Presently, by the fall of prices on the property market, many owners sell their homes for a similar or lower price than the purchase price when they originally bought them, which the main result is that there is no capital gains or this is not that high on the sale of the property.
However, if these owners are non-resident tax in Spain, that is, if they pay taxes in another country, then the buyer has the legal obligation to withhold 3% of the purchase price and to pay it to the Tax Office, on account of the capital gain taxthat the seller must pay for the gain on sale of his property. 18% is the tax rate that the Spanish Tax Authorities apply on the capital gain from the sale of a property.
If the seller has not obtained any capital gain or if the tax that he should pay for the gain is less than 3% retained by the buyer, the seller may request a refund of the whole amount or part of it
Well, in the moment that the Tax Office receives the request of the seller for the reimbursement of the income of 3% from the property sale, they firstly check whether the owner has submitted the form 210 –Income Tax Declaration for Non-residents when owning a property in Spain– (before 2008 it was the form 214), for the last 4 years prior to the sale of the property; in case he has not submitted it or he has not submitted any during these obligatory periods, the Tax Office demands the vendor to regularize the situation before returning anything.
In view of this requirement, the seller must submit and pay the corresponding tax due for every year that he has not submitted the form 210, with late payment interest and a financial penalty from the Tax Office for not fulfilling the obligation of submitting the form on time.
Because our experience tells us that many non-resident tax owners do not undertake the obligation of submitting the Form 210, we would recommend you to do it from this year. In case you would decide not do it now, you will probably have to do it later, paying a penalty as extra cost, and if it was your situation, an extra deadline in order the Tax Office to return the amount that the buyer withheld in the purchase of the property.
If you are trying to sell your property, and you have not submitted this tax during the last four years, we do recommend you to regularize the situation and submit the tax. This will prevent you a possible financial penalty from the Tax Office, because if you submit this form with no requirement from the Tax Office, that is voluntarily, you will not be sanctioned by the Tax Authorities.
Andalucian houses built out of regulation according to Town Hall´s urban law LOUA
Now that many municipalities in Málaga are approving their development plans in an attempt to regulate the urban chaos in relation to dwellings on undeveloped land, and to adapt those plans to the Law on Urban Planning of Andalusia(LOUA,) the obvious question is; what will happen to the irregular housing that cannot be legalized by the new urban plan adopted by each municipality?
A possible solution to these houses can be the designating them as homes “fuera de ordenación” (out of regulation), ie homes or buildings that do not satisfy the new municipality’s urban planning, therefore cannot be legalized, and it cannot be either asked any kind of responsibility to their owners or developers as any possible urban infraction has prescribed according to the LOUA or penal code, through the passage of over four years and five years respectively, since the buildings were finished.
Such classification of a property as “out of regulation” can be done by either the City Council or at the request of the owners, and entails certain limitations on the rights of the owners with respect to such property. Thus, the building can only undertake repairs work and maintenance for the strict conservation for the occupancy and use of such constructions, and such other works authorized under exceptional provisions of the Act. However, these properties can still be used by their owners, so that they can continue to enjoy their homes, do conservation work thereof and carry out any legal business on their property, acknowledging the existence of the above mentioned limitations in the property use and enjoyment but with the legal security that any legal liability can be required in the future because the housing has been declared by the City Council as out of regulation and, therefore, is now legally defined.
Given the numerous buildings that are not legalized in the Axarquia and over which there can not be imposed any liability, some municipalities are currently starting to open statement records of “out of regulation” in order to end up with this situation of legal uncertainty over these buildings that can not be legalized since they are located on undeveloped land according to the urban plan. The objective is also to give the owners legal protection letting them know what they can or cannot do on their properties but with the legal security that no responsibility will be claimed on them in the future regarding their properties. In fact our firm recently launched the first record of this type in one of the municipalities with more properties in this situation in La Axarquia, not having finished to this day.
According to the LOUA, the councils have the authority or power to define in their urban plans what can or can not be done on these out of regulation properties, so they can take this advantage of that power or authority to help solving the problem of all buildings that can not be legalized in the new general urban plan but over which there cannot be any imposed legal liability. Thus using their authority to help making this cataloging received positively among the affected property owners while helping to organize and regulate part of the chaos of the homes built on rural land, with the consequent benefit to the town Hall for new incomes and for the owners that will have legal security in their properties
Therefore, given the impossibility of legalizing the new urban plan on everything that has been built illegally, the legal definition of out of regulation may be of interest for the owner to give legal security to their property.
