: Gustavo Calero Monereo, C&D Solicitors, (Lawyers)

Torrox-Costa (Malaga/Costa del Sol/Andalucia)

INHERITANCE TAX IN SPAIN: WE ARE ALREADY EUROPEAN!

Written by Gustavo Calero Monereo on 11 February, 2015. Posted in Andalusian, Headline, Inheritance Tax, legal advice, malaga, NON RESIDENT, non tax resident, wills.

In our post of last March on Inheritance and Donation Tax, we discussed about the fact that European non-resident citizens in Spain were experiencing discrimination against resident citizens, because, under the same circumstances, they had to pay more taxes than resident taxpayers.

This unequal treatment happened when the deceased or beneficiaries were non-resident in Spain and they paid taxes in conformance with a State regulation which was more detrimental than the regional one, which was only applied to resident citizens.

This discrimination was confirmed by the European Court of Justice ruling dated 03rd of September 2014, which resolved this issue and established that Spain was infringing the free movement of capital within the EU, because of this separate treatment between resident and non-resident citizens.

On the 1st of January 2015, in order to comply with the aforementioned judgment, the amendment of the State Inheritance Tax regulation has entered into force in Spain. A special scheme has been introduced in regards of the Inheritance Tax, so that non-resident citizens in Spain who are European residents may apply the regional regulation as residents already do, equating their situation.

This new regulation establishes that in the event that the deceased is a European non-resident in Spain, the European non-resident beneficiaries may apply the regional regulation where the most valuable assets are located in Spain. If the beneficiaries are resident in Spain, the regional regulations where they reside shall be applicable.

If the deceased has been a resident in a Spanish region and the beneficiaries are non-resident in Spain, the non-resident beneficiaries shall pay inheritance tax in conformance with the regional regulations where the deceased resided.

At this point, it is worth mentioning that the collection of the Inheritance and Donation Tax in Spain is assigned to regional governments, so that they are free to set forth their own regulations.

The effect of this assignment is that the amount to be paid for this tax by Spanish residents may significantly vary depending on the region where they live. In fact, a fiscal “war” has arisen between regional governments as regards of this tax, because some people have decided to establish their residence in regions with a more favourable tax scheme in order to pay fewer taxes for inheritance and donations, particularly those with more valuable estates.

The most recent and famous case in Andalusia was that of the late Duchess of Alba, who was sentimentally related to Andalusia but not fiscally, because her residence for tax purposes was in Madrid. The main benefit of this fact is that her beneficiaries have had a tax saving of more than 90 million Euros in the Inheritance Tax.

Since non-resident citizens will also enjoy the same Inheritance Tax regulation than resident citizens and considering that the regulation to be applied is that of the region where the most valuable assets are located, this unequal treatment between regions will also affect them.

However, imagine that you are a non-resident in Spain, do not have any property, but you have some money in a bank entity in Spain. In this case, which regulation shall be applicable for your beneficiaries? It seems that the applicable regulation shall be that of the region where the bank registered office is located. Thus, it is not the same a bank entity with registered office in Madrid, Barcelona or Seville, for instance. It has been said “it seems” above, because a definitive answer has not been obtained when contacting the Tax Administration Office in respect of this issue.

In short, these are good news for European foreign citizens and their beneficiaries, and welcome to the regional regulatory “chaos” in respect of Inheritance and Donation Tax.

Author: Gustavo Calero Monereo, C&D Solicitors (lawyer)

Torrox-Costa (Malaga/Costa del Sol/Andalucia)

SPANISH INHERITANCE TAX: POSSIBLE CONDEMNATION AND CHANGES

Written by Gustavo Calero Monereo on 4 March, 2014. Posted in Andalucia, Andalusian, english speaking solicitor, Headline, heir, Inheritance Tax, malaga, nerja, NON RESIDENT, taxes, wills.

Did you pay too much Spanish inheritance tax? — Have you paid too much Spanish inheritance tax?

