Schlagwort: rustic

PURCHASE OF A HOME IN SPAIN AND HOME INSURANCE: WHAT YOU NEED TO KNOW

Geschrieben von Gustavo Calero Monereo am 30 Oktober, 2020. Veröffentlicht in AFO, andalusia, Andalusian, conveyancing, DAFO, english speaking solicitor, illegal building, malaga, nerja, Property law, purchase process, SAFO, solicitors Nerja, Unkategorisiert.

Home Insurance, purchase, property, Spain — Home insurance of your Spanish property

Buying a home in Spain entails a great financial investment and, therefore, you’ll want to do it with the lowest possible risk. This is why it’s very important to obtain legal advice and hire a specialised lawyer to help you throughout the purchase process, so that you can enjoy legal certainty and be aware of all the relevant information about the property.

However, there is another important thing to do before signing the Purchase Deed for the property. It is advisable to have home insurance ready to prevent any risk of financial loss due to potential damages, such as theft, water damage or fire. The importance of home insurance for the owner’s peace of mind and the investment made is self-evident.

This is why we’re posting this article, to clarify some concepts for foreign homeowners in Spain, so that they can understand this very important product well. In the event that you are buying with a mortgage, the bank will advise you and recommend that you obtain home insurance as, in the event of serious damage to the mortgaged property, the bank will want to secure repayment of the money borrowed.

At the end of the article, we cover home insurance for rural homes built in Andalusia, with or without DAFO/SAFO.

What are the building and the contents in home insurance?

A home insurance policy for an existing or new build property is based on two main concepts: the building and the contents.

1) The building (continente) is made up of the construction and structural elements of a home or building, whether these are walls, ceilings, floors or installations such as heating, water or electricity, among others.

2) The contents (contenido) are made up of the belongings of the people living in the home, such as furniture, electronic devices, personal effects, clothing, jewellery, art, etc.

What would be an appropriate value for the contents?

To properly assess the contents, we recommend that you think about how much it would cost you to buy the items you have in your home, going room by room until you cover everything in it. Jewellery or cash money have specific valuation in home insurance and may be insured up to a certain limit or under certain conditions. In other words, in this case, this information must be provided to the company so that it takes it into account in the policy.

And what is the right value for the building?

If the building becomes damaged, e.g. a fire, the company will provide compensation according to the cost of rebuilding the home, i.e. the potential cost of rebuilding the home must be calculated. The resulting value of this calculation is the one that should be included in home insurance as the value of the building.

A very common way to calculate said value is the use of average estimated building values published by the Colleges of Architects. For instance:

Mr Olle Johansson, a Swedish national, purchased a new home in the city of Malaga in 2020. It’s a flat measuring 120 sq. m.Well, taking into account the average estimated building values from the College of Architects of Malaga for 2020, the value per square metre built would be 809 euros. In other words, the value of the building for 120 square metres would be 97,080 euros. If there is an underground carpark and a store, these should also be appraised separately from the home, so that the policy covers them. Another example: Mr Jan Van Poppel, a Dutch national, will purchase a home in the countryside, in the Mijas area (rural land), which has: 200 built square metres plus 30 square metres for a pool. The value per square metre for an isolated home in the countryside is 984 euros and the value of the pool would be 445 euros per square metre. Therefore, the value of the building would be about 210,150 euros.

Valuing the building at the purchase price

When we buy a home and obtain home insurance, we often think about setting a value for home insurance as close as possible to the purchase price paid for the property. However, this reasoning is misleading as it should be taken into account that the land where the home is located is not covered by home insurance, as the land always remains intact. In the event of serious damage, if you already own the land, you only need to insure the cost of rebuilding the home. However, the value of this land is what makes up most of the purchase price of a home in most urban sales. For instance, buying a home in the golden mile in Marbella, in central Malaga or on the beachfront in Nerja entails a high cost due to the location (land) of the property, rather than for the value of the building itself.

Rebuilding is much cheaper than buying when you already own the land. Therefore, the most important thing is to insure the real reconstruction value in the event of serious damage. This is about assigning the actual value to the building of your property. You also need to take into account that, when you own a home in a block of flats, if there is serious damage affecting the building, the community insurance will cover part of the damages affecting only the common elements of the building. The façade, roof, terraces, etc., are elements that would be covered by the insurance of the Homeowner’s Association in the event of a fire. In other words, if you are buying a flat or apartment, you’ll need to insure the building. This is why, in these cases, you should calculate the reconstruction value of your building for insurance purposes. If you provide a value above the reconstruction value, this would lead to so-called over-insurance in your home insurance and, if you provide a lower value, it would lead to under-insurance.