Last Monday, the 13th of December, I read an article in the newspaper EL MUNDO in which they inform that about a hundred people from Northern Ireland were victims of a property fraud through the Ocean View Properties agency. It was supposed that the development company would build a housing estate in a plot located in Estepona (Malaga). Apparently fraud people made important payments on account of the purchase price in 2005 and 2006 for their future homes in Spain.
Concerning these off-plan property sales, directly from the developer (new property), apart from confirming whether the developer that sells is the owner of the buildable plot, and the relevant Town Hall has approved the urbanization project of this land, the buyer should request the immediate handing of the bank guarantee along with the interim payments that the buyer are going to carry, guaranteeing every payment for the building process until the granting of the purchase title deed. In this way, if the urbanization project may not be completed because of an administrative cause, because of the insolvency of the developer or any other cause non attributable to the buyer, then he can get back every payment made by enforcing this bank guarantee.
In this case, it is obvious that buyers and their solicitors did not require these bank guarantees to the developer. Now, the buyers should associate each other to force in the judicial proceedings, relying on a competent legal team that may advice them properly. It is essential to bring a lawsuit against them (civil action) or criminal charges (criminal action depending on whether it is considered a fraud or not) expeditiously so to call for the preventive seizure of all the goods that the developer may have, and all the administrators’ goods in any country, to study if the administrators have other companies opened so to attack all these goods.
When trying to get back money, the judicial proceedings is very long, so fraudsters or possible insolvents can hide or squander their patrimony and the trail of the money would be lost. The result of it may not guarantee the success.
Conclusion, if you are going to buy off-plan directly from the developer, make sure of who is the owner of the plot, of the urbanization project, and, specially, do not pay anything without receiving the corresponding bank guarantees for these interim payment until the granting of the purchase title deed. If you have signed a purchase private contract with a developer and you have not still the bank guarantees, it is time to require them, because the financial situation of the developer is complicated and, in short, you never know. Our advice is, if in doubt, you consult a solicitor in order him to analyze your situation.
All property owners in Spain are liable for some taxes every year. Even if you are (tax) non-resident, when owning a property, you must fulfill your fiscal obligations here in Spain by submitting your yearly income tax declaration for non-residents (IRNR).
In the event you are non-resident in Spain, the reason why you are subject to this tax is because your Spanish property is not your principal residence. Non-residents remain subject to the tax because, by definition, Spain is not their principal residence, so that it is necessary to calculate your property owners’ imputed income tax on your second and further homes you may have.
Be aware of tax year in Spain ends by the 31st of December, so that your income tax declaration should be submitted to Tax Authorities before this date, by filling out the application form number 210.
The calculation of the IRNR will depend on several factors, among others, the type of property (urban or rustic), when the rated value of the property for tax purposes was raised, price or valuation of the property, etc.
If you are in this situation and you still have not submitted your Property owners’ imputed income tax, you have one month approx. to be up-to-date with Tax Authorities.
Author: Francisco Delgado Montilla, C&D Solicitors (lawyers)
Torrox-Costa (Malaga/Costa del Sol/Andalucia)
Do you own a Spanish property without a (valid) building license?
Following the news published recently in a local newspaper, the Provincial Courts of Jaén cancelled the demolition of a two storey house and its swimming pool that were built on rustic ground. This house had the circumstance that its grounds invade part of the bank of a river.
There are currently a series of penal judiciary procedures opened all over Andalucía for crimes against the zoning law due to houses built without license on common rural grounds, that is to say, grounds which lack specific protection.
It must be clearly stated that in a procedure for the prosecution of a crime against land planning, the sentence pronounced doesn’t necessary order the demolition of the illegal building. This is due to the fact that demolition is not a punishment held within the penal code in case the owner is found guilty for having started the building process without planning permission. Demolition is thus a compensating measure, a possibility for the jury to evaluate the circumstances of each case in question that will have to be explained once the sentence is pronounced.
