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OWNING A BED & BREAKFAST (B&B) IN ANDALUSIA: DREAM OR REALITY?

Bed & Breakfast B&B Andalusia
Owning a Bed & Breakfast (B&B) in Andalusia

Starting a new life with your own B&B in Spain

In recent years, during the course of our work, we have met many foreign customers interested in living in Andalusia Spain, preferably in coastal areas and having their own rural hotel, hostel or Bed & Breakfast (B&B). Many of these customers consider this option due to their attraction to Andalusian climate and culture, with the dream of changing their lives and enjoying life in an extremely charming country.

Taking over a business or starting up yourself?

The main option that customers interested in opening a B&B in Andalusia contemplate is to buy a business already in operation, with fewer people seeking to buy property to build the business from the ground up.

If you look on the Internet, there are quite a few ads for the sale of rural hotels and B&B´s. Many of these ads offer the method of transferring a business that is already operating, along with the rental or sale of the property where the activity takes place.

During the transfer of the business, its assets, such as customer portfolio, fixed assets, provisions, etc. are valued. This serves the purpose of establishing a transfer price for the business, which must be paid by the new owner interested in continuing the operations.

What is a reasonable ´traspaso´ price for buying an existing B&B?

The valuation of the business (traspaso) is usually based on its income during recent years and on net profit, as well as the value of its fixed assets, i.e., all remodelling, improvements and provisions acquired for said business. Obviously, licences and legal permits required for engaging in such an activity are a key part of the transfer value.

In the transfer method, the rental of the property is usually established, most often with a lease option, or the property may be sold directly to the new owner. It seems more reasonable to choose rental with a lease option for the property during the first years of the business as if, for any reason, the business is not what was expected and the profits or workload are not worth the effort, we would lose the amount paid for the transfer but would not have to remain the owners of a property we acquired for a business we no longer wish to operate.

As you may infer, the operational cost of a B&B may be high enough to justify carrying out, prior to its purchase, a due diligence process about it for the purpose of determining whether the asking price (traspaso) is reasonable. I consider three lines of action very important in this regard:

VALUE OF THE BUSINESS.

You should hire an economist, expert, or tax consultant to study the accounting of the business during recent years, including all tax documentation, as well as the accounts submitted at the Commercial Register. With this report, an objective professional, knowledgeable on the matter, will take a snapshot of the financial situation of the business.

BUSINESS LICENCES.

In order to check whether the B&B you are seeking to purchase has all the necessary business licences, it is important for an architect to visit city hall and check whether the business is in order and complies with all the legal requirements for its operation. The architect will visit the property to verify that the infrastructure and installations are those legally required for this business and will issue a report of his or her findings.

PURCHASE OF THE BUSINESS.

Once you have decided to acquire the business, when preparing all the documentation for the transfer and rental/purchase of the property, it is important for an attorney to intervene so as to guarantee all the obligations of the parties, establish the payment method and protect the buyer from potential problems during its execution. If the property where the business will operate is located in a rural area, as is the case for many of these hotels, the intervention of an attorney is even more important, as these areas are subject to a series of legal limitations that must be reviewed.

Professional advice for your investment will pay back

It is obvious that this complete due diligence process for the B&B makes buying the business more expensive as you may spend a significant amount of money on these professionals and you may end up not buying the business. However, you must consider that spending thousands and thousands of euros, often from your savings or a bank loan, on something, before verifying its value, can lead to a very difficult financial and personal situation.

It is also a good idea to get informed about tourism in that area and expectations for the future. There are statistical data about the occupancy rates for rural accommodation that may help you. For instance, the Institute of National Statistics (INE) periodically publishes detailed occupancy surveys for rural tourism and any other type of accommodation and all this information, in detail and broken down by regions, can be accessed from its website.

New business changes after recession in Andalusia

For instance, on the 1 September, www.escapadarural.com published that rural tourism in Andalusia reached an occupancy rate of 36% in July and August. At the provincial level, 49% of businesses in Malaga were fully booked.

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

 

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

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!

