News Articles

News

Our news section provides regular updates highlighting recent cases handled by RDT Abogados, as well as notable events in Spain. 

Please visit regularly to benefit from updates in Spanish law and newsworthy court cases.

  • Family Law - Custody

    02 June 2014

    Notes on Spanish Family Law in relation with spouses of different nationality

    II. Custody and parental rights

    One of the most serious problems that spouses must face after a divorce is that of the custody of the children of the matrimony. Added to the usually sad circumstances surrounding a divorce (or separation, in the case of non married couples), when the couple has children, the rights of these children and whom to assign the liability of support and maintenance, become issues that in many occasions must be eventually ruled by a Judge.

    The fact that there are an increasing number of matrimonies in which the spouses are of different nationality, only adds another angle and complication to the matter of the children’s maintenance, support, visiting rights and general wellbeing.

    The European Union (EU) was sensible to the all previous and aimed to set clear rules within its members. In view of the numerous issues and conflicts of jurisdictions that the Judges were facing, the UE brought together in a single legal instrument the rules and provisions of divorce, separation and parental responsibility. This instrument is the Council Regulation 2201/2003: “Concerning jurisdiction and the recognition and enforcement of judgements in matrimonial matters and the matters of parental responsibility”.

    This is an essential rule on the matter, enforceable in all signature countries of the European Union (except from Denmark) from March 2005.

    This instrument, however, does not rule on the following matters: child´s names, maintenance, establishing and challenging paternity, emancipation, inheritance and trusts. All these topics are ruled by separate and specific regulations.

    The general rule and main spirit of the regulation is the priority to the child’s right to maintain normal relations with both parents. Also, that the child will have the right to make his or her views known on all aspects of parental responsibility, in view of his or her age and degree of maturity.

    The regulation applies to civil proceedings relating to divorce, separation and marriage annulment, as well as to all aspects of parental responsibility. Parental responsibility refers to the full set of rights and obligations in relation to a child’s person or property. In order to ensure equality for all children, the regulation covers all judgments on parental responsibility, including measures to protect the child, independently of any matrimonial proceedings.

    In general, matters relating to parental responsibility come under the jurisdiction of the courts of the EU country of habitual residence of the child. In certain cases of relocation, that is of a lawful change of residence of a child, where the courts of the EU country of the former residence of the child have already issued a judgment on parental responsibility (particularly as concerns rights of access), this matter continues to come under the jurisdiction of the courts of that country.

    Moreover, the spouses may accept the jurisdiction of the divorce court to also decide on matters of parental responsibility. In certain cases, the parents may also agree to bring the case before the courts of another EU country with which the child has a close connection, such as, for instance, the nationality of the child.

    Where a child's habitual residence cannot be completely established, the EU country in which the child is present will assume jurisdiction by default. Where it is not possible to define jurisdiction on the basis of the specific provisions laid down by the regulation, each EU country may apply its national legislation.

    An important aspect of the regulation is that it provides automatic recognition of all judgments without any intermediary procedure being required. A judgment on the exercise of parental responsibility can be declared to be enforceable in another EU country on the application of an interested party (and, in the case of the UK, after it has been registered for enforcement, i.e. abolition of exequatur, or process for validation of foreign judgements). The decision on the application for a declaration of enforceability may be appealed against. The enforcement procedure is governed by the national law of the EU country of enforcement.

    A distinction has to be made between a judgment acknowledging rights of access and the practical arrangements for exercising such rights. The judge in the EU country of enforcement can determine the practical arrangements for exercising rights of access if the necessary procedures have not been specified in the judgments by the courts of the other EU country in which rights of access were granted. In determining these practical arrangements, the judge must at all times comply with the basic elements of the judgment conferring the right.


    Each EU country designates one or more central authorities to exercise several functions, in particular to:

    • promote exchanges of information on national legislation and procedures;
    • facilitate communication between courts;
    • provide assistance to holders of parental responsibility seeking to recognize and enforce decisions;
    • seek to resolve disagreements between holders of parental responsibility through alternative means such as mediation.

    As a general rule, the regulation replaces the existing conventions between two or more EU countries that concern the same matters. It will prevail over certain multilateral conventions on relations between EU countries that concern matters governed by the regulation.

    Child abduction

    In order to combat child abduction (unlawful removal or retention of the child) in the EU, this regulation also sets rules on child abduction.

    By general rule, the courts of the EU country in which the child was habitually resident immediately before the abduction continue to have jurisdiction until the child is habitually (and legally) resident in another EU country, subject to the assent of all persons holding rights of custody and a minimum period of one year of residence.

    The court in question, that one which will understand of the claim of abduction, must issue its judgment within six weeks of the case being submitted to it. The child is heard during the proceedings, unless this appears inappropriate due to his or her age and degree of maturity.

    The courts of the EU country to which the child has been abducted can only refuse return of the child if there is a serious risk that return would expose the child to physical or psychological harm. However, the judge must order the child’s return if it is established that adequate arrangements have been made to ensure the protection of the child after his or her return.

    If a court rules that a child is not to be returned, it must transfer the case file to the competent court of the EU country in which the child was habitually resident prior to removal. This court takes the final decision as to whether or not the child is to be returned.

    The judge must give the child and the parties concerned the opportunity of being heard and must also take into account the reasons and the evidence based on which the first judge ruled that the child was not to be returned. If the judge in the EU country of origin reaches a different decision, i.e. that the child should be returned, this judgment is automatically recognized and enforceable in the other EU country without the need for a declaration of enforceability. The judgment cannot be challenged.

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  • Family Law - Matrimony

    12 May 2014

    Notes on Spanish Family Law in relation with spouses of different nationality

    1. Matrimony.

    Matrimony is an agreement made between two parties, formalised with the witnessing of a civil or religious authority, made in order to set a life in common.

    The union generates important consequences, not only strictly personal between the future spouses, but also of financial, legal and of social nature. It also forms and starts a family and, usually, generates descendants.

    Since it is increasingly common that couples may be of different nationality, one of the angles that provokes many issues is to ascertain which Law applies in case of a possible discrepancy and litigation, during and after the matrimony.

    In other words, it is then of essence to determine the Law of which country applies to the matrimony and, equally important, its eventual dissolution.

    The general rule in most of the European countries is that the lex loci from the Latin language locus, place i.e. the Law of the country, in which the matrimony takes place rules the matrimony, if with some exceptions.

    Depending of the nationality of the spouses-to-be getting married in Spain, the possibilities are:

    • One spouse is Spanish and one foreigner; matrimony celebrated in Spain. The Law will be Spanish.
    • Neither the bride nor the groom is Spanish but they´re get married in Spain. They can get married either under Spanish Law (but only if at least one of the intervening parties has been living in Spain for a minimum of one year), or the law of their country.
    • Regardless of the nationality of the bride and the groom, if the matrimony takes place in Spain but in the premises of a Consulate or Embassy, it is then considered as celebrated abroad, under the Law of the mentioned offices nationality.

    The marriage, once is duly completed, must be inscribed in the Civil Registry, and depending on the nationality of the non-Spanish person (UE, Europe yet non UE, other) some requisites may me requested: certificate of no impediment, etc.

    The religious matrimony and ceremonies have a long tradition. Most European countries have agreements with the different religions and creeds, so those who prefer so, can get married following only a religious ceremony. The marriage celebrated following these religions are perfectly valid and have the same effects that those performed following only a “civil” or non religious ceremony.

    It is important to note that several European countries have admitted, and to all effects, marriage between people of the same sex (Spain from July 2005; UK from March 2014). So in these countries´ legislation all the mentions to bride and groom must be taken and fully understood as referred indistinctively to the same sex intervening parties in the matrimony.

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  • Fraud & boiler rooms in Spain

    05 March 2014

    Several arrests were made recently in Spain (Barcelona, Madrid and Marbella) and in the UK (London) after a fraud committed, mainly against retired people and pensioners from the UK, was uncovered after months of investigation.

    The amounts defrauded are believed to be in the region of £15,000,000 and more than fifty arrested parties have been charged with fraud, money laundering and tax evasion. The massive fraud was committed using several boiler rooms based in Barcelona.

    Boiler rooms, are known in Spanish as "chiringuitos financieros".

    A chiringuito is a popular name given in Spain to small restaurants (usually of poor construction) built on beaches, right in the sand, that were very popular in the 70s in the Spanish coasts. A chiringuito financiero brings obviously its name of those restaurants and means a dubious corporation, very likely operating without the legal requirements.

    The Spanish financial authority keeps a permanent supervision on companies which advertise financial or credit services and has a list of chiringuitos, which is regularly kept up to date. This list is published regularly alerting to possible clients and investors that the names in the list are not authorise to act as financial entities, in many occasions not even as intermediaries or brokers in the financial markets.

    However, boiler rooms operate for a short period of time, in most occasions for only a few weeks, if not days, trying to get as much funds as possible and then disappearing laving nil or little trace. This makes it very difficult for the financial supervisor to spot the frauds and alert the potential financial losses to the cheated parties.

    The modus operandi of the swindlers is often the same – an appearance of a legitimate business and an offer of extraordinary and quick profit. On top of the previous, the client is urged to make a payment or deposit in a prompt way, or else the profit may be at risk.

    Overall, the Spanish legal system does provide a strong regulation which protects the financial and investment markets. 

    It is necessary always to seek independent advice. The fraudsters will often claim that the deal is so simple and straightforward, that no legal advice is required. This is far from the truth – anybody making a payment can, and must, get legal advice prior to actually pay. Also, this assistance must come from an independent professional, not from somebody recommended by the entity proposing the deal.

    Payments in cash are never to be agreed. By definition, a cash payment leaves no bank record and (together with the absence of invoice or receipt) becomes literally impossible to prove and / or reclaim later.

    There are clear signs of an entity not being 100 % legitimate: a company with a mere virtual address, mobile phones as only means of communication, free / non corporate email addresses, lack of formal and legal references.

    Absence of deposit contracts, receipts or invoices. Anyone making a payment or entering in a deal must have some terms and conditions in writing: what the deal is about, terms, costs, etc., plus, very importantly, a cooling-off period, i.e., a clear time to cancel after the initial payment.
    One of the tricks more frequently used are the requests for costs, taxes, and other concepts payable in advance.

    Payments to off shore or tax heavens based companies are banned in Spain. The Notary and any public office aware of such payment must report any transaction made overseas in which the recipient is an off shore corporation.

    An investor must always be suspicious of requests to make a payment or deposit straight away. An investment is something always to consider carefully, pondering pros and cons. No serious and sound entity will rush an investor into making a decision, much less if the amounts involved are high.
    If something sounds too good to be true, normally is not true. Exorbitant yields simply do not exist without risk.

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  • Property Co-Ownership

    21 February 2014

    Notes on property co-ownership in Spain; specifically on termination of the co-ownership or forced sale of a property

    One situation that arises frequently in relation with ownership of properties is that one of co-ownership, i.e. when two or more people own a property in Spain.

    The possible examples of the causes provoking the situation of co-ownership are typically: a couple (married or not) purchasing together, siblings inheriting from their parents or other ascendants, etc.

    This situation is clearly ruled in the Spanish Civil code, yet however it is a way of acquiring a property (residence, villa, plot of land) that provokes doubts, and possibly disputes, amongst those who are related to it, perhaps because those assisting in the acquisition commercially (real estate agents) or witnessing it (Notaries) do not explain its basic rules appropriately in origin, i.e. at the moment of becoming owners.

    The rules set in the Civil code on co-ownership are quite simple and very clear:
    The co-ownership is of the Roman sort (as opposed to the Germanic one). This means that each of the co-owners owns an ideal or abstract share of the property, not an exact and measurable half of the property.

    The property may have many owners and the ownership assigned in the title deeds may be in equal halves (obviously, when there´re only two parties) and in percentages or fractions (for instance, three owners with each one owning one third of the property).