Once we have established this, part of the jurisprudence establishes that not demolishing a building in a case in which the Council could have legalized this building by the administrative way; on those population nuclei built on rustic ground and constituted by numerous buildings that pay the common local tax, that have garbage pick up service, water, electricity, etc… that is to say: certain infrastructure with the appearance of a residential area; demolition of illegal buildings in this case would not apply in the court decision. This is due to the fact that it would not be logical nor understandable to reach a judiciary decision in which such an area with different constructions, since the objective of demolition within penal context is to protect and to make a rational use of the ground, little can be done to protect by demolishing one building when there are others around it, as it will not possible to totally recover that space left to its original rural status.
We could therefore conclude by saying that now a days among the multiple rustic areas with buildings without licences on them with the appearance of a residential area in themselves, he line that some sentences are following can be considered as more logic and coherent, since there is the impossibility to repair what was illegally built. This current situation is therefore the result of the Councils and the Andalusian Council in the neglect of their controlling functions on ground use for a long period of time, not having taken the appropriate measures in due time.
But let’s finally take into account that we are talking here about legal procedures against buildings that were not granted building permission. It is something very different to those buildings that were granted building permission despite wrongfully, in places where the General Building Planning would not allow them. These cases belong to the Litigious-Administrative jurisdiction. I will try to state the legal consequences to these cases in next article, although I assure you it won’t be an easy task.
I recently read an article in Diario Sur talking about Alcaucín Town Hall. It is still bogged down with the properties built in non building lands.
Consequences arisen from the urban corruption existing in Alcaucin (Malaga) since 2009, has resulted in a lack of legal security for part of the owners and people who are interested in investing in a property around this area of Malaga, provoking, as main conclusion, an important loss on the buying and selling property market, and a horrible publicity abroad of our local institutions and our legal system as well, for a non response in view of the abuse competence of some Town Halls in urban matters and, in the permission of the Andalusian Government, who has looked the other way for many years while the many urban irregularities happened; of course cashing up thanks to taxes and prices for the usufruct and enjoyment of the properties and for asset transfers.
Some of the professionals that work in this area, we wonder why so many legal proceedings are opened where the owners turn out accused. Most of them are not responsible of this illegal urban activity, but they can be seriously affected.
From a legal point of view, most of these procedures would end into nothing because of the prescription of many of the charged urbanizing crimes and because of the possibility of regularization of buildings, as it has been stated by the doctrine. Passing of time in the resolution of these judiciary procedures only provokes an overextension of this chaotic situation.
I do agree in the fact that town halls should be meticulous in the fulfilment of urban rules and that the Andalusian Government must closely watch private as well as local building activities. However, I do not quite understand that there should be a series of judicial procedures opened against illegal urban licenses that have enjoyed a tacit acknowledgement for years due to lack of control; specially, when these acts have been carried out in such an evident way and for such a long period of time.
The intervention line that is being carried upon the misuses of non-urban ground, not only arrives late but it does not solve the problem, thus causing the situation to worsen by overextending the resolution to the problem within the eternal judiciary channels. In many of these procedures the solution will not only be the least adequate but it may not even be possible to re-establish the original status to the illegally urbanised ground, which would be the desired thing to be done in this last instance. All this without taking into account the patrimonial responsibility that this will mean to the city council already in great debt and what’s more, the nullity of the illegal local licenses as well as the prejudices that may arise among those property owners who were counting on the city council to achieve a building permission.
In such a time of chaotic urbanism and autonomic and local irresponsibility associated to periods of growth, it would have been logic to establish a strict action line to be followed from now on, being categorical to all the illegal behaviour and conduct, reaching a consensus on the different competent institutions with logic and coherence by the assumption of responsibility over these illegal acts from those truly responsible. There are always solutions and technical means to be applied if both parts are implied in it.
We finally hope that coherence finally imposes itself. However, if this long period of uncertainty were here to stay, the image of the real estate would be irreparably damaged and the efficacy of the public and professional institutions in question. It will be difficult to overcome this situation because of this feeling of judicial insecurity and chaos in the criteria due to the arbitrary decisions that weaken us all.