Inheritance Tax in Andalusia
Inheritance Tax in Andalusia

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)

FUTURE REFORM IN ANDALUSIA FOR THE OWNERS OF HOMES CONSTRUCTED ON NON-DEVELOPABLE LAND

Andalucian houses constructed non-develople land
Andalucian houses constructed on non-develople land

Three weeks ago the Junta de Andalucia (Andalusian Regional Government) announced a reform of the Urban Development Law for Andalusia (LOUA) which aims to provide further legal security for owners of homes that are built on non-developable land (rustic land).

With the current LOUA regulations, for those buildings constructed on rustic land in Andalusia and which are within a zoning plot, the prescription period of six years that the administration has to “attack” these constructions on rustic land does not apply. In other words, no time limit is established, therefore the government leaves open the possibility to begin administrative procedures against said plot and the constructions that are on it, when it deems convenient, even if it has been over six years since the home was built.

The above has the main effect that a building on rustic land, built over six years ago on a property that has not been segregated, cannot be penalised or “attacked” by the government, whereas if the construction is part of a segregation/plot division it could be penalised in spite of being built over six years ago, and demolition of the homes built on this plot could be ruled, as established in article 49 of the Regulations on Urban Development Discipline. Regarding this article, I point out that in spite of it and in my opinion, I do not think that it is feasible to carry out any demolition under this precept due to several legal reasons.

The problem with current regulations since the LOUA came into effect in 2003 is that no serious monitoring or inspection policy has been implemented by the Junta de Andalucia and the Town Halls on rustic land. This has led to the proliferation of thousands of new homes and plot divisions throughout Andalusia, especially during the times of the real estate boom, and more so on the Costa del Sol, where this speculation reached unsustainable proportions.

In spite of the fact that it was feasible to control these constructions, it was not done and this led to the buildings entering the legal level, with many owners purchasing in good faith with all the appearances of legality. This has shown that current regulations in Andalusia on rustic land, and specifically on plot zoning, are pointless, because no one has made sure that they were enforced, making them inefficient at best.

Now the intention is to modify the LOUA and provide the possibility for isolated constructions located on plots of rustic land to regularise their situation through the figure of assimilating it as unregulated, that was introduced by the Decree of 2012. This will be so provided that the period of 6 years has elapsed without the government beginning any penalisation procedures against these buildings, therefore to these purposes the legal situation is considered as equal to those homes that are not located on a zoning plot.

It will take a period of 5 or 6 months for this reform to be approved, and it will be approved by parliamentary proceedings, therefore changes will be included during its approval.

I understand that this initiative by the Junta de Andalucia is a first step towards solving this problem. We all would have preferred for this not to have happened and that rustic land would never have been part of town planning speculation, but this problem started many years ago and the issue is clear; what to do with thousands of homes that cannot be demolished now?

Most of these homes are inhabited and they are still being bought and sold between private persons, therefore it is necessary to regularise them so that third parties acting in good faith have legal security as owners of these properties. Likewise, it is reasonable that those that were built without a building permit, which is most of them, should assume a cost for the regularization procedures and they should contribute the same as any citizen who wishes to build a house, and this bearing in mind that the acknowledgement by AFO is not the cure-all either. From an ecological and environmental standpoint, the legalisation procedure must guarantee that these homes do not cause any further damage to the area where they are located, and that their waste water is completely purified by autonomous installations, because as long as they are fully illegal, and cannot be “attacked” by the government, each owner will do what they see fit and damage to the environment will be higher.

In short, given the current situation and bearing in mind the problem that has been created due to the inactivity and lack of control by the public administrations, from a legal, financial and environmental standpoint, we must establish a regularization procedure for these homes. If not, if we continue with the current situation, it would be a great mistake and it would only continue to aggravate the problem as the years go by.