    The percentages do not have to be equal: one owner can have 50 % of the property and two others 25 % each. Same with fractions, it is actually a very common clause in a will that a person bequeath his property in the following way on the event of his passing: “one half to my wife, and one quarter to each of my two children”.

    The shares or fraction can be transferred. This transmission, as with a property itself, must be made by means of public deeds, witnessed by a Notary and registered in the Land Registry. Also, it is a transaction that is taxable.

    The rules for the use of the communal usage are to be democratic (the majority rules) and proportional (each co –owner must support the cost of the property in direct relation with his share, and can enjoy the property in the same proportion).

    A point which specifically provokes issues (and ultimately litigation at Court) is the situation in which a co-owner wants out of the property , or actually when all of the co-owners want to terminate the co-ownership situation.

    To illustrate this example: a very common enquiry to solicitors is that of a person who bought a property with a previous partner. Now they have split and they don´t know their respective rights: who is entitled to keep the property?, how to sell it?, or what route to take when only one wants to keep the entire property but he or she is unsure on how to buy the other one out?, what is the price to pay?, what is the process do it?

    However, as with the set of rules governing the co-ownership itself, the total or partial termination of the co-ownership is rather simple:

    The general principle is that no one can be forced to remain in the co-ownership. Any co-owner, even if he owns a small or minority share of the property, can request to be out and his share cashed and paid to him.

    Anyone who wants out of the co-ownership must notify the other one(s) his intentions. This gives the others an option to buy him out. If there´s more than two co-owners these have the option to purchase in the same percentages that they have.

    If it is impossible to get to an agreement on the price to pay, the parties, that one wanting out and the other(s) ones, can submit the disagreement to a third party (usually a surveyor). If they don´t agree who will be the third party to resolve the dispute, this disagreement can be taken to Court.

    If the other co-owner/s doesn´t exercise the option, the person wanting to sell can take the case to the Court. The Judge will supervise the sale, making sure a fair price is obtained for the sale, and will split and divide the price obtained between the previous co-owners in the same proportions to the percentages they owned. It is important to note that in this case, the party which refused to buy the other one out, by not exercising the option, will have to support the Court costs entirely.

    Please don't hesitate to contact us should you require a no obligation consutlation on any matter realting to the above.

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  • Portugal

    04 February 2014

     Ruiz Diaz Torres are delighted to announce the launch of our Portuguese law service.

    Our team of bi-lingual lawyers are on hand to assist with your legal requirements throughout Portugal.  Please visit the Portugal page within our services section for more information.

    If you would like a no obligation consultation with regards to your circumstances please don't hesitate to contact us.

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  • Spanish Mortgages

    20 November 2013

    On November 19th the Spanish Supreme Court issued a resolution rejecting the request of BBVA (Spain's second largest bank) to revoke the Court´s recent Judgement which declared illegal, null and void all floor clauses entered in mortgage agreements by BBVA and two other banks; Cajamar and CaixaGalicia.

    This resolution closes the case and leaves the banks with no other option than that of removing the said clauses in all their mortgage agreements.

    It is relevant to point out that this resolution is the third issued by Supreme Court regarding the same matter – the first was the actual Judgement, dated last May 9th and the second one a request for clarification submitted by BBVA against the Judgement and denied by the Court on June 3rd.

    After this issuing, the case firmly sets a precedent and can be claimed in any dispute involving floor clauses.

    At the same time, and the very same day,  November 19th, a Court in Bilbao, in a case of dispute between Caja Laboral and a client, stated that “all floor clauses should be declared null and void, based in the many precedents and the obvious injustice they bring to the mortgage agreements”.

    These two Court resolutions are only the umpteenth items in a long list of virtually identical pronouncements of the Courts in Spain against the floor clauses – in April a Judgement declared null and void all the floor clauses entered by CajaMurcia in their mortgage contracts, and after that another Court invalidated in one document 40,000 thousand clauses entered in as many mortgage agreements by CajaSur.

    After all these previous developments at the Spanish Courts, it is more than obvious that the disputes over the floor clauses have been a major issue that has attracted considerable attention.

    However, some other clauses, also regularly entered in the mortgage agreements, have also been declared as abusive and have been the subject of disputes at Courts, all of which, as with the floor clauses, have been found in favour of the claimants, i.e. the mortgagees.

    One of these abusive clauses is the one setting the interest reference in the mortgages. In Spain, as much in all continental Europe, the interest rate used as reference in the Euribor, set by the European financial authorities in Brussels, which happens to be currently at its ever lowest level (0.25 %).

    However, some Spanish banks kept on using as reference the IRPH (Indice de referencia de los préstamos hipotecarios or Reference rate for mortgages), an old reference used mostly by the Spanish Cajas (saving banks) historically. This rate had the credit of being more stable, thus giving the borrowers some long term peace of mind, in the sense that the monthly payment would remain quite steady throughout the term of the mortgage.

    However, another characteristic that this reference has (which was always conveniently hidden by the banks at the moment of agreeing the mortgage) is that is remains at all times at levels above 4 %.
    Some claims were brought to Court in relation with this matter, with many borrowers pointing out that they had not been advised on the actual rate they were agreeing on (much less advised on using the Euribor instead), and these Courts ruled – yet again, in all cases - for the IRPH to be substituted by the Euribor, plus (as with the cases related to the floor clause) for the banks to refund to their clients all the monies actually paid based in the damaging difference of the two references.

    The Spanish Government, to prevent an avalanche of claims, enacted a rule that forced the banks not to use the IRPH as from November 1st. However, all the mortgagees with this reference rate still in their mortgage contracts do have the right to request its substitution.

    And yet there are, apart from those two possible abusive clauses above described, several others that are being increasingly brought to the Courts, with the same result of being declared abusive and hence removed from the contracts.

    In no particular order, these other clauses are:

    • That the mortgage agreement can be terminated by the bank upon just one payment defaulted by the mortgagee (the applicable Law requires three consecutive payments defaulted).
    • The interest for the overdue payments to go above 15 % upon default. (It is common practice by the banks to set this interest rate at 18 and also well above 20 %).
    • That the borrower authorizes the bank (sometimes giving it actual power of attorney) for the bank, in the same mortgage agreement and not knowing it, to change some terms and conditions of the very mortgage agreement.
    • That the bank can cede its position as the lender party without even communicating it to the borrower; but that the borrower cannot, in any case, cede its rights to any third party.
    • That the borrower assumes all the costs of the mortgage agreement.
    • That the borrower must take an insurance (both personal and also for the property mortgaged) for the total life of the mortgage, and that that insurance must be agreed with the company chosen by the bank.
    • That the borrower rejects his own jurisdiction and submits himself to the Courts and Tribunals chosen by the bank to solve any dispute arisen from a possible dispute.

    As mentioned above these clauses are mere examples of those regularly found in mortgage agreements. These clauses, plus many others of similar nature, have been declared illegal, as they alter the desirable balance of rights and liabilities in a mortgage contract.

    The pronouncements of the Courts Judgements are devastating, stating that “these terms and conditions in the agreements, usually hidden in the usual panoply of legalities, seem consciously made to confuse the borrower and to make him enter in a contract, and for decades, that otherwise he would have never agreed”.

    If you would like us to review your mortgage contract under no obligation, please don't hesitate to contact us by calling 0203 475 40 41.  Alternatively, you can submit your mortgage contract via email to info@rdtabogados.co.uk. Please also provide your full contact details.

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  • GE Mortgages

    14 November 2013

     RDT Abogados have recently agreed mortgage settlements with GE in Spain on behalf of several clients.

    If you have a mortgage with GE in Spain and can no longer afford or justify the monthly mortgage payments, then please contact us.  It is likely that we can assist.

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  • Conveyancing in Spain

    15 October 2013

     Conveyancing – The process of buying a property in Spain

    The process of buying a property in Spain is quite straightforward and, regardless of the bad press that has gathered in recent years, quite safe. The Spanish legal system offers a very strict set of rules that, if followed closely, will lead to a completion without legal issues or major problems.

    The first step will be to agree a price on a property. It is important at this stage to be sure that the counterpart is either the owner of the property itself, his or her solicitor or an agent who is authorised to market the property.

    Once the price is agreed it is quite common to sign a reserve or deposit contract, by which the vendor takes the property off the market, and the buyer agrees to complete the purchase once the legal checks are made.

    It is customary to pay a deposit at this stage (something in the region of 3 to 10 % of the agreed price). However, some basic precautions must be in place. Namely:

    • A full description of the property and its exact Land Registry details.
    • A specific mention of charges or encumbrances the property may have.
    • That the party acting as vendor or it representative shows proof of ownership.
    • That a deposit or reserve agreement is in place, stating the exact amount paid for this concept and the rights of the parties to withdraw the sale and, more importantly, the consequences of this withdrawn regarding the deposit.
    • A term to complete the purchase, usually of 30 days.

    In the term agreed in the deposit contract (normally also called “private contract”) the buyer should run the checks on the property.

    These checks should be, basically:

    • Land Registry. Issues pertaining the ownership of the property. Also, charges the property may have (mortgages, embargoes, etc).
    • Council / Municipality. Local / council tax paid and up to date; same with other local taxes and fees (rubbish collection, etc). In purchases of lands and / or off-plan properties, it is important to review any possible issues in relation with the habitation license.
    • Various. Insurance, management, utilities, etc.

    Once the buyer has completed the checks and verification of all the previous, the parties will agree a date and time to sign at the Notary. This is a significant difference to the English conveyancing process.

    In Spain contracts are not “exchanged”, but rather the purchase / sale must be witnessed by a Notary, and registered in the Land Registry. The Notary will then produce the purchase or title deeds, also known as “the public contract”.

    The buyer receives a legalised copy that must be taken to the tax office, for the stamp duty to be paid. Then, the deeds are taken to the Land Registry, where the transmission of ownership and all its details are recorded and kept.

    Only when the purchase deeds are returned to the new owner with the “three seals” (those of the Notary, Tax office and Land Registry) in it, the transmissions has been fully and legally completed.

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  • Rental Agreements

    06 September 2013

    A new bill was recently passed and enacted in Spain significantly amending lease agreements on real estate. This Law has been considered for some as quite necessary in Spain in order to adapt leases to a very active market.

    The main goal of the new regulation is to protect the landlords, as the previous Law was very protective towards the tenants, sometimes even in situations of non-payment of rent.

    The most relevant points of the new set of rules thus approved can be summarized as follows:

    • The parties (landlord and tenant) have more freedom now to come to terms and conditions in the agreement, such as minimum term for the contract.
    • For the first time “electronic address” is accepted as valid communications and to give notice between the parties.
    • An important modification is that the tenant does not lose his status in the lease even if he does not have his permanent address or main residence in the rented property, when his spouse or children continue residing in the referred property. Also, if the lessor sells the property (independently and regardless of the option to buy that the lessee will keep) the new proprietor will have the right to cancel the contract or continue with the rent, with the original terms and conditions.
    • Another important point is the term of the contract. This has always been an issue in lease contracts, as the tenants, under the previous Law, could very easily ensure a minimum of five years guaranteed tenancy. The parties now have the right to agree initially any term they wish. The tacit extension of the contract once it reaches the terms initially agreed is also limited to one year at a time after the lease comes to its term (previously the automatic extension was for three years).
    • The tenant can quit the contract (regardless of the actual term agreed) anytime after the initial six months, only by giving a one month notice to the landlord.
    • Another point, which regularly creates issues between the parties, is works, reparations and / or refurbishments made to the rented property. The new Law allows the parties to agree about the supporting of costs and disbursements, even cancelling the monthly rents to compensate for the said costs.
    • The parties are now free to agree that the yearly increase of the rents could be linked to any official reference. If no clause previews this increase, the Spanish RPI will apply by default.
    • In relation to the termination of the contract, the term given to the tenant after a default in the payment is of 10 days (it was 30 days previously), after which, if the rent remains unpaid the contract is deemed null and void and the eviction commences. In cases of termination of the contract, the landlord can request the contract be cancelled and null and void if the tenant carries unauthorized works in the property.