Last 27th of March 2012, the European Commission pursued an action against Spain for the breach of the Treaty on the Functioning of the European Union and the Agreement on the European Economic Area, as a result of the discrimination in respect of the Spanish inheritance and gift tax, since non-residents pay more taxes than residents under the same personal conditions.

Spanish inheritance tax is managed by Spanish autonomous regions, so there are significant differences from one region to another in respect of this taxation. Each regional administration has regulated this tax in a different way. However, if the taxpayer is a non-resident, the Central State Tax Administration Office is the competent body to collect this tax payment instead of the regional government tax office. Regional government regulations are much more favourable for taxpayers than central government tax rules, since regional administrations have established tax exemptions and reductions for the inheritance and gift tax.

However, these discriminatory situations between residents and non-residents in Spain also arise between residents of the different autonomous region. In fact, last 8th of May 2013, a court order from the Spanish Supreme Court established the illegality of the inheritance regulations of the Valencian autonomous region, because these regulations allow heirs residing in this region to benefit from tax reductions against those residing in other Spanish regions who do not enjoy from this benefit.

It is expected that in the future the Spanish Constitutional Court itself rules in this respect. Furthermore, upon consideration of this inequality legal situation, it is likely that the inheritance tax may be reformed in the medium and long term in order to balance differences among the different Spanish autonomous regions.

Regarding the action against Spain, last 8th of January the hearing for this proceedings was held before the Court of Justice of the European Union. It is very likely that a judgment may be pronounced in a few months in regards of this case. If this court order condemns Spain because of this discrimination, it may give rise to a right for reimbursement of undue taxes paid to all those non-residents in Spain who paid in the last 4 years the Spanish inheritance and gift tax, provided that this payment had been higher than the tax payment corresponding to residents belonging to this Spanish region under the same circumstances.

Taxpayers may claim within 4 years. This period starts to run from the date of tax payment. For this reason, in the event of a possible ruling condemning Spain in this regard in the following months, it is very important that all those non-residents in Spain, who paid inheritance and gift tax in the last 4 years, check if their payment was higher than the one made by a resident in the same Spanish region. If that were the case, they should claim for the refunding before the end of this 4 years period. Once this period expires, they will not be entitled to it. The submission of this tax refund claim shall stop the 4 years expiry date while it is decided if Spain is condemned for this issue.

Our law firm is at your disposal to assist you in this matter. We would offer you our service on the basis of a “no win-no fee agreement” for the submission of the aforementioned tax refund claim before the Tax Authorities, that is, you would pay nothing to us if the public administration declines this first claim.

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

RECENT CONTROVERSIAL DEMOLITION OF TWO PROPERTIES

Written by Gustavo Calero Monereo on 28 October, 2013. Posted in assimilated out of ordination, building permit, developer, english speaking solicitor, Headline, judgment, lawyer, legal advice, malaga, nerja, non developable land, Property law, property law, solicitors Nerja. No Comments on RECENT CONTROVERSIAL DEMOLITION OF TWO PROPERTIES

Controvercial demolition properties Andalucia

Last Monday October 14th, the Regional Andalusia Government Junta de Andalucia carried out the demolition of two houses which were built without construction permit on non-developable land in the rural area of Las Terreras, in the municipality of Las Canteras, Almeria.

In this case, the developer did not have construction permits to build both properties. This is a different situation from that explained in our blog post in March, but there are also involved third parties in good faith, who bought the aforementioned properties to the developer/seller. The demolition of these properties means the infringement of a fundamental property right according to the interpretation of the European Court of Human Rights (ECHR), which has demanded that:

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

– Property loss due to general interest—for example, the compliance of planning legality over ownership of assets—shall be previously compensated to the owner.

Therefore, upon consideration of this European case law, it is not sufficient that in these two cases the judgment has assessed civil liability and the seller-developer is sentenced to compensate owners who bought these properties, but this compensation should be made effective prior to demolitions to avoid the risk that the seller fails to pay or is not able to pay and, as a result of this, third parties in good faith are not compensated. It should be noted that subsidiary liability of public administrations is not observed, as no construction permit was granted.