What would happen in the case of over-insurance in the policy?

Imagine a home in a building measuring 100 square meters, with a building value of 300,000 euros because this was the price paid when it was bought. If there is a serious accident requiring the reconstruction of the home, the company will never pay more than the reconstruction value, which would in general be around 80,000 – 90,000 euros. In this case, the owner would be paying a very high premium every year for the insurance policy needlessly, as the company will only honour claims up to the reconstruction cost of the home. In extreme cases, the company could even interpret that there has been bad faith when obtaining the insurance policy and this could be a major issue, as it could declare the policy void and refuse to pay the amounts that should be paid in the event of damages.

What happens in case of under-insurance?

In the event that the building or content is valued below the actual value of the building or furniture, the company will not cover 100% of the damages, even if the amount of the claim is lower than the value of the insurance policy. For instance, if the actual value of reconstruction of the building is 100,000 euros and the policy contains a building value of 60,000 euros, the home would only be insured at 60%. Someone might think in this case that any damages equal to or lower than 60,000 euros would be covered by the policy but in reality that’s not the case. For instance, in the event of a small fire with damages valued at 10,000 euros, the company would interpret that 40% of the claim is not covered by the policy as only 60% of the building value of the home is insured. Therefore, it will only pay 6,000 euros as compensation, always applying the rule of proportionality to every claim.

Special insurance: luxury homes

If you own a luxury home or you are thinking about buying a luxury home, the estimated cost of reconstruction or replacement based on the coefficients of the colleges of architects would surely not be a valid calculation method for homes of this type. The key to insure the building in homes of this type is to calculate the reconstruction value of the property with objective parameters. I.e. if the home has very high quality finishes in terms of automation, insulation, aluminium or timber structures, flooring, taps, toilets, air conditioning, etc., this must be taken into account and, in this case, these values should be added to the building insurance. As mentioned, the value of the building must be as accurate an estimate as possible of what it would cost to rebuild the home to the same standards. In this case, it’s very important to inform the company of the “peculiarities” of this home so that it has as much information as possible and to accredit the reason behind the value of building insurance being above the average reconstruction values in the area. Keeping all purchase invoices and proof of purchase for high-value furniture is very important to prove the estimated cost.

What is the insurance compensation consortium?

All persons who have an insurance policy in Spain, whatever the type, pay a small part of the price to the consortium. The consortium is a public business entity that covers accidents such as flooding, terrorism, atypical cyclones, large fires or other risks set down in the “extraordinary risk insurance regulations”, which are not covered by insurance policies, with damages of this type being expressly excluded from insurance covers. When damages of this type occur, as the insurance company does not cover them, the consortium acts as guarantor to compensate policyholders and keep them protected in these situations.

Rural homes and the building value in home insurance

First of all, we should remember the legal premise that most existing rural homes (rustic / countryside) in Andalusia, which are used for residential purposes, are illegal and, therefore, in the event of the destruction and total loss of the home, such as due to fire, earthquakes, serious flooding, etc., they cannot be rebuilt. This is because the Urban Planning Law of Andalusia (LOUA) does not allow for issuing a building permit on rural land for a residential home. The existence and continuity of those thousands of illegal homes on rural land are based on their age. Therefore, in the case of destruction or total loss, there would no longer be an old home and it would not be possible to obtain a permit to build a new house or rebuild the one that was there.

The above explanation means that the value of the building in home insurance for these homes can be estimated, as mentioned above, at around 984 euros per square metre built in Malaga. As the value is based on what it would cost to rebuild the home and the rural home cannot be legally rebuilt in the event of total loss, what situation would we be in? In the event of total loss, if we have a country home with a surface area of 150 square metres and the building is valued at 150,000 euros, the company would pay that amount as compensation for the building, along with the amount corresponding to its contents. In this case, the owner would receive compensation for the home in addition to the value of land where nothing can be built. This is why the value of the land in a rural home is very low compared to the construction value, especially when compared to an urban home on land where it is legal to rebuild it.

Tips for a safe and well insured home

When obtaining home insurance and purchasing your property, think carefully about the value of the building and contents and don’t forget to include stores, parking spaces, pools, etc. If you have any doubts about the insurance value, talk to the insurance company itself. It’s important for the company to help you clear up any doubts when assessing your insurance value.

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

Expenses from the renovation and improvement of a property can reduce the tax

RENOVATING YOUR HOME? DO IT RIGHT AND PAY LESS TAX WHEN YOU SELL

Geschrieben von admin am 9 Juli, 2018. Veröffentlicht in Andalusian, Andalusian, conveyancing, costa del sol, costa del sol, english speaking solicitor, english speaking solicitor, lawyer, lawyer.