    The new Law states that its main purpose is to reactivate and increase the number of leases after the crisis and its effects on the real estate market, namely in the holidays and second residencies for foreigners.

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  • Corporate Seminar London

    07 August 2013

    RDT 's Corporate Department is holding a business seminar in our London office on Thursday 15th August 2013.

    The subject is:

    “The most common mistakes in export business. A legal view: International contracts”

    We would like to invite you to a seminar on “The most common mistakes in export business. Legal view: International contracts”that is being hosted by Grupo Ruiz Diaz Torres, RDT Abogados – RDT Corporate.

    This seminar will be chaired by Cristina Pérez Mateo, Spanish lawyer specialised in International Trade and Commercial Law, and member of the Madrid's Bar Association of Law.

    During the presentation we will look at the common mistakes made by companies that expand into foreign markets, including:

    • How to expand business into foreigners countries minimising risks
    • Secure means of payment
    • International contracts: the best options to distribute services or goods.

    Details are as follows:

    Date: 15 of August 2013

    Time: 11:00am for a 11:15am start until 12:15pm (followed by a drinks reception)

    Venue: RDT Corporate
    41 Lothbury
    London, EC2R 7HG
    United Kingdom

    RSVP: Please RSVP by emailing info@rdtcorporate.es

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  • Probate in Spain

    06 August 2013

     With an estimate of around 250,000 British owning (and in many cases residing in) properties in Spain, it is quite common to encounter their relatives, descendants and potential beneficiaries of the estates of the owners, facing difficult circumstances when those pass away leaving a property and some other assets in his or her estate.

    It means that, in addition to bereavement and grief, the relatives and potential beneficiaries of the deceased find themselves not exactly knowing what to do and in the middle of a legal situation in which the succession of the estate is partially ruled by two completely different legal systems or jurisdictions, the Spanish and the English.

    On top of this, some factors add even more confusion to the process, such as a foreign language related to an intricate matter, the distance (for most of beneficiaries reside in the UK while the assets they will inherit are in Spain), the fact that on many occasions there is no will (neither Spanish nor English) validly granted and in place, or that even if granted, one or both wills are lost or their whereabouts are uncertain.

    The process to follow for the inheritance, even if it cannot be considered simple, is quite straightforward and thoroughly detailed and set by the rules solving the conflict of jurisdiction between Spanish and English Law.

    There are two general rules governing the succession:

    1. The assets in Spain will always be transmitted under Spanish Law (even if there’s a valid will granted in England) and the inheritance taxes (in relation to those assets) will be paid in Spain.
    2. Spanish Law applies to all Spanish citizens. This rule is very strict and does not allow the free disposal of the assets – two thirds of the estate must go to the immediate descendants. However, this rule does not apply to foreigners, who can, even if they are residents in Spain at the time of their passing, bequeath, as a legacy, any part of the estate or the whole of it to the spouse, descendant, relative or any other party.

    The first step to take will be to know if there is a valid will in place. In Spain this is easy to search, as all the wills, right after being granted at the Notary, are registered in special office in Madrid. This office is public and anyone with an interest in a succession can have a certificate stating if any deceased party granted a will, and how to obtain copies of it. If there is a will in place then a “testate” inheritance process will follow, i.e. going as per the clauses and dispositions granted by the deceased. If there is not a valid will in place then the inheritance follows the “intestate” process and the Law will determine entirely the actual beneficiaries and the share of the estate they will inherit.

    After the application of the previous and general rules, it is necessary to ascertain and identify the total number of inheritors that the estate will have, so these beneficiaries can claim the share of the estate they’re entitled.

    This is done by following the details of the deceased as per his or her birth, marriage and death certificate, and deploying from there the full family tree (spouse / s, children, second matrimony, etc.). An important point is that the inheritance is a right, not a liability – in other words, nobody can be forced to inherit. This means that any potential beneficiary can simply reject his or her part of the estate, if he or she doesn’t want to inherit a property encumbered with legal charges (a quite common circumstance while inheriting a mortgaged property).

    The last step will be to take the complete itinerary of facts and the supporting documents (mainly certificates, all of which must be originals) as described above, to the Notary. An important note must be added here: all the documents issued by an English office or drawn in English must be translated into Spanish and legalised.

    The Notary will then review all the information and documents submitted with the file, request for any necessary item missing, and will finally issue the deeds containing the transfer of ownership from the deceased party to the beneficiaries. All the beneficiaries must sign the deeds at the Notary office, as a formal proof of acceptance.

    This signing can be made personally or via Power of Attorney. These deeds, once taken to the Land Registry for inscription and paid the inheritance taxes, will be full, formal and legal evidence of ownership. It is important to note also that the Spanish State requests for the whole process to be completed within six months from date of death, otherwise surcharges of taxes (in the form of 25 % penalty fee on the taxes to pay) will apply. It is possible to apply for an extension of this term.

    Please don't hesitate to contact is if you would like a no obligation consultation with regards to any element of wills or inheritance.

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  • Property Purchase in Spain

    30 July 2013

    When many are still suffering the consequences of the financial crisis and the many excesses that provoked it (and amongst those excesses were the real estate craze in Spain) there are many property owners who are complaining of being tied in to purchase agreements full of clauses that were not properly explained to them and in many cases not even translated.

    Many people feel cheated by misleading advertising and a glittering marketing campaign that prompted them to buy.

    The conclusions around, in many internet blogs as much as in the reliable media, is that Spain is a kind of wild west, in which it is very easy to be scammed; a place with unbeatable weather but where it is impossible to buy real estate with a guarantee. Is this so? Is Spain that lawless country so usually painted?

    Very much on the contrary, Spain has one of the safest and most reliable systems in the world to protect real estate purchases. The combination of Notary witnessing and Land Registry inscription is the legal basis of the system. On top of these foundations some specific rules extend the protection for the purchasers:

    Act 26/84 relating to consumers’ protection, states that any feature, description or characteristic of anything offered or advertised to the general public will be considered as part of the purchase contract, from the moment of the agreement, even if it’s not precisely mentioned in it.

    Act 34/88 with regards to marketing and publicity, rules that anything promoted open and / or publicly for sale in sale must be genuinely described, and its main characteristics fully explained.

    Act 515/89 relating to real estate publicity, set the exact rules to advertise real estate properties for sale (location, size, stage of construction, payment conditions, etc.). Moreover, this Act confirms as mandatory for any party advertising a property for sale, to keep a copy containing the full details and the characteristics, specifications and finishing of the property in a different file to that used for advertising, and that these two documents and the information they contain, must match completely. (The scope of this Act should not be underrated. A Spanish individual complained recently of an apartments promotions advertised by BBVA real estate, because in some posters promoting a complex of apartments it read “...this information is purely informative and may change”. The complaint made BBVA to withdraw all the posters they had in the area).

    The previous are only a few of the resources that the consumers have to make sure that their purchases will be safe and legal. The Spanish Legal System has in place more than enough means to protect the purchasers of properties. It will not be the lack of legal protection, but the lowering of the basic cautions to have before signing an agreement, what will cause difficulties. The rules above described, and many others as much enforceable and fully in place, can (must, actually) be claimed, discussed and agreed before signing in the dotted line.

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  • Mortgage Floor Clause Update

    19 July 2013

     After the recent Supreme Court judgement in which the court declared all floor clauses within mortgage agreements signed with BBVA (Spanish second largest bank) were abusive, hence null and void, some other first instance courts have started to apply and execute the legal precedent in claims filed by mortgagees.

    The banks initially admitted the Supreme Court precedent and started to remove the floor clauses of the agreements which, obviously, reduced the payments in accordance with the new (and lower) interest rate.

    However, the banks were reluctant to agree a retrospective effect of the clause removal, i.e. taking the reduction of the payments back to the date when the mortgage deeds were signed, and return the amounts thus paid in excess.

    The first judgments to clarify this dispute have been issued and are, in all cases, quite clear: the floor clauses are null and void, so their effect in the agreement must be taken accordingly in the sense that the actual monthly payments of the borrowers should be calculated as if the clause had not been in the contract. In another words, the banks have to return the amounts paid in excess from the very date the contract was signed.

    In Badajoz and Barcelona two first instance courts judged against many other banks and made them pay back to the clients retrospectively.

    In Murcia an important case was held, in which BMN (formerly CajaMurcia, very active in the real estate boom of the past decade in Murcia and Alicante) alleged that they only included the floor clause in “approximately 30 % of the mortgage agreements proposed by the bank”. An independent research commissioned by the court discovered that the floor clause was entered in 70 % of the agreements, if with different names, structures and mechanisms – however, they were all floor clauses impeding the interest rates in the mortgages to fall below 3 %.

    In all the cases commented above, the banks have been forced to return all monies paid in excess and its interest.

    The banks insist in their standing: mainly the clauses are in the contract and were known and freely agreed by the borrowers.

    However, the general spirit of the Supreme Court has been detailed very precisely by the court number five of Barcelona in the case against BBVA, which says: “the floor clause was in the agreement, but concealed among an outstanding amount of details, in such an way that it is clear that its intention was to divert the attention of the borrower”.

    If you have a floor clause within your mortgage agreement please don't hesitate to contact us for a no obligation consultation.

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  • Mortgage Cap & Floor Clauses

    09 July 2013

     A floor clause (or “cláusula suelo” in Spanish), usually entered in a financial agreement in relation to a cap floor, refers to a specific condition generally included in financial contracts, principally loans.
    As a loan can be agreed based upon fixed or variable interest rate, the loans agreed with variable rates are usually linked to an official interest rate (in the UK the LIBOR, in Spain the EURIBOR) plus an extra amount (known as spread or margin).

    Thus, what the mortgagee actually pays the bank every month is: a portion of the capital plus the benchmark or interest reference plus the spread. The latter (the spread) is, from the bank’s perspective, the profit for lending the capital; from the borrower’s is the price of using the monies borrowed.

    Since the parties will want some certainty on the amounts actually paid and received in case of sudden and sharp movements of the benchmark, they can, and usually do, agree a system by which they are sure that the payments will not go too low (on the bank’s side, so they count on a certain and regular profit) or too high (on the borrower side, so the payments keep in an affordable level all throughout the mortgage term).

    This system of limitation of the interest getting too low or too high, is that one known as “floor and cap clauses”.

    These schemes have been used for many years in banking, and have been deemed as a useful way to keep the risk and uncertainties of the signing parties of a mortgage at bay. However in Spain, from around a decade ago, the original scheme has been corrupted to a point in which it has taken the Spanish Supreme Court to issue a Judgment in order to protect the consumers / mortgagees from the constant abuses that the banks inflicted on them.

    The problem started around the years between 2001 and 2003. In the beginning of the last decade thousands of properties were sold every year in Spain (many of them to foreigners, as second residences), and thousands of mortgages were agreed to finance those purchases. In a crazy push to gain new clients, the local banks had to look for fresh ways to attract new borrowers.

    In the midst of what is now considered irresponsible lending, a way to appeal to the new applicants, to all those looking for offers on how to finance their new homes, was to offer mortgages with a ridiculous, almost symbolic, interest rate, linked to an also very low margin – ads reading “mortgage at EURIBOR plus 0.5 %” or very similar were typical for almost a decade.

    The competition between the banks was fierce in offering lower and lower rates. Since the EURIBOR, or benchmark, was low (it started the decade at 3% and ended up in 2010 below 1%), a quick calculation provided attractive figures: the repayment costs virtually nothing in the medium and long term, and with a lease it would be a profitable investment.

    At this point very few borrowers, if that, would read the whole mortgage agreement before signing it, let alone having it translated and fully explain by an independent accountant or solicitor. There were a couple of years at a fixed rate, typically 3.5 %, but that was just the beginning – for 15, or 20 or more years the monthly payment was going to be ridiculously low. The buyers jumped on these offers – at the peak of the property bonanza (between 2004 and 2006) one million properties were sold every year in Spain.

