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ENGLISH SPEAKING LAWYERS IN MALAGA (ANDALUCIA / COSTA DEL SOL) SPECIALIZED IN PROPERTY LAW & CONVEYANCING

Archive for Property law

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)

PLUSVALIA TAX PAYMENT WHEN THE ACTUAL VALUE OF CONVEYED PROPERTIES HAS DECREASED

Spanish Plusvalia tax decreased value property

Spanish Plusvalia tax with decreased value property

Currently, as a result of the existing conditions of real estate market, the sale price of a real estate property may be below the purchase price or slightly above it.

As regards of these situations and in connection to taxes to be paid when selling a property in Spain, it is necessary to clarify that the increase in urban land values is the first element of the taxable event of the local tax on the increase in urban land values (Spanish acronym I.I.V.T.N.U.), commonly called PLUSVALÍA. Thus, in the event of no increase, no tax may be applied, despite the content of the objective rules for the calculation of the tax provided by Article 107 of Spanish law regulating local taxation (L.H.L.), since no tax liability may arise when an essential element of the taxable event is missing.

The legal liquidation system does not preclude that the taxpayer proves in the specific case that the application of the calculation methods by the Tax Administration leads to unrealistic results. On the other hand, regarding the formula of Article 107 L.H.L., the Supreme Court ruling dated 22nd of October 1994 was conclusive when maintaining that this article was subsidiary, defending and safeguarding taxpayers. According to this Judgment “legal regulations only provide a rebuttable presumption, which is subject to be distorted in each particular case by appropriate and sufficient evidence in the above terms for the taxpayers and in conformance with the provisions of Article 385 of the Spanish Civil Procedural Law. This reasoning, in regards of the actual increase in value(plusvalía) from property sales leading to non-taxation, was also highlighted by the Supreme Court in the Judgment dated 29th of April 1996 and the Judgment dated 22nd of September 2001.

However, a recent Judgment from the High Court of Justice of Catalonia dated 18th of July 2013 also pronounces undoubtedly the fact that town councils cannot charge the plusvalía tax in the event that it does not exist, since the Judge states that when an essential element of the taxable event is missing –as for example obtaining a profit from a property sale—no tax liability to pay plusvalía tax may arise.

Recently, it is being confirmed an increase of court rulings admitting taxpayers’ appeals against tax liability in the event of loss of assets. In the words of Pablo Chico de la Camara, Professor of Financial and Taxation Law: “the caselaw of the Constitutional Court confirms the impossibility to tax a nonexistent taxable wealth by the local authorities”. This situation may occur when the transferor may certify the loss of assets on the occasion of a land conveyance. It is clear for the Supreme Court that the nonexistence of increase in land values precludes the application of the Plusvalía tax.

To sum up, the objective absence of increase of land value may lead to non-taxation, as a result of the nonexistence of the taxable event, since the legal contradiction cannot and should not be resolved in favour of the “calculation method” and to the detriment of the economic reality. Consequently, it would mean the ignorance of the principles of equity, justice and economic capacity.

These same conclusions shall be applied when an increase of the value occurs and the amount of this increase is proved to be lower than the result of applying this calculation method, being the same principles infringed.

These conclusions, which are already supported by several doctrinal criteria and caselaw, shall be considered as unquestionable at present, in view of the aforementioned economic reality.

In SHORT: when it is certified and proved in a specific case that there has not been an economic and actual capital gain from a property sale, the payment of the Plusvalia tax (I.I.V.T.N.U.) shall NOT be required by town councils.

But the reality is that Town Councils are still requiring the payment of this tax despite properties are sold at a loss, so that the judicial procedure is the only chance in this case for taxpayers to “tackle” the payment of this tax. However, when the resulting plusvalía tax payment is relatively low, it is not worth taking legal actions, due to legal costs.

For those who decide to claim, we understand that there are sufficient legal and solid arguments to obtain a favourable judgment.

 

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

SPANISH PUBLIC TAX ADMINISTRATION REVIEWS PROPERTY TRANSFER VALUES

Spanish Tax Administration reviews property value

Spanish Tax Administration reviews property value

In the last few years, property market prices have dropped in Spain and the cases in which the National or Regional Tax Administration has reviewed declared values for property transfers have increased, whether for conveyance, inheritance or gifts; that is, you may sell your property for a certain and determined price, but the Regional or National Tax Administration may review that value after the sale and for tax purposes; then, it may consider that the real value of this sold property is higher than the one declared on the deed of sale, and therefore, the buyer shall pay the Transfer tax (ITP) on property transfer on the basis of the new value, which has been reviewed by the Regional Tax Administration, although the buyer had bought it for a lower price. In addition, the seller may have to declare capital gains higher than those actually obtained as a result of the review carried out by the National Tax Administration.