 

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

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

THINKING ABOUT SELLING YOUR PROPERTY IN SPAIN? DO IT IN 2014 TO AVOID PAYING MORE TAXES

Capital Gain Tax when selling Spanish property
Capital Gain Tax when selling Spanish property

Next 1st of January 2015, a new tax reform will come into effect. This reform was approved in August by the Spanish Government and, among other measures, it will affect taxation of capital gains obtained as a result of a property sale in Spain:

1) Tax reduction from 21 % to 20 % for capital gains earned by a sale if the seller is non-tax resident in Spain.

2) Tax reduction from 21 %-27 % to 20 %-24 % for capital gains earned by a sale if the seller is a tax resident in Spain.

In these terms, it may seem that, from the 1st of January 2015, taxes for capital gains earned by a property sale will be reduced. However, you should be careful with this reform, since from the 1st of January 2015 sellers of a property may not be enable to apply reducing and updating coefficients of the purchase value when the property was bought.

You may wonder what it means; and it means that heretofore if you bought a property and then you sold it, when calculating the capital gain from the sale, you could update the price paid when you bought the property a few years ago, however, from 2015, this purchase value will not be allowed to be updated. For example:

You bought a property by public deed for 150,000 Euros in 2003 and now it is on sale for 200,000 Euros.

1 ) IF YOU ARE NON-TAX RESIDENT IN SPAIN

–          if you sell your property in 2014: the updated purchase value would be 177,540.00 Euros and 4,716.60 Euros should be paid for taxes as a result of a capital gain of 22,460.00 Euros taxed at 21 % rate.

–          If you sell your property in 2015: the purchase value would be 150,000 Euros (no update is allowed) and 10,000 Euros should be paid for taxes as a result of the capital gain of 50,000 Euros taxed at 20 % rate.

2) IF YOU ARE TAX RESIDENT IN SPAIN

–          If you sell your property in 2014: the updated purchase value would be 177,540.00 Euros and 5,375.00 Euros should be paid for taxes as a result of the capital gain of 22,460.00 Euros obtained.

–          If you sell your property in 2015: the purchase value would be 150.000 Euros (no update is allowed) and 10,880.95 Euros should be paid for taxes as a result of the capital gain of 50,000 Euros.

As shown by these examples, tax savings when selling your property in 2014 or from the 1st of January 2015 may be worthy of consideration.

Other examples of updated values with the same prices above: if you bought the property in 1995, the updated value in 2014 would be 210,750.00 Euros; then, you should not pay taxes for capital gain if it is sold in 2014 and you should pay 10,000 Euros for taxes if it is sold in 2015.

If you bought the property in 2013, the updated value in 2014 would be 154,454.00 Euros, then if you sell it in 2015, you would pay less taxes than selling it in 2014; however, this a small saving between 400-700 Euros according to whether the seller is a non-tax resident or tax resident in Spain.

In these examples, neither deductible expenditures (taxes, notary, registry and estate agent fees, etc.) have been taken into account, nor other possible deductions to which fiscal residents may be entitled.

CONCLUSION: if you are thinking about selling your property in Spain, you will probably be interested in doing it before the end of 2014, you will avoid paying more taxes for the profit obtained on the sale.

If you have recently bought a property or the sale price is very similar to the purchase price, you may be interested in selling it from 2015, as there is not a great difference regarding taxation. If you are selling at a loss, that is, you obtain no profit, it makes no difference whether selling it this year or the following.

Nevertheless, the most coherent decision is to make your own tax estimation for your particular case in order to know whether it is more convenient to sell this year 2014 or not, so you will have a clear idea of your possible tax savings.

 

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

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

 

 

 

 

 

 

CADASTRAL REGISTER: TO BE REGISTERED, THE QUESTION IS CLEAR

Cadastre registration Spanish properties
Cadastre registration Spanish properties

The cadastre is a compulsory administrative register which depends on the Ministry of Finance. It keeps the description of rural and urban properties as well as properties with special features. This register has nothing to do with the Land Register, where registrations are voluntary and legally prevails over the Cadastre.