    After signing the agreements, the borrowers started repaying the loans for the first couple of years, at the initial fixed rate, expecting a drastic reduction of the payments once they go to variable. However, after some years into the term of the contract, the monthly repayments went up. They called their banks managers commenting on a mistake in the last month’s charge, but the reply they got was that there was nothing wrong with the charges – these were correct, all made as per the agreement.
    It was in the agreement. Going down to the smaller print of the mortgage deeds, conveniently hidden amongst the endless and tedious legalities (a mortgage agreement has normally about 50 pages of complex verbiage, hard to understand even for a Spaniard not completely familiar with the legal jargon), there was a clause that simply was to make that godsend clause reading “EURIBOR plus 0.5%” totally futile, completely irrelevant, as good as not actually entered in the contract. This was the floor clause.

    No one mentioned it to the borrowers initially, but somewhere in the contract there was a clause setting the floor and cap levels. The floor clause meant that regardless how low was the benchmark or official mark linked to the mortgage (EURIBOR), there was a floor in place: a minimum interest to apply to the mortgage every month. For instance, if the floor clause is set at 4 %, it didn’t matter that the rate of reference rate would go down to 1%, because if the sum of this rate to the spread gives less than four, then 4 % would be the interest to pay.

    The borrowers complained about it to their banks in two ways, closely related one to the other: firstly, it is unfair that they do not benefit from the cut in the interest rates of the reference rate (the EURIBOR has been below 2% for 4 years now, from 2009 to 2013. Currently it’s 0.5 %); secondly, it is there in the agreement, but nobody explained it clearly to them. However, the banks refused firmly to discuss it, retorting in all cases to the same reply – you signed the agreement freely, and now it’s final in all its clauses enforceable, there’s nothing they will do about it.

    The aftermath

    Since the banks rejected even to consider discussions with their clients, so the claims started to reach the Courts, profusely, and all based on the same grounds; that something essential to the agreement, such as the cap and floor clauses, should have been explained precisely and more into detail, not left in a clause towards the end of the contract.

    The first Judgements were dubious – it was a new circumstance, a dispute based upon complex, unique financial terms and conditions. Some Judges ruled favouring the banks – after all, there was an agreement and witnessed by a Notary.

    However, the Higher Court, and eventually the Supreme Court, all ruled in the same direction in their pronouncements of the appeals (which came by the thousands): the clauses are obscure, very difficult to understand, hence they must be declared abusive and taken off the agreements.

    Even if there was an agreement in place, and it was freely signed by the borrower, the general rules on financial contracts state that the essential clauses of an agreement (and the applicable interest rate is one of them) must be discussed individually and must be stated clearly in the document to sign.

    The Supreme Court issued a historical Judgement (May 9th 2013) ruling illegal all floor clauses entered in the mortgage contracts from BBVA and two other Spanish banks. The conclusions of this document works like a handbook on the use of floor clauses in fair contracting:

    • The Courts must protect the weaker party in an agreement, usually the consumer against the lender.A clause is abusive when: a) it limits only the rights of the consumer, and b) it has not been negotiated and discussed individually between the parties.
    • The professionals (the banks) must prove that they offered to discuss the essential clauses individually, and has offered the consumer (the borrower) alternatives.
    • Any clause deemed abusive must be taken off the agreement, retroactively, i.e. not from the moment it’s declared abusive, but from the date the contract was agreed.

    If your mortgage agreement contains cap & floor clauses, please don't hesitate to contact us. It is likely that we can ensure that these clauses are removed from your loan agreement.

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  • Residency

    04 July 2013

     The Spanish government has approved the obtaining of legal residency in Spain via purchasing of property.

    Initially it had been thought that the minimum level of investment in the Spanish property market required would be €160,000. The actual amount is now higher, at a minimum of €500,000 in real estate property. It means that from last May 25th any foreigner who purchases a property in Spain for a price of € 500,000 (or higher) will obtain Spanish residency.

    This legal scheme comes with some important benefits. Firstly, the residency in Spain will be granted as well to the spouse and children of the direct buyer. Also, the residency will be of the Schengen sort, i.e. it will allow the buyer and his or her family to move freely within the Schengen space, which comprises all the E.U. countries plus Norway, Switzerland and Iceland.

    Another benefit is that the permit will be given initially for two years, after which with just one renewal, it will become indefinite, for as long as the initial buyer remains full owner of the property. It will be possible to rent the property – as this will not affect the residence obtained – with the only obvious condition that the proprietor declares and pays the relevant income taxes as per the rents received.
    Another minor, yet relevant, conditions to access the residence in this way are:

    • It is not with retroactive effect.
    • The five hundred thousand euros must be brought from abroad – it is not possible to finance the purchase in any bank in Spain, not even partially.

    The residence is not subject to any other condition than those detailed above, i.e. its granting will be automatic and not discretionary. However, it is subject to checks on the buyer from the Spanish Ministry of Interior (to prevent criminal offences, such as money laundering or other international crimes), and also to the Spanish Ministry of Foreign Affairs (to control at the buyer country of origin, the personal circumstances of the buyer and his or her family).

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  • Mortgage Contracts

    21 June 2013

    The mortgage agreement in Spain is taken very seriously and must be witnessed by a Public Notary and registered in the Land Registry. The mortgage deeds contain approximately 50 pages of clauses, terms and conditions pertaining to the agreement - namely the capital of the loan, the interest rate, term/number of years the contract is for, to name but a few.

    The hard copy of the deed documents are presented to both parties (usually a bank and a mortgagee). The deeds are bound in stiff card with consecutively numbered pages, the language used is very specific and the entire document looks formal.

    All deeds must have what's commonly known as the "three seals": that of the Notary, the tax office and the Registrar, proving, respectively, that the agreement has been witnessed by a Public Notary, the taxes have been paid and that the agreement has been duly registered. Without any one of the three seals the agreement is deemed not only un-enforceable, but invalid.

    The above shows how strict a mortgage agreement is in Spain. The regulations were set in the mid-19th century and have change very little since. As the acquisition of a property, usually the family home, is one of the most important events in one´s life, in Spain the mortgage agreement is considered one of the most formal contracts available. It is governed not only by the Civil Code, but also has a specific rule connected to it: the Mortgage Law.

    Taking a step back from the seriousness of the mortgage contract allows us to understand both the basics and the intricacies of the numerous mortgage issues that are currently flooding the Spanish system, and how it has been possible to have such a strict contract declared dissolved.
     
    Between 2003 and 2005 the Spanish economy was booming. The growth of all financial indicators was remarkable and the unemployment rate reached a historically low 9% (by Spanish measures). However, beneath these buoyant figures laid some worrying issues that the Spanish economy has never been able to dispose of.

    The overall growth was not created by industrial achievements, but rather was based on what's commonly known as a "bubble", i.e. a constant increase of the prices in one sector that gives the impression of general and solid economic growth, but which can end suddenly with a change in the trend. This sudden change leads the bubble to "burst". The Spanish bubble was quite a dangerous one: a "construction bubble".
     
    From 2004 and throughout 2007 the number of properties built and put on the Spanish market year on year exceeded those of France, Germany and Italy combined. The high dependence of the National economy on the construction sector (around 40 %) and the draw of good weather conditions meant that both nationals and foreigners bought new properties (first homes and second residences respectively) in Spain, mainly along the Mediterranean Coast and the Balearic and Canary Islands.
     
    The third element of this apparently wonderful scenario is the role the Banks played. In a favourable financial environment, the Bank of Spain kept the interest rates down, close to zero, with the aim of pushing a seemingly endless economic wave. In addition to allowing large amounts of money to be lent quite easily, the Banks lowered the mortgage requirements, approving loans even to those applicants with part-time jobs, something that was unthinkable only a few years earlier.

    At the same time the Banks were so keen to lend that they found a way around the regulation preventing them from granting a mortgage for more than 80% of the value of the property. They began inflating the property values through the pre-sale mortgage valuations carried out by companies commissioned by the Banks. This spiral provoked the cash to flow and the prices to rocket for years - until the crash.
     
    By late 2007 there were signs that the situation was changing. There were hints of a world recession and more tangibly in the local market, the properties were still being built but were not selling so quickly. By mid-2008 alarm bells were ringing and in September 2008 the Lehman Brothers Bank collapse marked a point in which all concerns came to a head. 2009 was marked by full blown recession and open panic which worsened as the year progressed. The trend of previous years reversed: the properties were not selling, even with the prices dropping to ridiculously low levels, and the construction industry simply tanked. The number of small and medium size builders taken into administration in Spain between 2009 and 2010 is reported to be close to three thousand.
     
    This situation, or "the crisis" as it was quickly coined, also affected the legal system and the mortgage agreements as previously described. When the economic cycle slowed in 2008, there was a knock-on effect which meant redundancy for many who had borrowed from the banks. Suddenly many families had to face the hardship caused by the unemployment of at least one head of the household (in many cases two).

    In the UK the situation was very much the same for those who had borrowed from the banks to finance their second homes in Spain. When the property owners approached their lenders proposing they take their property in exchange for cancelling their mortgage agreement and outstanding debt, the response from the banks came as a blow. Simply put, the banks were not willing to reduce the original loan amount to reflect the change in the economic environment or cancel out the inflation they had artificially induced. This meant that an owner with a property valued at 100,000 in 2005 who had taken out a 90,000 mortgage, with an outstanding debt of 85,000 when the crash happened was now burdened with a property valued at 60,000. On the whole the Banks were willing to take the properties but would insist that the borrower pay off the outstanding debt as well (in this case 25,000).

    Those who stopped their mortgage payments because they had no means to support a second home abroad started to lose their properties in Spain following a repossession process. In addition to this they were also sued in the UK for the outstanding debt plus the overdue mortgage interest accrued, the Spanish Court costs, and the European Enforcement Order costs. As per the previous example, initial debts of €25,000 easily became £100,000.
     
    Those with the problems described above sought the assistance of Spanish Law Firms looking for solutions. To begin with the banks were approached with the view to reaching an amicable outcome. However it soon became clear that the banks were unwilling to cooperate or look for a solution which could satisfy both parties, and so inevitably the cases reached the Spanish Court system.

    The recurrent issue that gave grounds for the legal claims came down to the point that if the bank had commissioned the valuation of the property, and accepted that value as a basis to grant the loan, it is most unfair that if/when the property value falls only the borrower bears the weight of the shortfall; this will be as much as to put all the possible risk of the agreement on the borrower who is invariably the weaker party in the contract.

    Spanish Courts accepted this argument timidly at first and then completely by the time it reached the High Courts. So much so that judgments were issued favouring the full resolution of the contracts and thus the complete cancellation of the debts and / or outstanding capital of the loan. One such Judgement issued in September 2010 by a Higher Court after an appeal explicitly states that the banks "[as] main characters in the financial system, and liable overall for the situation provoked hence particularly in this case, for the drop of the value of the property".

    This Judgement signalled a turning point in how the mortgage issues were handled. The value to be taken into consideration in the case of a settlement with the bank (Dación en Pago) was no longer the market value at the point of settlement, but the initial value that was accepted by both parties when the original agreement was signed.
     
    Moreover, a review of virtually all mortgage agreements signed in Spain during the boom years (roughly from 2003 to 2007) has exposed widespread flouting of the basic legal and banking practice rules. A thorough, page-by-page, clause-by-clause, study of the mortgage agreements reveals that the following malpractices were a constant theme:
     

    • Use of only the Spanish language and no available translations or interpreters, even if the mortgagees did not speak Spanish.
    • Floor and cap clauses in relation to the interest rates, protecting only the bank: strict limits to the lower levels that the interest rates can fall to in the floor clauses, yet no limits in how high the same rates can go.
    • Borrowers agreeing to give power of attorney to the bank, in the very same mortgage agreement, without the borrowers made fully aware of this circumstance.
    • Clauses by which the bank / lender reserved the right to change any clause, term of condition of the contract. Again without the mortgagees even knowing.
    • Clauses in which the banks reserved the right to transfer their position and rights as the lending party to any other particular or institution, yet again without having to notify the borrower.
    • Personal loans agreed, unsecured and with higher interest rates, in a hidden clause of the mortgage agreement, once more the borrowers’ didn´t have the faintest idea that they had agreed to such a thing.