The abovementioned situation is legal and possible pursuant to Article 57 of Spanish general taxation law, in which it is provided that the Public Administration may check the property values by using different means.

Regarding urban properties, the Regional Tax Administraions and the Andalusian Regional Government are often supported on the grounds of an Order that is yearly approved to calculate the taxable minimum value of urban properties in this regard. As a result of this, it is possible to calculate this taxable minimum value from applying a rate provided by this Order to the details contained in the real estate tax IBI receipt (council tax). Then, you can know in advance whether the Tax Administration may claim more taxes or not when transferring your property.

Regarding rural real estate or properties with special characteristics, the matter becomes increasingly complicated, since Public Administrations may not always proceed by applying the aforementioned values and sometimes they are supported on the grounds of an expert report drawn up by technical personnel of the Tax Administration, which justifies the proven value of this rural or special property; for example, currently it is very common that the reviewed value for this type of properties is determined according to the estimated average values of construction, which are yearly publish by the Professional Association of Architects of Malaga. These values are indexed in a table containing the construction value per built square metre pursuant to the construction type and its features.

In the last year, as a result of this significant increase of value reviews by the Andalusian Tax Administration and, to a lesser degree, the National Government, our law firm always carries out an estimation of the taxable minimum value for tax purposes when advising our clients about property conveyance issues. Thus, they are warned of the possibility that their property value may be reviewed and the possible extra cost which may arise from this review. This is aimed at preparing our clients for this unpleasant surprise.

In general terms, the Andalusian Regional Tax Administration currently collects every single Euro from value reviews of property conveyances, so that if the taxable minimum value is higher than the conveyance actual value, it is quite normal that the Regional Government notifies you after a few months claiming the payment of the ITP tax on property transfer, stamp duty tax or gift and inheritance tax for the excess value reviewed.

The National Tax Administration, which is the competent body for capital gains collection of property sales, is not as determined as the Regional Tax Administration is when reviewing values. However, in those cases that the seller is not a tax resident and no capital gains has been obtained for the sale, when the 3 % withheld by the buyer is requested to be returned, the National Tax Administration does not hesitate to review the taxable minimum value of that property, so that the 3 % withheld is not returned in full to the seller. Furthermore, as a result of the reviewed taxable value, the seller may also have to pay the Tax Administration for capital gains, although no real gains had been obtained from the sale.

Obviously, there are grounds to challenge the property revaluations before the Public Tax Administration; however, in order to know if it is worthy to challenge it, it is important to examine and analyze each particular case in detail and determine if the reviewed value is properly justified before going ahead with the recourse.

Finally, it is also worth mentioning the possibility to file with the Tax Administration, prior to the property transfer, a binding report to obtain from the Tax Office the taxable value of this property. In some cases, it may be advisable to request this report, which commits the Tax Administration to respect it, although the value on this report will also oblige us for tax purposes.

 

 

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

 

THE “SUMMER HOLIDAY RENTALS” ISSUE

Spain, summer, holiday, rentals, tax, law

New rules Spanish holiday rentals tax

On the 5th of June 2013, Spanish Law 4/2013 dated 4th of June was published in the Spanish Official Gazette B.O.E. This recent Law states the procedures to relax and promote the rental housing market. By means of this Law, the Spanish Government tries to regulate summer holiday rentals, which are not controlled by the Spanish Tax Administration Office.

These regulations aim at two basic objectives: on the one hand, to change people’s habit in respect of meeting their housing needs—up to now, people were inclined to purchase their usual home and obtain a mortgage. Now, it is a question to be more inclined to live in a rental home. And on the other hand, these regulations aim at combating underground economy of summer holiday rentals.

Nevertheless, these regulations leave summer holiday rentals without legal protection, because they provide that “rentals intended for non-residential use” are not regulated by the Urban Rental Law (Spanish acronym LAU), but by the regulations of Regional Governments according to their own criteria.

Particularly, Andalusian legislation on this respect is very strict and tough if compared with other Spanish regions. For example, owners with less than three rental properties in the same building or residential complex are not included within Andalusian regulations. As a result of that conditioning, a high percentage of owners are prevented from renting their second homes. This is aimed at combating “encroachment” upon the tourist professional field and unfair competition for traditional tour operators.

Alternatively, the new Law imposes strict and controlling measures for this type of summer rentals—the Spanish Tax Administration Office obliges electric companies to submit annually a report including household consumption. This is intended to gather the necessary data to detect those housing rentals that are not declared.