Cadastral registration by property owners is compulsory, as provided by Article 11 of Spanish cadastral law Ley del Catastro Inmobiliario; that is, title holders to the properties shall declare before the Cadastre Office any variation or modification as for example: conveyance, new constructions, land partitions and additions and any other necessary information so that cadastral descriptions of properties are in accordance with the facts.

Consequently, owners’ obligation to adapting the physical reality of the property to the cadastral facts is clear.

Articles 70 and 71 of the Spanish law Ley del Catastro set out the rules on infringements and penalties, so that “failing to submit declarations, submit them after deadlines or submitting false, incomplete or incorrect declarations” may be considered an infringement punishable by a fine from 60 to 6,000 Euros. To date, we have no evidence that the Cadastral Register is penalizing owners for failing to submit the necessary declarations, although these are not submitted.

The problem that we have noted is that the Cadastral Government Office in Malaga refuses to accept modifications on properties built on non-developable lands and requested by owners or their legal representatives, despite it is deemed that the documents legally required has been submitted for these proceedings. We reiterate that the Cadastre is a compulsory register and as a result it is important to be taken into account.

As far as we understand, the Cadastre systematically refuses some variations and modification on non-developable lands; consequently, it is requested additional documentation which we consider to be unnecessary and should not be demanded according to Spanish law. In view of this situation, which we understand that is not applicable to law, our law firm has filed complaint actions against different administrative proceedings, which are pending to be resolved by the Economic Administrative Court of Malaga.

If owners are obliged to declare their property modifications or variations before the Cadastral Register Office and their legal documents are provided, what is their responsibility if the Cadastre denies their request or asks for further documentation that owners do not have?

From our point of view, the fact of requesting the cadastral variation or modification providing the necessary documentation should exempt owners from any infringement imposed by the Cadastral Register, since they did their best to adapt the physical reality of their property to the cadastral facts.

On the other hand, the Minister of Finance approved last year the cadastral regularization procedure 2013-2016, by which the Real Estate Cadastre intents to incorporate ex-officio urban and rural properties with constructions, as well as any variations of their features, so that these properties are recorded in the Cadastral Register and the Spanish property tax IBI may be collected.

In Malaga, just a few municipalities has acceded to this procedure, by which owners are requested the payment of a 60 Euros fee to carry out this regularization, although it is probable that other municipalities also accede to this procedure in the following years.

To sum up, and despite the existing difficulties to register in the Cadastre some modifications or variations, we advise owners to check if their property is correctly registered in the Cadastre, so that they may request before this register office the necessary modifications and variations to adapt the physical reality of their property to the cadastral facts. As a result of this action, they will avert potential problems.

 

Author: Gustavo Calero Monereo, C&D Solicitors (Torrox-Málaga)

SPANISH GOLDEN VISA FOR NON-EUROPEAN RESIDENTS

Golden Visa Spain
Golden Visa Spain

During our stay at the Second Home fair in Utrecht this March we received several questions about the new Spanish ´Golden Visa´ (or ´Investor Visa´) from professionals with wealthy clients in China and Africa. With the rapidly growing middle and upper-class in these new economies, these questions are rather interesting for us as a law firm specialized in property law / conveyance.

With this new investor visa law the Spanish government tries to attract foreign investors in order to stimulate the national economy, to give an impulse to the real estate market and to create more jobs. Politicians up to now are rather enthusiastic, as up to the 14th of April already 661 Golden Visa were granted to investors from China, Singapore, Japan, the United States, South America, the Middle East and Russia. With this article we´d like to inform you about the details of this Spanish law that became active on the 27th of September 2013.

Non-European residents can apply for the Golden Visa under several conditions. The ‘cheapest way’ for them is to buy a Spanish property with a purchase price of over € 500.000. But there are more options for the lucky few that can financially afford to immigrate to Spain. Investing in Spanish companies with shares of € 1.000.000, or having a Spanish bank deposit in Spanish financial entities of the same amount of money, will also do.