Renovating house in Andalusia: tips & save on Capital Gain Tax

One of the first things many people do when buying a property is renovate it.

The expenses from the renovation and improvement of a property can reduce the tax on capital gains in the event that it is evidenced in the future sale of the existing or new build property. It is important to clarify that repair or preservation costs for the property are not deductible. Deductions only apply to renovations or improvements that increase the value of the property compared to before they were made.

The cost of improvements would be added to the price paid in the sale, resulting in lower capital gains tax due to the difference between the price to transfer the property and the purchase price, which means less tax would be paid to the Tax Agency. This will be so provided that such renovation and improvement works can be evidenced so that the Tax Agency can accept them. Below, you will find what I consider to be the most important aspects to be able to prove the works carried out for tax purposes.

TECHNICAL PROJECT

Having an architect draft a project and oversee the execution of the works is not a minor issue. If the works to be carried out are of a certain scale, it is always best to have a professional perform follow-up and control since he or she would be liable if something goes wrong. Likewise, having carried out the works with a technical project and a final works certificate can be used to evidence the improvements made in be property before the Tax Agency.

BUILDING PERMIT

If you are going to renovate a property, it is always necessary to get a building permit for both major and minor works. It is true that this is often not requested to save money, for instance when renovating the inside of a home or a room, as there are less chance you will be found out.

Having a building permit will help you on three important aspects:

To evidence the lawfulness of the works –provided that it complies with the permit granted–. Likewise, it is important for you to know that, if there is an accident at the building site, not having a permit may entail consequences of criminal liability for the owner.
When it comes to works where the distribution of the property will change, the constructed area will be enlarged or a new home will be built, the building permit –among other documents, such as the final works certificate and the permit for initial occupation– will be necessary to register this new construction in the Property Register.
When selling a home with profit, the building permit will serve to prove to the Tax Agency that improvements were made so as to request that these are taken into account as part of the purchase price of the home.

Having a building permit is more important in terms of urban-planning and criminal law than in terms of taxes.

CONSTRUCTION CONTRACT

It is very important to sign a contract for the works to be carried out with the builder. The construction contract will mainly evidence which is the construction company that performs the works, the type of works to be carried out, their estimated cost and the location where they will take place.

INVOICES AND PROOF OF PAYMENT

Without a doubt, in terms of taxation, this is the most important requirement for the Treasury to recognise this improvement or renovation.

We often find homeowners who have spent a lot of money on improving their properties but who have no invoices issued by the builder or proof of payment for these works. It is essential to prove to the Tax Agency that these amounts have been paid by bank transfer or personal cheques made out to the construction company. If you have no way to prove these payments, it will be impossible for you to include these improvements in the purchase price of the property. You must always request an invoice and keep proof of payment.

The costs of the improvements will be added to the purchase price because of which you will pay less Capital Gain tax. The Capital Gain tax of this moment is 19% over the profit between the purchase and sales price minus the deductions.

WORKS WITHOUT A PERMIT THAT CANNOT BE LEGALIZED

It is possible that, for the works you intend to carry out in your home, it is not possible to obtain a building permit, for instance in works to enlarge a home in non-urban land –rural land–, increasing the surface area beyond the development potential –such as when enclosing a balcony– or building to a height higher than that allowed. The first thing you should take into account is that, as the owner, you will assume the legal liability that may arise if legal proceedings are brought in connection with these works without a permit.

If you will be carrying out such works, it is important for you to sign a construction contract with the builder, for you to obtain an invoice for each payment and for payments to be made by bank transfer or cheque. Even if you do not have a permit, it would be possible for these improvements to be taken into account when selling the property.

The Tax Agency cannot reject improvement works for not having a building permit –inspecting urban planning law is outside their jurisdiction–, for which reason it is important for you to be able to evidence the works that were effectively carried out, what their cost was and submit payment documents.

In these cases, it would not be a bad idea to have a technician draw up some type of report –not a project– explaining how the property was before and the works that have been performed, providing photographs and documentation from the owner. This is an additional document that can be used to prove improvement works.

NEW CONSTRUCTION DEED

The New Construction Deed is a document signed before a Notary Public to register a building in the Property Register in Spain. Even when the construction does not have a building permit, it is possible for it to access the Property Register in Spain –which does not mean it is legal– provided that a series of requirements are met.