     
    This list contains but a few of the clauses regularly found in mortgage agreements that are known to be abusive and most certainly illegal. Many of these abusive agreements have been taken to Court in order to support the mortgagees' standing and claims against the Banks.

    Despite all its pomp and formality, a mortgage agreement can be declared cancelled by a Judge. It is not only possible, but very much feasible based on the itinerary of facts mentioned above.

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  • Mortgage Terms

    14 June 2013

    The Spanish Supreme Court issued an important Judgement last week, which declared all floor clauses null and void in mortgage agreements, as of last May 9th.

    The Spanish banks are reacting promptly and BBVA has sent a communication to all its mortgagees with this clause in place in their mortgages (estimated to be around 450,000 accounts) so the mortgage deeds are amended accordingly.

    Some other banks have followed BBVA's initiative, waving off the floor clauses for the July payments. CaixaGalicia has gone further announcing they will return to clients the excess paid in  the May and June payments.

    With the euribor (main interest reference for mortgages in the euro zone) currently at 0.5 %, the savings for borrowers are of consideration, as most floor clauses set the limits for the mortgage interest rate as high as 4 %.

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  • Energy Certificates

    10 June 2013

    From 1st June, the owners who put their properties in sale or rent for more than four months will need to get a certificate of energy efficiency of the property. The Royal decree that regulates this regulation was approved last April 5 by the Goverment. From now on these properties will be provided with their own tag of energy efficiency, very similar to the one that we already see in the domestic appliances.

    This certificate analyzes the demand and the energy consumption of a building and the result is summed up in a label. With a color code, it will classify the properties on a scale that goes from the highest category, the "A" (less consumption), to the lowest, the "G" (major consumption).

    The owner will have to show this labeling to the future buyers or tenants. So the tag must appear in all the announcements of sale or rent. Also the original certificate has to be delivered along with the contract of sale or a copy of the certificate in case of a rental contract.

    This regulation is already applied in the rest of the countries of the European Union where it is common to find the energy qualification of a property as an important fact in the advertisements of the real estate sites. In Spain we are already familiar with the energy tags of domestic appliances.

    Nevertheless, we still do not have this concept associate to our real estate. With this new measure we will familiarize ourselves with the relation between property and energy efficiency.

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  • Business in Spain

    05 June 2013

    Spain has a reputation of having a slow and difficult bureaucracy in all that relates to Public Administration. This repuatation seems to be deserved – in the annual reports that the OECD publishes each year, some rates and data are analysed as a measure to determine the industrial and business efficiency of each member country.

    The conclusions on the latest annual report show that in Spain it takes 47 days for company to be set up and ready to trade whereas the average of the OECD members is 23 days. Some equally reputed rankings give even bleaker conclusions – the UN published in September 2012 a chart with all the countries of the world about how easy was to incorporate a company, with position number 1 being the easiest – Spain held position 150 out if 193.

    Recent Governments have tried to change and modernize a system that overall has its roots in the XIX century (via the Commerce Code, enacted in 1885) and that was only much worsened by a hyper - bureaucratized and centralized dictatorship that ruled the country for the best part of the XX Century.

    In the last 20 years, however, new Laws have been approved trying to facilitate the setting up of a business, reducing the paperwork and lowering the financial requirements.

    As in most of European Countries, an entrepreneur can materialize his or her idea or project for business via Self Employment, convenient for single tradesmen and small – local business, or through a corporation, more suitable for larger enterprises.

    In either case, the first two steps should be to register with the tax office, for the relevant tax liabilities, and at the SS (Seguridad Social, the equivalent in the UK to the National Insurance and employee’s benefits and pension regulatory body).

    The registration for taxes will start with obtaining the CIF (Código de Identificación Fiscal, or tax registration number). With this code the next step will be to obtain the license for business opening and then the registration for Economical Activities (or Trade Commencing in the rough equivalent at the HMRC). It will be also necessary to register in the local VAT scheme.

    With regards to the SS, it is necessary to register in the Self-Employed scheme, and then as employer (both the self-employed and the corporation) if the business will have personnel in the payroll, i.e. employees.

    In parallel to all the previous, if the vehicle for the business is going to be a company, this entity will have to be incorporated under the Companies Act rules. The minimum requirements to incorporate a company are:

    • Company denomination, name.
    • Capital and allotment.
    • Articles of association.
    • Bank account.
    • Directors (minimum of one).
    • Shareholders (minimum of one).

    A public Notary must review the documents and information submitted and then will produce the “Deeds of incorporation”. This document will be registered at the Companies House (Registro Mercantil).

    While this relates to the “horizontal” rules, it is important also to know and understand of the “vertical” political organization of Spain, as it affects quite considerably the commercial activity.

    The Administration in Spain is organized, vertically, as follows: Estate, Countries (Comunidades Autónomas, of which there are 17) and the fifty two Provinces.

    Each province can rule on its territory, depending on the competences distributed in the Constitution. The Estate has exclusive competence, for instance, on anything pertaining to the SS, so these rules will be the same in all Spain, regardless of the exact location. However, some taxes are to be paid at the Province Administration, for example the Economical Activities tax.

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  • Residency Schemes

    30 May 2013

     After some confusion in the past few months, the Spanish government has finally approved the obtaining of legal residency in Spain via property purchase.

    Initially it had been thought that the minimum level of investment in the Spanish property market required would be €160,000. The actual amount is now higher, at a minimum of €500,000 in real estate property.

    It means that from last May 25th any foreigner who purchases a property in Spain for a price of €500,000 or higher will be entitled to Spanish residency.

    The Government has also announced that any foreign national who purchases at least €2 million worth of Spanish national debt will be eligible to claim Spanish residency.

    These two schemes are in addition to the preexisting program which saw any individual with a sound business plan, and realistic aim to create jobs in the Spanish jobs market, eligible for a residence permit.

    If you are interested in discussing your circumstances, please contact us for a no-obligation consultation.

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  • Tax on foreign assets

    09 April 2013

     After some important amendments in relation to the Spanish tax system, the first months of 2013 saw the introduction of the Form 720. The new form is a declaration of foreign assets over €50,000 for all Spanish Tax residents.

    If you have been paying tax in the Spanish territories for the past five years (either as a non resident or as a resident), or you spend at least 184 days a year (half the year plus 1 day) in Spain you are considered as a Tax resident and you must complete and submit the Form 720 declaring all your assets abroad.

    It is important to note that the form is a new requirement that needs to be completed before April 30th; for the following years the deadline will be March 31th for the previous calendar year (the Spanish tax year runs from January to December). Annual submission of foreign assets via the form 720 is mandatory if the value of your assets increase by €20,000 or more.

    The assets which you are required to declare fall into three classifications:

    1) Accounts, funds and liquid assets deposited in financial institutions abroad with a combined value of €50,000 or above by 31st December 2012.

    2) Stocks, Bonds, Values, Financial rights and savings in insurance companies, deposits managed or obtained abroad with a combined value of €50,000 or above by 31st December 2012.

    3) All types of real estate and rights over real estate abroad with a combined value of €50,000 or above on 31st December 2012.

    If the combined value of your assets in any of the above categories is less than €50,000 you do not have to make a declaration for that category. All three classifications above are regarded as individual declarations, but are submitted through the one form.

    Although the Form 720 is (in theory) only a mere “declaration” and not a Tax, failure to submit will incur a fine of €5,000 per category of asset with a minimum overall fine of €10,000. If you are late making your declaration there is a €100 fine per category with a minimum fine of €1,500.

    Please contact us if you require advice on this subject.

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  • Spanish wills

    09 April 2013

     It is now possible to grant a Spanish Will & Last Testament without you having to travel to Spanish and visit a public Notary.

    Those who want to grant a Spanish will can go to his or her local Notary in the UK with the will already drawn. The document, once witnessed by the Notary, can be registered at the relevant office in Madrid.

    Previously it was necessary to travel to Spain to have the document witnessed by a Spanish Notary. However, it is now possible to visit a UK notary at your convenience and receive the exact same level of validation. Whether you have purchased a property in Spain or have savings in the bank or own a car or any other asset, recording your last will and last testament ensures your assets go where you want in the event of your death.

    As explained above, after the will’s grantor passing, its beneficiaries in the inheritance will be able to track down and locate the will at the Madrid Registry, and the documents will be in compliance with the Spanish Law and fully enforceable – exactly as if it had been granted in Spain.

    The Spanish part of the estate will be then divided and transmitted to the inheritors as per the deceased party instructions and in accordance with the applicable Spanish rules.

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  • Repossessions in Spain

    14 March 2013

     The European Court has declared the Spanish system of repossessions to be illegal.

    According to a statement that has just been published by the EU Court of Justice, the Spanish law which governs mortgage repossessions violates the legislation of protection to consumers.

    It concludes that the foreclosure system established in Spanish law, is incompatible with the directive on unfair terms and does not protect the consumer because it allows the loss of property, and eviction, before an action for damages is exercised against the Bank.

    The judgment of the Court of Luxembourg confirms the legal opinion presented in November by the  attorney general to the EU Court of Justice, Juliane Kokott. The Court argues that, "Spanish regulations list the (very limited) reasons by which a debtor may oppose the procedure or foreclosure" and adds that "the existence of an abusive clause in a mortgage contract is not included in those reasons".

    Therefore, the judgment concludes that "Spanish regulation which prevents a judge, who wants to declare a clause within a mortgage contract abusive, from suspending the eviction started by another procedure, is contrary to the right of the Union".

    The current repossession process must now be amended to allow mortgagees to contest any clause within the mortgage agreement that is deemed unfair or abusive.

    Until now the banks could reject discussions with their clients regarding these clauses because they were protected by the strict process enforceable. This EU statement allows the mortgagees to contest any specific clause of the mortgage (such as the overinflated valuation, the high interest rate for the defaults, etc.), and this claim will stop and supersede the repossession process.

    All this comes as another blow to the mentioned Spanish banks repossession processes, already quite weakened by recent local Judgments that have favored the mortgagees in disputes with the banks.

    The European Court of Justice reached this decision after analyzing the question of whether the Spanish Law conforms to European Directives on unfair terms as presented by the Commercial Court No.3 in Barcelona.

    The original case dates back to 2007 when a Moroccan national living and working in Spain took out a Mortgage for €138,000 with Catalunya Caixa to buy a property. He stopped making repayments in 2008, and the bank began foreclosure procedures.

    In accordance with Spanish legislation, the bank was awarded 50% of the value of property because, even following a public auction, no buyer for the property was forthcoming.

    The Moroccan national was expelled from the property on 20th January 2011 even though he had filed a complaint requesting the mortgage contract be deckared void as he claimed the 18.75% interest rate was abusive and as such should halt the eviction procedure.

    However, as mentioned above, the Spanish legislation that regulates this matter prevents the foreclosure process from being stopped if there are no reason as referred to expressly in the law, existence of an abusive clause in the mortgage contract is not one of the accepted reasons . I.e., It is required that the original process is concluded before the bank can be sued for unfair terms within the mortgage, meaning that the consumer might be left homeless while they fight the bank through the courts.

    The Spanish authorities declare just hours after the document was issued that the Law will be reformed as much as it is necessary. It will mean that the whole repossession process will have to be changed. Also, the Law amendments will have retroactive effect, being possible to claim for abusive clauses on cases already started.