In order to guarantee the payment of compensations, appropriate actions should be taken prior to execute demolitions in the same proceedings for the enforcement of judgments. If this were possible, this situation should be determined as a reason to stop the judgment enforcement until compensations are paid to the affected owners. Obviously, each case should be analysed in order to determine whether the owner knew about the absence of construction permits and even though he was aware of the risk involved, he bought the property. In these cases, protection for these owners should be different.

Regarding certain information compiled by different means, there is a chronological perspective to be pointed out in respect of these two demolitions, which reveal the inefficiency of inspection and penalty procedures in regards of town-planning regulations, as well as the belligerent approach of public administrations participating:

– In 2004, the Andalusian Regional Government initiated a proceeding against the developer and he was fined because of the earthmovings in this area. Then, he was obliged to restore it to its original state. Obviously, the developer failed to comply with this order to restore it to its former state. In addition, the Town Council or Andalusia Regional Government should have acted in this moment, as well as they have done now, when carrying out the demolitions.

– In 2007, the Andalusia Regional Government officially ordered to the Town Council the demolition of the properties, as they have been built on non-developable land without construction permits. From 2004 to 2007, 3 years have elapsed. During this period of time the 4 properties were built and no competent public administrations did paralyze the works before they were completed. As a result of this, the completed houses were entered into legal transactions and then new owners arised. Why were construction works not paralyzed within these years?

– Once that the 4 properties were completed, the Town Council authorized water and electricity supply for them; this illegal authorization granted by the Town Council implied that these homes were appropriate to be occupied, as these supplies were essential for their sales.

– In 2012, The Andalusia Regional Government seemed to request the Town Council to execute the demolitions.

– In October 2013, the demolition of two properties was carried out by the Andalusia Regional Government, because the Town Council did not do so. The other two properties are also pending to be demolished.

Nine years have elapsed since the construction activities without permits are known until their demolitions were indeed executed. During this period of time, third parties in good faith have appeared and been affected by this situation. Have public administrations really done their utmost? Could have they acted earlier and with greater accuracy since 2004?

It would be a rather difficult task to think that the Andalusia Regional Government and Town Councils are not liable for a large number of homes built without permits on non-developable land in Andalusia—liability becomes obvious for those properties built with construction permits—since they had aerial images of each area, cadastral information and documents from the Payments Offices for transfer tax collection, which may have allowed them to protect non-developable land and enforce Andalusia town planning Act (LOUA). But they did not want to do so. Accordingly, as town planning duties have not been complied in respect of inspection and penalty procedures, the liability of Andalusia Regional Government and Town Council is joint and shared.

It is also worth mentioning the existence of certain arbitrariness on the part of public administrations when judgments were enforced, since older proceedings are still pending to be enforced and no actions are being taken on them.

Foreign residential tourism is a key factor for local economies in many areas; different national newspapers have been looked up and all of them echoed the new demolitions, which is a very harmful publicizing. They stressed the absence of economic compensations before demolitions were carried out, rather than demolitions itself.

It is not a question of implementing a general amnesty for all irregular acts executed on non-developable land without permits, since this may lead to a negative message for people who meet regulations. However, the fundamental property right should not be further infringed in conformance with the European Court of Human Rights (ECHR) case law and property right should be protected in Spain as a fundamental right. In addition a legal system which protects third parties in good faith should be provided in order to ensure legal certainty; inspection and penalty procedures should be carried out and should not go on forever due to the lack of interest of public administrations, so that their effectiveness may paralyze these type of constructions before they are entered into legal transactions; common sense and realism should be imposed and Regional Governments should be consistent with what has been accepted in these years, due to their failure to act or interminable penalty and enforcement procedures.

It seems understandable that town-planning legality will be now strictly enforced and hopefully it will be watched over. However, solutions should be provided from a logic and legal perspective for all previous cases.

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

PREFERRED SHARES: THE GREAT SCANDAL

Written by Gustavo Calero Monereo on 11 June, 2013. Posted in Andalucia, english speaking solicitor, fraud, Headline, interest, lawyer, legal advice, malaga, preferred shares, solicitors Nerja. No Comments on 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)