If you have built a pool, garage, storeroom, etc. in Andalusia without a licence, it is possible for you to get an architect to issue a certificate of age six years after completion, to evidence the new construction and its age. This certificate can be used to sign a Deed of Declaration of New Construction before a Notary Public and register the construction in the Property Register. In some cases, it would not be possible to register it in the Register, such as when the land is especially protected.

VALUE OF THE CONSTRUCTION DECLARED IN THE DEED

The value of New Construction assigned in the Deed cannot in itself be used to prove to the Treasury how much was spent on the property at the moment of selling.

For instance, if you declare, in the Deed, that you have spent 50,000 euros on the pool and garage you built, unless you have proof of payment and invoices from the construction company, the Treasury will reject this expense. This is so because what you do before the notary is nothing more than a statement, which means that the Notary does not check if you really spent that amount or if it was more or less –and isn’t required to do so–.

In my opinion, if you are going to do a Declaration of New Construction for works without a licence, you should include a copy of the invoices and/or proof of payment to the constructor in the Deed, as this would evidence the value you declared and make it easier for the Treasury to accept it when selling the property.

Lastly, if you are thinking about doing any work on your property, I wish you all the luck in the world and, most of all, lots of patience; I almost ran out of it myself when I renovated mine…

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

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

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

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

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

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

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

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

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

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

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

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

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

DRAFT OF THE DECREE ON THE LEGALIZATION OF HOUSING ON NON-DEVELOPABLE LAND OF ANDALUSIAN REGIONAL GOVERNMENT

Geschrieben von admin am 13 August, 2011. Veröffentlicht in Property law, Unkategorisiert. Keine Kommentare zu DRAFT OF THE DECREE ON THE LEGALIZATION OF HOUSING ON NON-DEVELOPABLE LAND OF ANDALUSIAN REGIONAL GOVERNMENT

Three weeks ago, we received in our offices a copy of the draft implementing Decree of 20^th of June 2011, which regulates building and scattered rural settlements on non-developable (non-urbanizable) land in Andalusia.

This draft is supposed to be created as an attempt to regulate the situation of a large number of properties located on non-developable (non-urbanizable) land in Andalusia, where criminal or administrative proceedings cannot be filed against them for land development liability, because the offense or infringement is extinguished by prescription. The Andalusian Regional Government is partially responsible for this situation, as they have not protected or controlled the legality regarding land developments of municipalities for many years. Meanwhile, they have collected the profits from the transfers of title ownership by means of the transfer tax.

Regarding the draft of the Decree, the concept of constructions assimilated out of ordination is not understood. The use and enjoyment of these constructions can be exercised, but a complex administrative procedure is established, so that the city councils certify the security and necessary facilities for the use and enjoyment of these properties. However, the resolution to this procedure shall never mean the grant of the First Occupancy License, neither the owner’s rights shall be recognized to be exercised before any administrative or criminal proceedings (article 7, section 6 of the Decree).

If the use of housing is recognized and regulated to preserve the rural area, the environment and the scenic value where the construction is located, then, why the First Occupancy License is not granted when the owner is enjoying the property? What does “non-recognition” mean before any court proceedings? As a result, it could be understood that in the event of court proceedings, this recognition of assimilated housing shall not have any legal “value” for these proceedings, that is to say, legalization or regulation does not exist.

Maybe, the problem is based in the creation of the concept “assimilated to out of ordination”, which was incorporated by the Decree on Urban Discipline of Andalusian of 2010 and its implementation.

Furthermore, an additional problem arises, as the Land Registry jurisdiction belongs to the Spanish Government. As a result, the State legislation should firstly include this legal concept of “assimilated out of ordination” within its rules in order to authorize the registration in the Land Registry of any administrative action which establishes a construction under the consideration of this concept. Nowadays, the only existing concept is “out of ordination”, but nothing is referred to constructions “assimilated” to these ones. Then, the Regional Government is not authorized to establish the access or registration in the Land Registry, as this jurisdiction belongs to the Spanish Government.

Lastly, in many Andalusian municipalities as the Axarquía region, thousands of isolated houses have been built on non-developable land under the corresponding construction permits. Then, it does not seem coherent that differences in treatment are not considered for these owners acting in good faith, regarding these municipal permits they were granted. This draft of the Decree does not include any reference to them; therefore, the legal situation of the constructions with permits equates with these other constructions without permits.

In conclusion, regarding the content of the draft, legalization or regulation of properties located on rural land is not incorporated; no legal novelty is provided to solve out the problem resulting from the lack of control of Public Administrations regarding the use of land; this law only complicates even further the current situation of this issue.

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