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  • Mortgage Reforms

    11 February 2013

     The Spanish government's reaction to widespread mortgage issues.

    The Spanish Ministry of Finance recently passed through Parliament a set of reforms under the very revealing title of “The unbalance between the banks and the costumer’s rights”' This motion introduced significant reforms in mortgage, general lending rules and practices in Spain.

    The main points of the reform, which will affect not only the new mortgages but also all those already agreed and enforceable between banks and debtors, are:

    • The minimum percentage value at which the bank will be able to repossess the property will be 75 % (of the said property value).
    • The term for the mortgage cannot go beyond 30 years.
    • The interest rate for the defaulted payments cannot go above 12 % or only three times the reference rates, whichever is lower.
    • The swap, floor and cap clauses, and all clauses relating to currency exchange rates, will have to be explained separately and clearly by the notary at the signing. The notary will be able to request from the lender a precise and detailed manuscript of these clauses. The notary will have to make sure that the terms and conditions of the clauses stipulate a reciprocal protection in relation to the interest rates and the currencies exchange.
    • The banks will not own more than 10 % of the shares of any valuation company, hence limiting the influence on them. During the “construction bubble”, i.e. from 2004 until 2008, the banks in Spain virtually owned the valuation companies, and pushed for these to issue surveys at higher values, and thus provoking an over-inflation in prices that has been deemed as a direct component of the very recent real estate crisis.

    All the previous rules will be enacted under an urgent Law approval procedure, and it’s expected to be passed and enforceable in a matter of a few months.

    The Spanish financial authorities are trying to eradicate a situation that’s been described as “highly unfair” by several independent and highly qualified surveys by the Spanish Lawyers Association and Magistrates, mainly because it dates as far back as 1946 and has been described as too strict and not flexible enough to adapt its rules to the modern banking practices and, most of all, to the situation provoked by the recent financial crisis.

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  • Bank Investments (Swaps)

    09 January 2013

    In the last two weeks two important judgements have been passed in Spain.

    In the first, Banco Popular has been forced to return some investments, plus interest and the Court costs. The case started due to a couple, clients of the bank, claiming that the bank entered a swap clause in a mortgage agreement without advising them properly how that financial product actually worked in relation to the mortgage.

    Sudden movements in the interest rate markets provoked that the savings account of the mortgagees was literally emptied, to their astonishment.

    The Court ruled that that product, the swap, is totally unsuitable for an average mortgage applicant and that its inclusion in the agreement was “definitively abusive, almost fraudulent”.

    In another Court case, a court has ruled as abusive the interest set by Caja Laboral at 18 % for overdue amounts in a mortgage. In this case, the Court has stated that “the rate is totally out of proportion when the reference rates were [at the time of the agreement] 4 %.

    The judge from the second case issued a note to the Magistrates Association recommending to review all similar cases brought to the courts under the light of the protection the consumers must have in their deals and agreements with the banks, as the weaker part in these type of contracts.

    These two judgements have caused great satisfaction in consumers associations, law firms and independent financial advisors, which have been demanding the authorities a tighter control on the banking industry.

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  • Off Plan Property Purchases

    03 January 2013

     A Court in Barcelona has passed judgment favouring the buyers in a case of off-plan property purchase, in which the mandatory bank guarantees were not issued and delivered to the buyers. The judgement states that the developers’ Directors have full personal responsibility and are ordered to return the deposits paid.

    Off-plan purchases have brought much distress – and also heavy financial losses – to numerous buyers in their second residences in Spain. Lured by bargains, offers and discounts, many British citizens have got into trouble by hastily making down payments on off-plan properties on projected developments and constructions that ultimately failed to be completed.

    The recent economic crisis has only accentuated the problems, as it brought enormous financial hardship to virtually all small and medium builders in Spain, as the “bricks and mortar bubble” exploded suddenly in late 2008. This has ensured that thousands of properties have been left unfinished and the buyers not only did not get their dream homes, but actually lost their initial deposits.

    Despite this situation, the Spanish Law stipulates (from 1967, no less) strong means to protect the buyers and their deposits.

    It is mandatory that a bank guarantee is issued by the builder’s bank in order to protect all the deposits paid by the buyers initially at the stage commonly known as “private contract signing”.

    However, many developers, to avoid blocking funds at their banks, have regularly managed to avoid this requirement and, at the private contract signing, just mention that the guarantee will “be sent shortly after the contract signing”.

    The bank guarantee is rarely issued beyond this event, so the buyers’ deposits are totally unprotected – and in the end if the builder goes into Administration or simply closes down the business leaving the properties unfinished, there’s no way to recover the funds paid; until now.

    The Judgement issued just before Christmas by a Barcelona Court completely changes the previous scenario. In this Judgement, the partners of the building company are made fully responsible for the funds received by the company once it ceased the business without completing the construction.

    It is important to understand the fact that this ruling opens an important door to claim for the return of the deposit to those partners, principals and directors of the building company, even if the company has been legally closed down and liquidated.

    Academic sources in Spain have supported the Judgement commented above, insisting that is more than obvious the malpractice of the said companies responsible parties who, in many occasions voluntarily, failed to fulfil their mandatory duties with their buyers.

    Some associations of consumers and local solicitors are recommending going actually one further step beyond, even pursuing the buyers’ deposits through criminal Courts requesting full liability from the builders’ representatives.

    The Spanish Prosecution Service has promised to act promptly review most carefully the cases brought forward to its knowledge and competence.

    If you feel that this judgement may assist you, please contact us for a no-obligation consultation.

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  • Residency through investment

    03 January 2013

     The Spanish Government is reforming the law in order to grant residency permits to foreign nationals who purchase a property in Spain. The minimum purchase price of the property is €160,000.

    The underlying aim is to assist the banks to sell some of the vast amount of properties built during the real estate boom between 2000 and 2008, in which more properties were built in Spain than in any other European country.

    The Law is currently under review by the Spanish Parliament. It is likely to come into force very soon, possibly by the beginning of the coming year, 2013.

    The Spanish Socialist party, currently in the opposition, has said that this is not a correct measure to try and solve the problems of the Spanish economy.

    However, the Government replied that very similar, if not identical, Laws has been put in place recently, rather successfully, in countries such as Portugal and the Republic of Ireland, and that these Laws are helping to boost the economy.

    In general, the proposed legal amendments have been well received by the consumers and, obviously by the banks, but also by potential residence applicants, who rushed to request information from all sources, and who have complained that the current Law regarding residency via financial means is quite complex – under the current state of things to gain residency in Spain the applicant must prove a steady and high monthly income, which can often be difficult to prove.

    Further details on exact requirements and application process will be issued by mid December, with the new system in place by January 2013.

    If you are interested in obtaining residency in Spain, please feel free to contact us for a no-obligation consultation.

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  • Dacion en Pago

    04 October 2012

    The Spanish Socialist Party, currently in opposition, has announced that, once in Government, they will alter the mortgage system to facilitate settlements in the event that the mortgagees cannot continue with the monthly payments.

    The party will ensure a clause is included within the mortgage deeds whereby the bank pre-agrees a settlement - dacion en pago - at any point upon request of the mortgagee.

    As expected, the banks have reacted cautiously, but have started to offer that possibility to new clients applying for mortgages. The current Government has announced some changes to go along with the trend.

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  • Bankia Investigation

    04 October 2012

    A judicial investigation has recently opened in the High Court against the executives of Bankia, the bank created by the merger of different entities (mainly regional savings bank, or “cajas”).

    Bankia's main component, Caja Madrid was, during the 1980s, the fourth largest Spanish financial institution and second largest European savings bank. Caja Madrid had started to lower the risk assessment on mortgage applicants, to a level that has been described by the Court investigators as “alarmingly unprofessional”.

    The inspection reports that were commissioned by the Madrid High Court, and conducted by the Bank of Spain, concludes that the basis for the financial problems had commenced between 2003 and 2007.

    During those years, Caja Madrid slipped into a growing spiral of irresponsible lending via mortgages and off-plan building without proper risk assessments.

    "It is clear the failure that has resulted have made swing the expansion of housing in a credit policy based on lending by more than 80% of the guarantee, some times over 100 % of the collateral (...)" is one of the conclusions; "loans were granted to those who, in fact, had no ability to pay," stated the inspectors.

    By 2010, Caja Madrid alone had  accumulated € 7.2 billion in “dubious or difficult to recover” loans, plus an extra € 6.2 billion in high risk financing. The inspectors described the profile of Caja Madrid as an "Entity with adjusted solvency and decreasing profitability."

    Two circumstances led to the situation as described: a) the number of mortgages approved without a real risk assessment on the actual financial capacity of the mortgagees, and b) the over inflated appraisal of the properties guaranteeing the mortgages.

    The combination of these two factors ensured that 20 % of the mortgages were granted in a way that menat is was virtually impossible for the bank to recover the loan. There are thousands of cases where applicants have insufficient income to pay-off the mortgage, yet many were given 110 % of the property’s value.

    The investigation is still open and it is expected to reach the top executives of the bank between 2004 and 2010 (now already discharged of their posts at that time).

    How is this situation affecting current mortgagees that cannot carry on with the mortgage repayments?

    Quite directly. The Higher Courts are increasingly basing judgement on the value of the property at the time of purchase, and not (as the banks prefer) the market value at the moment of the settlement.

    The reasoning is simple: the lending bank commissioned and approved the valuation at the time of purchase, so now it has to bear the consequences of it.

    These inflated valuations helped to create an unsustainable market bubble that exploded by the end 2007, bringing down the property prices dramatically and affecting, not only the macroeconomics, but the day by day households finance.

    Based upon these recent cases,  the Magistrates are claiming that the weaker party in the mortgage should not carry entirely the negative consequences of the current financial climate, but very much on the contrary, the banks should be made responsible for it, hence take the consequences. The Judgements are constantly citing, for instance, that “the financial system is entirely responsible for this current crisis, and the banks are main players in that system”.

    If you have a mortgage in Spain and are struggling to meet the repayments, please contact us.  We offer a no obligation consultation and it is likely that we can assist.

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  • Dacion en Pago clause

    17 September 2012

    Those applying for a new mortgage in Spain should request article number 140 of the Mortgage Law to be included within the mortgage deed.

    This article does not change the mortgage terms in any manner, but only pre-agrees an unconditional settlement during any period of the mortgage term, should the client decide to return the keys to the bank, giving up the property.

    In another words, it is a door open for an early settlement ("dacion en pago") any time the mortgage holder should decide to exit the mortgage.

    It is little known that this article has existed in the Spanish legislation for over a century, but the banks do not usually mention, let alone offer it, while discussing the terms and conditions of the mortgage.

    Please feel free to contact us if you are applying for a mortgage or remortage in Spain.  We may be able to assist with negotiating your mortgage terms.

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  • New Criminal Legislation

    17 September 2012

    On Friday 14th September 2012, the Spanish Government announced an important change in legislation.

    A new Criminal Act will be proposed to the Parliament. This new law will introduce terms of life imprisonment in relation to criminal sentences for several major offences and also to those who are considered as persistent offenders.

    The act will also increase sentences for terrorism, general indiscriminate violence, sexual offences, fires intentionally provoked and murder. The new Criminal Code is expected to be passed and enforceable during early 2013.

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  • Lease Agreements

    11 September 2012

    A new Law was passed on August 24th 2012 which aims to "improve the security and certainty" of both landlords and tenants, says the Spanish Government.

    The new Law will try and achieve enhanced security for both parties by "encouraging rental housing owned by non-residents, giving greater legal certainty to owners so that they get to market homes and, last but not least, providing access to housing for those of young age and lower income families." New and further reforms of relevant Laws (such as the Civil Procedure Law) will follow.

    One of the more relevant aspects of the Law recently introduced is that it will take just ten days to evict tenants who fall behind in paying the monthly rent.