Legal importance of correct inscription in both Spanish Cadastre and Land Registry
Although little by little the situation is changing in an important way for the real estate owners, this can not be used to comply with the obligation established in the Real Legislative Decree 1/2004, of 5 of March, in that the text is approved refunded of the Law of the real estate land registry, of recording to its name the property that it possesses or the one that it has just acquired, whether by means of buying and selling, succession or any medium, or to record any physical change that be produced in this, whether group, segregation, new work…etc.
This “bad” custom nowadays can have quite serious consequences in the enjoyment of the right to the property on the part of any person that possesses good real estate in Spain.
Article 1 in their first section of indexed norm is that to regulate the land registry defines the same one as “…a registration administrative clerk of the Treasury Department in which the goods are described urban, rustic real estate and of special characteristics just as they are defined in this Law”. Subsequently in its second section it exposes that this Law is applied in ah the Spanish territory.
Any owner of a dwelling or plot, or both it should be affirmed that the details of the property coincidence with the physical reality of the same or with the title of property, normally Public Deeds for three important motives from a practical point of view.
1.- Because the Real Decree indexed at the start of this article and that to regulate the real estate and registry, collected explicitly in their article 70, establishes the classification of simple tax infraction, the lack of presentation statements done, does not perform in a time limit and the ones that be false or inexact, that is to say that the people that acquire a good real estate, or those being the owners segregate, they group their plot, or they expand the metres of their dwelling, but they declare said alterations or modifications in the land registry through the official forms, can be guilty persons with a fine that oscillates between 60.00 and 6,000.00 euros according to the circumstances. That is to say, since it is an obligation imposed by normal ranks of Law, the obligation to declare in the land registry any variation or modification of the property on the part of its holder, if it does not comply the same, there can be sanction.
2.- Because upon being a public registration, the land registry that incorporates the plans of each one of the plots or properties of each municipality with inclusion of the sensitive data of the same, without a person with a plot or property does not have the same one recorded in the land registry, or the same one presents some error in its inscription or, still being collected in the land registry, is not to it’s name and did not carry out the corresponding change of property ownership, can be found with the unpleasant surprise that its neighbour, for example, recorded in the land registry its property or carries out some modification of the same that can affect him to its boundaries and, if its property does not appear as its name in the land registry or the same not even appears recorded as we have commented, the and registry wit not be able to notify him that its neighbour is going to proceed to carry out a change and that you have a period of time to allege what estimates convenience. That is to say, if that property modification of its neighbour affects him in the use and enjoyment of his property, you will not be able to allege anything in defence of his interests and, possibly, its neighbour will be able to carry out that alteration in the and registry with the damages that this can cause him in his property. And all because you did not do what the law obliges when you bought the property or when you carried out the modifications in the same one that is perfectly recorded in the land registry the details of its property.
3.- In any operation of buying and selling of good real estate, the notaries are obliged to request descriptive property certificates and graphics since said information can obtain by telematic way. In the supposed one that they cannot contribute that document because there exists some problem in the and registry with the buying and selling of said property, they have to make it to be evident in the Public Deeds and, although that lack of contribution of the property reference by means of the certificate does not impede that the notaries authorize said Deed, neither does it impede the inscription in the Registration of the Property of the same, except in supposed punctuality, the problems that can arise for the good of the operation should be keep in mind, since that the buyer of said real estate before the warning of the notary have doubts of the situation of said property and this can cause the break, or at least the complication, of said operation of buying and selling. It is kept in mind that, although the Public Deeds be the reliable document of property, the land registry is used to being but exact with the existing reality in the real estate, since it incorporates in their fiat detailed database that they be brought up to date from time to time and in which the changes are incorporated that themselves are not collected in the titles so much as relating to the dimensions of the plot and boundaries, as in the constructions that be carry out in the same.
In conclusion, i would like to emphasize that the correct inscription in the land registry of any property has as main consequence in the legal security of the proprietary person of the same and of the person that can acquire it in the future, as well as of administrative agencies. If you have a property real estate in Spain or are thinking to acquire one, be sure that the same one found recorded in the land registry is with at the most important date; situation, ownership, extension and boundaries.
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Presently, by the fall of prices on the property market, many owners sell their homes for a similar or lower price than the purchase price when they originally bought them, which the main result is that there is no capital gains or this is not that high on the sale of the property.