The new Law literally provides the following: “… it is not included within the scope of this law: … the temporary assignment for use of the entire furnished and equipped home to be immediately occupied, marketed and promoted through tourist offer channels for economic purposes, when this property is subject to a specific regime as a result of its sectorial regulations.    

Upon consideration of this statement, these regulations may be discussed and interpreted in respect of renting a home for holidays from a private landlord. We consider that this rental is possible, but it is necessary to tell the difference between two types of scenarios: on the one hand, the rental per days with a tourist purpose; and on the other hand, the seasonal rental.

In the former case, it implies a regular commercial use of the rental by a professional, offering other additional services apart from the accommodation. In fact, this kind of tourist apartment rentals was also excluded from Spanish Urban Rental Law (LAU) up to now. They were regulated by the legislation of the competent public bodies.

In the later scenario, we are not dealing with a tourist business activity, but a temporary assignment without additional obligation. Accordingly, this new Law does not seem to affect people under these conditions. In case it does, it may certainly imply a clear restriction of owners’ rights. They may be able to rent their homes per season, whether for a long term or a short term, including per days. In addition, these housing rentals are regulated under the protection of Spanish Urban Rental Law of 1994 (LAU).

 

 

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

 

 

OBTAINING THE LICENCE OF FIRST OCCUPATION

Importance Licence First Ocupation LFO

Importance Licence First Ocupation LFO

We have recently known, through our clients’ consultations, of the situation that most of the owners of La Axarquía area suffer, which comes from the lack of a License of First Occupation on their properties, particularly, regarding those problems with contract the supplies, such as the electricity supply for their first time or for its restoration, after being cut off by the electricity company (i.e. end of construction site temporary power).

The License of First Occupation is a certificate issued by the town hall that confirms that a newly-built property fully complies with all planning and building regulations, and is ready to be used as a dwelling. It also confirms the compliance with all Health, Safety, Planning and Construction laws, and that the property has been fully completed, with no outstanding works. Each newly built dwelling will have an individual License of First Occupation. License of First Occupation only applies to newly-built properties as the L.F.O. is the original authorization to use them as a dwelling.

Granting a License of First Occupation certifies that the developer has built the dwelling fully complying with the original Town Hall’s Building License, as well as complying with all Planning laws.

The first occupation licence wasn’t required before 1978, this means all the properties with more than 37 years won’t have it.

The License of First Occupation is required to have access to the official supplies (water, electricity, gas,…).

The Spanish law requires the granting of the License of First Occupation to set up any utility contract for the property. Nevertheless, the most of the properties  without the first occupation licence have electricity supply and water supply. Many of these properties haven’t a first occupation licence due to the works in the urbanization aren’t finished yet but the owners are living there. We can say that in many cases the real situation of these properties haven’t anything to do with the content of the law.

It is always advisable to complete the purchase with a valid License of First Occupation (LFO) in place, even if it is not illegal to complete at the Notary office without a License of First Occupation. In other words, the property purchase completion before a Spanish Notary public without a LFO is legal in Spain, and the property can be lodged under your name at the Land Registry records. However, it is not legal to “live” in a property without the License of First Occupation. This is the reason because not having it in the new homes will prevent you from having access to water and electricity supplies for the property in order to get them connected.

Properties without LFO can be bought, sold and registered at the Land Registry. So it is not illegal to sell a property without LFO. If you own a newly-built property that was not issued with the License of First Occupation you might have trouble selling it as the potential buyers may seek for a steep discount because of this matter.

The information concerning the LFO given in this post may have to be understood as a benchmark to all those new built properties according to a building license previously obtained and complying with all Planning laws. If this building license was not given, if it was not according with Planning laws, or, in the event that the works carried out did not adhere to the building plan, we will be in another different situation, and the way to get access to these supplies would be different as well. But this is an issue which will be analyzed in a further post, taking into consideration the new measures introduced by the called new “Decree of legalization”, approved by the Andalusian Parliament last 10th of January, in this sense, which is not in force yet.

 

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

 

NEW URBAN SCENE IN LA AXARQUIA

Complex urban planning in Andalucia: PGOU, LOUA & POT

Complex urban planning in Andalucia: PGOU, LOUA & POT

Due to the urban complexity that most of the municipalities of La Axarquía are immersed because of the Spanish local elections held in May, the changes in the local governments could mean changes in the way of managing each municipality and in the solutions that such local governments could propose in view of the complex urban development in this area.