    According to the Ministry, with the current rules the landlord is forced to file an action at court and obtain a favorable judgment for non-payment of rent as the only way to an eviction. In addition, in the previous situation, the tenant had the chance to pay at the last minute and the process would cease.

    By simplifying the requisites for the eviction, the authorities look also to unblock the chronic delays within the court system in Spain. The new set of rules also gives the tenant the option to terminate the contract by giving the landlord one months notice.

    It also ensures that the owner may recover the property, without so provided for in the lease, if five years have elapsed since its signing. This will be permissable in the event of the landlord requiring the property for themselves, first degree relatives by blood or adoption or your spouse divorce or annulment after a two-month period of notice.

    Another relevant change is the chance that the parties will have to agree any kind of scheme to keep the monthly rent up to date. Under the previous regulation, the rent had to be kept necessarily linked to the C.P.I., whereas now the intervening parties can freely agree any reference or rate to keep the rent up to date.

    Please don't hesitate to contact us if you are in a dispute with a tenant or landlord.  We offer no obligation consultations on all lease matters.

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  • Timeshare Legislation

    11 September 2012

    The Spanish authorities completed this summer relevant amendments within the local Laws to fully adapt the Spanish legal system to the European regulation of contracts and agreements defined as “timeshare”.

    The EU authorities started by 1994 to rule, quite strictly, timeshare contracts between companies and consumers. This regulation culminated in 2008, with the Directive 122/2008, which made mandatory within all European States a set of rules to protect the users of timeshare developments and, in general, holidays schemes.

    In June, Spain the Law (through the Royal Decree 8/2012) that aims to put an end to the controversies, and also abuses, originated by the previous situation. The mentioned abuses related, mainly, to extremely long (in some occasions of lifetime length) agreements, numerous deposits and down payments lost and hidden or non legible clauses in the contract.

    Under the new rules, from June 2012 the contracts and in general schemes or products within timeshare agreements to be enjoyed or executed in Spain must comply with the following;

    1. The timeshare holidays or any kind of product/shared ownership offered for holidaying cannot be offered as an investment.
    2. The terms and conditions marketed, whatever means they are issued (newspaper, online, brochure, etc.) will be clear, simple and straightforward; and this information, even if preliminary, will be enforceable in the contract to be signed at a later stage by the parties.
    3. The company cannot request down payments, deposits, monies on account or any kind of funds in advance before the contract is formally agreed.
    4. The client can withdraw from the contract after the second instalment paid, if (as it very often, if not always, happens) the contract is agreed on a long term basis against fees or costs to be paid in equal and periodical instalments.
    5. The client will be able to desist (without any cost, penalty or fee whatsoever) in any case within 14 days after signing the contract.
    6. The contracts will be drawn in the language of the client and also in Spanish, if the place where the said client will be enjoying the holidays will be Spain.
    7. It will be null and void any reserve or renounce to any of the rights granted by the applicable Law.

    Please feel free to contact us if you have an exisiting timeshare agreement or are considering a timeshare proposal.

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  • New Financial Regulations

    04 September 2012

    The Spanish Government introduced a new set of rules on Friday 31st August 2012 in order to both reorganise the Spanish financial system after the recent crisis, and to restructure the financial system. This new legislation is primarily aimed at the saving banks.

    The new regulation was issued under a long and complex Law (the Royal Decree 24/12) of wide scope that aims to end the unstable situation of the Spanish banks after the crisis reached its peak earlier this summer.

    The issues covered by the new legislation are;

    • The high level of properties the banks are accumulating as a result of constant asset repossessions and mortgage defaults, and the effect that this is having on the real estate market.
    • The confusion generated after a significant sale of investment products by the banks, in a desperate attempt to gain liquidity after a massive mortgage default that has hit, quite alarmingly, the balance book of several institutions.

    The solutions proposed in the RD 24/12 are various, but can be summarised as follows:

    • It gives the Spanish financial authorities the right to take over “early”, any institution likely to get into financial trouble. This measure is aimed to avoid situations like those provoked by CAM bank and, mainly, Bankia, the latter a merge of various institutions all very active in the mortgage market between 2005 and 2008 and whose accounts were unbalanced due to bad loans.
    • The authorities will be able to decide whether to inject public funds or to liquidate any institution with serious liquidity issues.
    • An institution, named already as “bad bank” or “toxic bank” will be created. It will be owned and controlled by the Government and will have the purpose of handling all assets repossessed by the banks after mortgage defaults, and that are currently impossible to sell in the local real estate market due to their loss of value. These assets could be written off the institutions’ accounts, hence facilitating the banks a normal access to credit in the financial markets. The financial authority, via the ad hoc vehicle described, will have up to 15 years to liquidate these assets at levels that will allow the banks to recover the funds lent with the mortgages.
    • To avoid the situation generated with the deposits known as “preferred participations” (an investment midway between a long term deposit and a capital-stock purchase, with an intricate yield and obscure terms) the banks will not be allowed to sell sophisticated investment products to individuals, but only to investment companies.

    Despite another set of rules is expected shortly, the RD 24/12 has been well received by the specialised media, the Spanish stock market and the consumer associations, all of which have been openly upset and disappointed recently with the Government after it failed to provide stability to the financial situation after the constant rumours of a Spanish default and rescue by the EU.

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  • Mis-sold Bank Investments

    21 June 2012

    The Regional Chief Prosecutor of Galicia has issued a press release stating that he is preparing a criminal action against Novagalicia, as the entity “CaixaNova” (formerly an independent entity but currently one of the Cajas that merged to form Novagalicia) may have committed a fraud when selling preferred participations (investment products) to many individual clients.

    The way the Caja sold the product was entirely against the rules laid down by the Spanish Savings and Investments Authority (Comisión Nacional del Mercado de Valores).

    This body requested that all financial institutions should not offer the preferred participations to regular clients, but only to those with: a) regularly high balances, and b) who were knowledgeable and experienced investors. The Financial Authority recommended detailed verification of those clients interested in this particular type of investment, in order to check the suitability of the client to the financial products.

    However despite the regulations, the Prosecutor in this case is aware that the higher management of the Caja gave instructions to sell the participations “as much as possible, without any restrictions and regardless of the balances held in the account – the more subscriptions the better”.

    Some clients of the Caja that had funds in saving accounts have stated that they received enforceable contracts and subscriptions of the participations even if they had not applied for the investment, and much less agreed to them.

    An especially grave case has been known in which a client of Caixanova did agree to the investment by stamping his inked fingerprint in the contract, as he was illiterate.

    The Prosecutor’s press release was issued in early June 2012 and the case is expected to reach the Criminal Court shortly, with the representatives having to declare all the related facts.

    Some Spanish banks have started to offer and exchange the preferred participations for normal saving accounts or shares of the bank, after the complaints have literally flooded many bank´s ombudsman. However, Novagalicia has not offered any similar settlement to its clients. It is estimated that a figure of around € 30 billion has been invested in this product in Spain in the last five years.


    If you believe that you have been miss-sold an investment product in Spain please feel free to contact us for a no-obligation consultation.

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  • Mortgage Resolution

    26 April 2012

    The Spanish Government has issued a further Resolution, which clearly points towards looking for a permanent solution to the ongoing problem of mortgage disputes.

    On April 10th 2012 the Spanish Ministry of Finance invited the Spanish financial institutions to sign up to a Resolution by which the said institutions agree to coordinate and organize mechanisms to settle those mortgages that the debtors cannot afford to continue paying.

    The majority of the Spanish banks (see complete list of signatories below) have formally agreed to this scheme, and although it does not mean an automatic solution to all mortgagees in trouble, it is another step in the direction of providing new ways to settle with the banks by returning the property.

    Under certain conditions the banks agree to take the property back, and by doing so, they agree to cancel the debt entirely, even to those mortgages with negative equity.

    As mentioned above this is a quite important step towards a full regulation of the problem in a way that will lead in the near future to a full implementation of a flexible system for settlements (or dación en pago, as known in Spain).

    Complete list of Financial Institution joining the Spanish Government Recommendation.

    • Arquia Caja de Arquitectos, S.C.C.
    • Banca Cívica, S.A.
    • Banca March, S.A.
    • Banco Bilbao Vizcaya Argentaria, S.A. (BBVA).
    • Banco Caminos, S.A.
    • Banco Cooperativo Español, S.A.
    • Banco de Caja España de Inversiones, Salamanca y Soria, S.A.U.
    • Banco Español de Crédito, S.A.
    • Banco Etcheverría, S.A.
    • Banco Grupo Cajatres, S.A.
    • Banco Mare Nostrum, S.A.
    • Banco Pastor, S.A.
    • Banco Popular Español, S.A.
    • Banco Popular-e, S.A.
    • Banco Sabadell, S.A.
    • Banco Santander, S.A.
    • Bankia, S.A.
    • Bankinter, S.A.
    • Bankoa, S.A.
    • Barclays Bank, S.A.U.
    • BBK Bank Cajasur, S.A.
    • Caixa de Credit dels Enginyers-Caja de Crédito de los Ingenieros, S. Coop. de Cdto.
    • Caixa Popular-Caixa Rural, Coop. de Crédito.
    • Caixa Rural Altea, S. Coop. de Crédit V.
    • Caixa Rural Benicarló, S. Coop. De Crèdit V.
    • Caixa Rural de Callosa d'en Sarrià, S. Coop. de Crédit V.
    • Caixa Rural de Gijón, Cooperativa de Crédito.
    • Caixa Rural de L'Alcudia, S. Coop. V. de crédito.
    • Caixa Rural Galega, Soc. Coop. de Crédito Limitada Gallega.
    • Caixa Rural La Vall San Isidro, Coop. de Crédito V.
    • Caixa Rural les Coves de Vinroma, S. Coop. de Crédit V.
    • Caixa Rural Sant Josep de Vilavella, S. Coop. de Crédit V.
    • Caixa Rural Torrent, S. Coop. de Crédit V.
    • Caixabank, S.A.
    • Caja de Ahorros y Monte de Piedad de Ontinyent.
    • Caja de Crédito Cooperativo, S.C.C. (NOVANCA).
    • Caja Laboral Popular, Coop. de Crédito.
    • Caja Rural Católico Agraria, S. Coop. de Crédito V. de Vila-Real.
    • Caja Rural Central, S. Coop. de Crédito.
    • Caja Rural D'Algemesi, S. Coop. V. de Crédit.
    • Caja Rural de Albacete, Ciudad Real y Cuenca, S.C.C. «Globalcaja».
    • Caja Rural de Albal, Coop. de Crédito V.
    • Caja Rural de Alginet, S. Coop. de Crèdit V.
    • Caja Rural de Almendralejo, Sdad. Coop. de Crédito «Cajalmendralejo».
    • Caja Rural de Asturias, S.C.C.
    • Caja Rural de Baena Nuestra Señora de Guadalupe, S.C.C.A.
    • Caja Rural de Cañete de las Torres, Ntra. Sra. del Campo, Sdad. Coop. Andaluza de Crédito.
    • Caja Rural de Castilla-La Mancha, S.C.C.
    • Caja Rural de Cheste, S. Coop. de Crédito.
    • Caja Rural de Córdoba, S.C.C.
    • Caja Rural de Extremadura, S.C.C.
    • Caja Rural de Guissona, S.C.C.
    • Caja Rural de Navarra, S.C.C.
    • Caja Rural de Salamanca.
    • Caja Rural de Soria, S. Coop. de Crédito.
    • Caja Rural de Teruel, Soc. Coop. de Crédito.
    • Caja Rural de Utrera, S.C.A.C.
    • Caja Rural de Villamalea, S. Coop. de Crédito Agrario.
    • Caja Rural de Villar, C.C.V.
    • Caja Rural de Zamora, Cooperativa de Crédito.
    • Caja Rural del Mediterráneo.
    • Caja Rural del Mediterráneo, Ruralcaja, S.C.C.
    • Caja Rural del Sur, S.C.C.
    • Caja Rural La Junquera de Chilches, S. Coop. de Crédito V.
    • Caja Rural Ntra. Sra. del Rosario, Sdad. Coop. Andaluza de Crédito.
    • Caja Rural Ntra. Sra. Madre del Sol, Sdad. Coop. Andaluza de Crédito.
    • Caja Rural San Isidro de Villafamés, S. Coop. de Crédito V.
    • Caja Rural San Jaime de Alquerías del Niño Perdido, S. Coop. de Crédito V.
    • Caja Rural San José de Almassora, S. Coop. de Cdto. V.
    • Caja Rural San José de Burriana, S. Coop. de Crédito V.
    • Caja Rural San José de Nules, S. Coop. de Crédito V.
    • Caja Rural San Roque de Almenara, S. Coop. de Crédito V.
    • Cajamar Caja Rural, S.C.C.
    • Cajasiete Caja Rural, S.C.C.
    • Catalunya Banc, S.A.
    • Colonya Caixa D'Estalvis de Pollença.
    • Crédit Valéncia, Caja Rural, S. Coop. de Crédit V.
    • Ibercaja Banco, S.A.U.
    • ING Direct NV, sucursal en España.
    • Kutxabank, S.A.
    • Liberbank, S.A.
    • NCG Banco, S.A.
    • Nueva Caja Rural de Aragón, S. Coop. de Crédito.
    • Popular Banca Privada, S.A.
    • Ruralcaja, S. Coop. de Crédito.
    • Targobank, S.A.
    • Unicaja Banco, S.A.U.
    • Unnim Banc, S.A

    If you have a mortgage in Spain and are having difficulty meeting the repayments, please contact us today for a no-obligation consultation.