There is another option for obtaining a Golden Visa, which is buying Spanish bonds / public debt titles with a worth of € 2.000.000 or more (minimal duration 5 years). In addition, it´s also possible to obtain the Golden Visa by starting a business activity in Spain with a significant worth to the national economy, such as job creation, socioeconomic improvement or scientific/technology innovation. Of course, this officially needs to be approved by the Spanish administration (Economical and Commercial Office). The last option concerns high qualified professionals or transactions within the same company (issued by the Big Companies and Strategic Group Unit).  The condition, of course, is that these professionals can´t be found on the Spanish employee market.

The rights of the residence permit apply to the permit holder and his spouse, children up to 18 years and also -due to health reasons- dependent parents or children over 18 years.

The Golden Via is granted for one year (a normal tourist’s visa only lasts for 90 days) and is renewable for two years, after which another two more years can follow (as long as the investment maintains). After these 5 years you would be entitled to apply for a long-term residency, but this permit will not be granted automatically. The requirement here for is that the applier has lived in Spain legally and effectively for five years, which means that within these 5 years he hasn´t lived abroad for more than 6 months consecutively and for not more than 10 months in total.

Of course, along with the permission comes a set of demands, of which the following are the most important. The person may not have stayed illegally in Spain before, can´t have a criminal record in Spain (o due to the Spanish legal system in the last 5 years) and he needs to have sufficient economic recourses for his (and his family´s) stay in Spain. It´s not obligated to have a tax residency within Spain, though, which makes the Golden Visa even more attractive for foreign investors.

 

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

 

SUCCESSFUL DUTCH REAL ESTATE FAIR FOR C&D

Seminar ´Buying a house in Spain
Seminar ´Buying a house in Spain

As we already informed you in our previous news letter, C&D has been present at the Dutch Second Home fair in Utrecht last month. Being the only Spanish law firm on the fair, our daily seminars about the Spanish purchase process turned out to be the best attended during these three days, which proves that Spain is still a very attractive country for the Dutch to invest in. Also more than half of all exhibitors (mainly real estate agencies and developers) were focussed on Spain, which according to the organisation already has been the case for many years now.

In our stand we were able to speak to a lot of people with serious plans on buying a property in Spain, in most cases on the Costa del Sol or even particularly the Axarquia. The main issue in our conversations was to explain the important role of the lawyer during the purchase of a property in Spain. This situation is different from the Netherlands as in this country the lawyer´s work is completely done by the notary. We also got a lot of questions regarding wills and tax issues, for example on the subject of renting out a new bought property.

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

Stand of C&D Solicitors on Dutch Second Home Fair in Utrecht
Stand of C&D Solicitors on Dutch Second Home Fair in Utrecht

Our daily seminar we held in both Dutch and English and we explained the different phases of the buying process with the various legal documents there are to sign (reservation contract, private purchase contract and the title deeds). Besides of this we gave some background information on the official investigation of the lawyer, by which the future owner can make sure he´ll buy his property with all possible guarantees and free of any risks. (The extended Dutch text of our seminar you can find on the home).

Looking back we can say that this fair exceeded our expectations and has been really successful for us. Not only in the perspective of attracting new clients but also as a learning experience of presenting our company on the Dutch market. Despite of the good weather this Second Home edition in Utrecht attracted around 5.000 visitors.

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

C&D AT SECOND HOME FAIR IN UTRECHT

erfrecht spanje
Dutch Second Home Fair

C&D Solicitors likes to inform you about the fact that we will be present at the Second Home Fair in Utrecht (the Netherlands) from the 28th until the 30th of March.

As the only Spanish law firm on this fair we´ll provide Dutch visitors with legal and fiscal information concerning the Spanish purchase process. We also have been invited to -together with our Dutch commercial assistant- give a daily seminar, which will start at 14:45 hrs. (seminar 1). After this seminar exists the possibility to ask us specific questions in the fair´s wine bar that will have a special theme on Spanish wines.

If you happen to be able to visit the fair, you can download free tickets through this link and we look forward to welcome you in our stand!

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

RECENT CONTROVERSIAL DEMOLITION OF TWO PROPERTIES

Controvercial demolition properties Andalucia
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)

 

 

 

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