We have to take into account that, nowadays, most of the municipalities are working in the production and approval of their new General Plans for Urban Zoning (PGOU) to adapt them to the Urban Zoning Code of La Axarquía (LOUA) and to the Plan for Town Planning in La Axarquía (POT), and so as to offer a final solution to all those housing developments built upon non-urban areas as well as to the thousands of isolated buildings within each municipality.

Apart from the several actions carried out by the town halls, it is worth mentioning the announcement made by the Junta de Andalucía about the approval of a Decree to legalize the large number of houses in La Axarquía. Besides, the Junta de Andalucía has made an inventory about houses built upon non-urban areas and which is being sent to each of the town halls so that they could know the situation of all those mentioned houses.

The PGOU is the main instrument in the planning of each municipality and it provides the characteristics and nature of the area that comprises such municipal district. So, it is very important that those owners with properties built upon non-urban areas, whether it is an isolated house or a house within a development, appear before the municipal offices as soon as possible, preferably with a specialized lawyer, in order to study the situation of the houses and the possibilities of legalizing them or declaring them houses out of regulation.

It is worth mentioning all those housing developments partly or totally built upon non-urban areas, but with different situations in their basic infrastructures (lighting, roads, sewer systems, water, etc). In those cases, it is necessary that each Community of Owners or, if it is not established, one of their representatives, enquires in the town hall about the situation of the housing development and its possible inclusion in the new PGOU.

If we take into account that it seems that possible mid-term solutions and measures may arrive, it is important that owners ask and take part in such “regularization” process that will be born within each town hall, so as their property or housing development could be part of this new plan, or in order to find a solution for each conflict or situation.

Obviously, regularizing each house will have a charge for the owners, depending on their situation, but we think it is a “minor wrong” if this situation of legal insecurity upon many rustic properties comes to an end.

Nowadays, our legal firm, which represents some clients that have houses or are part of a housing development built upon non-urban areas, has already started to deal with several town halls about the situation and regularization proposals of their properties. It is important that the owners are the ones who look for solutions with the town halls.

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

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

 

CURB ON “FLOOR CLAUSES” IN MORTGAGE LOANS

Nullity floor clauses mortgages Spain

Nullity floor clauses mortgages Spain

On the 30 September 2010, Court no. 2 of Seville gave judgment declaring the "floor clause” introduced by the respondent entities Spanish bank BBVA, Saving Banks Cajamar and Caja de Ahorros de Galicia in the mortgage loan deeds formalised with them abusive and therefore null and void, for considering that the minimum threshold interest rates set by them are abusive and detrimental for the consumer.

Although the judgment has been appealed by the three financial entities mentioned, the Court has ordered the provisional application of the resolution. Therefore, as from 27 January 2011, they will not be able to include the said clause in their mortgage loans, and from 11 April, they will not be allowed to charge the clients with the difference between the minimum interest rate as per Euribor plus the interest rate agreed with the client, and the minimum threshold interest rate or  “floor rate” set by the said bank entities in their mortgage loans.

The so called “floor clause” means that in times of low mortgage interest rates, such as the ones we have lived through and are living through at present, the client is committed to pay a set minimum interest rate, which means that even if interests go down, their mortgages cannot benefit from lower interest rates

According to ADICAE (Association of Banks, Saving Banks and Insurance Companies of Spain), in Spain, there are currently 3.8 million clients who have this “floor clause” included in their mortgage loans and have not been able to take advantage of lower mortgage interest rates over the last years. The said association considers that in 2010, Banks and Saving Banks obtained a revenue of 7,000 million euros thanks to these clauses. These results show the importance and relevance of this judgment.

Therefore, as from 11 April, the entities BBVA, Saving Banks Cajamar and Caja de Ahorros de Galicia are obliged to recalculate repayments in all loan agreements taking into account a variable interest rate according to the Euribor benchmark rate, plus the interest rate negotiated with the client, and not according to the minimum threshold interest rate or “floor rate” established in their mortgage loans. This means that, since the interest rates applicable will be lower, the monthly repayments of those clients who have a mortgage loan with any of these entities will decrease.

Commercial Court no. 11 of Madrid has currently admitted the biggest joint action filed in Spain against 45 bank entities for the application of these “floor clauses”. It is likely, that before the end of the year, we know if such a number of saving banks and banks have to follow the path of the other three mentioned, which will be the most logical and coherent outcome.

However, whichever the result, it is likely that this issue of "floor clauses” reaches the High Court, who will then be in charge of taking the definitive decision about these provisions being abusive or not.

In the meanwhile, I would advise you to check your mortgage loan deeds , so that you may see if you have benefited from this judgement and if from 11 March, your bank is applying the resolution.

We will keep you informed on new updates.

 

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

 

 

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