     

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  • Inheritance tax reclaim

    17 April 2012

    RDT Abogados are delighted to announce the launch of our No Win No Fee inheritance tax reclaim.

    If you have paid inheritance tax in Spain within the past 4 years, we may be able to assist with the recovery of the majority of the amount paid. It is a requirement that either the deceased or yourself were non-resident at the time of payment.

    The inheritance tax law in Spain differs for residents and non-residents. The tax levied for non-resdietns is significantly higher than for residents. This method of taxation is in clear breach of European Union legislation, which stipulates anti-discrimination as per the EU Treaty.

    On this basis, RDT Abogados are able to claim back the overscharged tax amount from the Spanish authorities. Our bi-lingual team of solicitors have many years of experience in dealing with tax issues in Spain.

    We are confident in our ability to obtain refunds for our clients and accordingly have set a No Win No Fee payment structure for new clients.

    Key Points:

    • Term to claim: four years from payment of tax (date stated on forms 650 or 652) and not of the passing of the deceased party.

    • Inheritance tax payment of more than € 4,000.

    • Taxes paid in relation to the donation of a property can also be considered to an application to reclaim.

    • Non resident citizen of any EU country or Norway. Any other country will be considered (will depend on treaties between the relevant states). It is not possible to claim for Swiss citizens.

    • Minimum original documents to supply: forms submitted to Spanish tax office, inheritance deeds and power of attorney (once the claim is approved by RDT Abogados).

    • Only spouses by matrimony and ascendants and descendants (sons, grandsons, parents and grandparents) beneficiaries can claim – not common law spouses.

    • Average term for claims: 18 months. The claim must go to tax office in Spain, Spanish Court and EU Court.

    • RDT Abogados offer a No Win No Fee service. A Success Fee will apply.

    • A Power of Attorney will be required. This will involve a visit to Notary. The Notary will charge the client directly for processing the document.

    The original documents as listed above, together with our Terms of Business (available upon request), should be sent to our London office.

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  • New Alicante Office

    17 April 2012

    RDT Abogados are delighted to announce the opneing of our new Alicante office.

    Our Novelda office has relocated to Alicante city centre.  The new office is located at C/ Antonio Galdo Chapuli, 15 and is situated 50m from from the British Consulate.

    If you are in Alicante and require legal assistance, please don't hesitate to drop into our offices, where Silvia, Susi and Dulce are on hand to assist.

    The office is open 9.00 am - 5.00 pm Monday to Friday.

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  • Spanish Ombudsman report on mortgages

    03 February 2012

    On 27th January 2012, the financial Ombudsman in Spain issued a report and conclusions on the current issues affecting mortgages in Spain.


    This report is the result of the numerous complaints of mortgage holders when, due to the current financial climate, they struggle to repay and cancel the mortgages.


    The report points out the many wrongdoings of Spanish mortgage lenders over the past few years and specifically during the property boom.

    The main criticisms relate to the lack of clarity on the main financial terms and conditions and poor or non existent English translations available to those without enough knowledge of the Spanish language.


    The Ombudsman firmly not only recommends but instructs the banks to rectify these issues.
    However, most importantly, the survey addresses a recurring problem that affects most if not all the mortgages in default.

    In Spain, repossession is undetaken without consideration of the value of the property at the time of repossession. The value used is that of the original bank valuation upon purchase.


    So, if for instance a property is charged with a mortgage of € 100,000, but after several years the bank repossess the property and it is sold at public auction for, say, € 60,000 and the mortgage repayments over the years have reduced the balance by € 10,000, then the bank has the right to chase and claim from the mortgage holder the remaining balance which, in this example, would be € 30,000.


    This means that, apart from losing their properties, the mortgage holders owe the bank a large amount of money. Also, it makes impossible to reach an agreement with the bank when the mortgage initially falls into arrears, as the bank will expect the property plus a lump sum to cover any shortfall.


    The Ombudsman’s report clearly states that this system is completely unfair and abusive, as the banks take full advantage of the fluctuations, in many occasions dramatic, of the property market.
    The report mentions several precedents from the Higher Court in Spain that recently (and increasingly) have observed this unfairness and have judged in favour of the mortgage holders. This has enabled mortgage holders to be released of their financial obligations by returning the keys back to the bank, and by doing so cancelling the debt in full.


    The report also request that the banks include a clause in new mortgages that will allow settlement between bank and buyer, by returning the property to the bank, if at any moment the mortgage holder cannot keep on paying the monthly instalments. This clause is previewed already and available by law and can be claimed by new purchasers of real estate when buying in Spain.

     

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  • Huma Mediterraneo

    16 January 2012

    RDT Abogados is representing a group of UK clients who placed deposits for properties on Almanzora Country Club.

    The developer was Huma Mediterraneo.

    The class action is progressing well, and with the benefit of a bank guarantee from Banco de Valencia, we expect a positive outcome this summer.

    It is not too late for individuals to join proceedings. It may be that we can claim under the bank guarantee that we presently hold.

    If you have placed a deposit with Huma Mediterraneo, please contact us for a no-obligation consultation.

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  • Amendments to Immigration Law

    13 December 2011

    The law RD 1710/2011, dated November 18th, changes the regulation on immigrants entering Spain.

    This recent law modification simplifies the procedures and requirements to obtain legal residency in Spain. 

    In particular, the amendments will benefit the relatives of EU citizens with residence in Spain.

    The alterations to Spanish immigration law are relevant specifically in two areas:

    • Reducing the terms to obtain legal residence for non-EU born relatives of EU citizens with residence in Spain. Five years are reduced to three in case of matrimony with a non-EU born.
    • Giving stronger legal protection to relatives and spouses involved in expulsion cases.
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  • Reduction to Notary Fees

    13 December 2011

    A rule was recently issued in Spain (RD 1612/2011, dated November 14th) in which Notaries and Registrars are forced to amend their fees and adapt them to previous regulation on public services.

    The most important rule is that protecting the mortgage holders in cases of subrogation, refinance and settlement with the bank via returning the property’s keys (in Spanish “dacion en pago”).

    In all these cases the Notaries are forced to review and reduce their fees by approximately 5 %.

    The Land Registry fees will be reduced by roughly the same amount.

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  • Further judgement in favour of borrower

    15 November 2011

    A first instance court in Madrid has judged against Bankinter in a claim made by a borrower in relation to the terms and conditions of a mortgage loan.

    The sentence states that the swaps (or any other mechanism of cap and floor of interest rates) will have to be "clear, complete and fully comprehensible" to the borrower, otherwise they will be declared null and void and of no application to the agreement between the bank and the individual.

    The sentence goes further, saying that the terms and conditions relating to interest rates must be understandable to an "average individual, not familiar either with financing or with the basics of banking".

    Also, the sentence says that this protection is valid even if the borrower has benefitted from favourable movements of interest rates during the course of the loan repayments.

    Please don't hesitate to contact us if you need any advice in relation to your mortgage in Spain. We would be happy to review your mortgage contract and provide impartial advice whilst taking into account your circumstances and intentions.

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  • New wealth tax in Spain

    31 October 2011

    The Spanish authorities have recently introduced a new wealth tax in Spain , which may affect some some foreign property owners.

    In view of Spain's current economic woes, it is no surprise that the government in Madrid have been seeking ways to generate additional tax revenue.

    Accordingly, a wealth tax has been introduced by Royal Decree from September 2011.  This form of taxation will stay in place for at least two years.

    The tax will affect individuals with assets valued at €700,000 or above.  The tax liability in most cases will amount to around 2% of the value of the assets.

    Each individual will need to submit an annual self assessment tax return.  A local tax representative should also be appointed.

    The authorities are able to impose fines of up €1,000 for late submission or non appointment of a tax representative.

     

     

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  • VAT reduction on new build purchases

    12 October 2011

    On 19th August 2011 the Spanish government announced a 50% reduction in the I.V.A. payable on purchases of new build properties throughout Spain.

    This means buyers will now only pay 4% tax on the purchase price.

    This reduction is applicable until 31st December 2011.

    The Spanish government has taken action in an attempt to stimulate the property market and encourage buyers to reduce the number of vacant new build properties throughout the country.

    The number of newly built unsold properties is currently estimated at 700,000.

    Industry watchdogs hope that the lower rate of I.V.A. will assist the beleagured construction industry.

    It is also good news for buyers of off-plan properties, who will now benefit from lower completion costs.

    If you are buying a new build property and would like a quoation for conveyancing please don't hesitate to contact us.

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  • Mortgage Issues in Spain?

    11 October 2011

    The Audiencia Provincial of Girona (or Higher Court, a second instance between the Juzgados de Instancia - first instance - and the Supreme Court), has judged recently in favour of the claimant against Deutsche Bank in a mortgage dispute.

    The first instance judged that, after repossessing a property charged with a mortgage, the bank had the right to claim from the mortgage holder the balance between the value of the property at the moment of repossession and the market value of the said property.

    Since the market value of the properties has decreased considerably because of the general financial climate, in virtually all cases of repossessions the mortgage holders find themselves sued following repossession.

    This sentence in the province of Girona, sets a precedent in the sense of declaring the debt totally cancelled once the property is repossessed by the bank.

    As this judgement has been passed by a higher court, it can be claimed as a precedent in similar cases throughout Spain.

    Please feel free to contact us if you find yourself in similar circumstances.

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  • New website goes live!

    26 September 2011

    RDT Abogados are delighted to announce the launch of our new and improved website.

    The English language website has been developed specifically for the UK and Irish markets. You will find an overview of the main services offered by RDT Abogados.

    If you require assistance in relation to a subject matter not detailed on the site, please feel free to contact us.
     

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Key Contacts

United Kingdom
41 Lothbury
London
EC2R 7HG

T: +44 (0)203 475 40 41
F: +44 (0)203 475 41 42


Ireland
Pembroke Hall
38/39 Fitzwilliam Square West
Dublin 2

T: +353 1 903 6403


Alicante
C/ Antonio Galdó Chapuli, 15
03001 Alicante


Barcelona
Rambla Catalunya, 99, 1st Floor
08008 Barcelona


Canary Islands
Albareda, 111
35008 Las Palmas


Malaga
Avenida Tomás Pascual 34, bajo.
Urbanización La Quinta.
Benahavis
29679 Málaga