LEGAL EYES
Q Intending to buy property in Spain I was advised to avoid using a solicitor as their role is basically the same as that of the notary anyway. I want to keep costs down. Should I dispense with a solicitor?
A. As we have seen cutting out the solicitor has led to many problems: properties built without planning permission, the neglect of a 10-year guarantee, habitation certification, etc.
There are vital differences between the notary and solicitor. The purpose of the notary is to merely place on public record formal documentation regarding legal transitions; especially relating to property conveyance and the setting up of companies.
The solicitor ensures the property is legal and obtains documents necessary for the transfer. He will find out if there are outstanding debts on the property, which need to be settled.
As facilitator between the buyer and seller’s banks, estate agents he liaises with the notary office. He will make certain the property is free of liens, encumbrances, or charges such as mortgages. There will also be aspects relating to property taxation, especially for non-resident buyers and sellers.
If such matters are not handled competently, then the buyer and sometimes the seller may be exposed to serious risk.
When signatures are exchanged the solicitor carefully peruses the draft of the deeds written by the notary’s clerks, for the approval of the buyer and seller’s solicitors. He also coordinates payments and the cancellation of charges; usually the mortgage; translates and explains the content to his client.
The solicitor checks satisfactory compliance with tax affairs, to make sure the title deeds are inscribed at the Land Registry, without which the property could not be subsequently sold.
Notaries never intervene in these procedures, essential to ensure the security of both the vendor and buyer. It is simply not sensible to proceed without a solicitor. In summary the notary acts on behalf of the state and the law: The solicitor acts on behalf of his clients.
Q. The term padron and empadronarse are terms that keep cropping up I know it is a form of registration but I am not sure as to the implications, the benefits or legal requirement to complete the process. Can you shed any light on it?
A. A timely question as it coincides with the British Embassy in Madrid promoting the empadronarse and setting out its reasons for doing so. The padron is simply a register of those people who live in each municipality. Registering is required of those who spend more than six months a year in Spain be they property owners, tenants, or long term ‘guests’.
It is how each Town Hall knows how many people live in the municipality in order to meet the community’s needs. Protected by data protection laws it is not a prying device.
To register, visit the padron desk at your local Town Hall. Take your passport, NIE certificate, a utility bill in your name or the person you rent from, and a copy of your deeds or rental contract.
As resources allocated to each municipality are based on the numbers on the empadronamiento by registering you help yourself and your local community. These include better public services, improved access to health care facilities, a reduction in some taxes plus discounted access to leisure and cultural activities.
Q. What are the tax implications for someone who owns property and rents it to tenants for a few weeks to subsidise their income? My friend does so for just six weeks a year but jealous neighbours reported her to the administrator of the urbanisation. He says the Inland Revenue will be informed and court action may be taken.
A. That informal renting is commonplace doesn’t legitimise it, and yes it can be regarded as taxable income and IVA (VAT) is applicable. It is no different from the unregistered tradesman ‘doing a bit on the side.’ Check the community rules to see if it is allowed. There are risks other than tax. Accidents do happen. Could you claim against insurance cover if an accident happens as a consequence of a letting?
Legitimate rental-tourism is showing year on year growth so it might be worthwhile to consider your second home as a business. The better established holiday letting services will guide and advise you as their success is based on your satisfaction and safety.
Legal Eyes© Michael Walsh Legal Partnership.
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THE RUSH TO RENT HOLIDAY HOMES -Will This Be The Costas Survival Option?
Mike Walsh
With property rental registrations up by 30% year-on-year and enquiries up by 30% property rentals are changing the face of tourism. The mobility and cost effective advantages of ‘letting tourism’ could give the tourist industry a much needed booster shot.
Changes in legislation giving better protection to property letting owners, and a more competitive rental market, are accelerating the trend away from purchase to rent. It is a change that could regenerate Costa tourism, bringing it quickly back to pre-recession levels.
The radical shift is boosted further by tighter lending restrictions for property buyers. Michael McLaughlin for southerncomfit.com property rentals says he predicted the change in tourist tastes in 2007. This was a turning point when, for the first time, more tourists rented than bought traditional package holiday deals.
For many buyers property purchase will continue to be an investment offering good returns. However, those who once bought a holiday home are discovering that renting can be a cost effective hassle-free alternative. You get a lifetime of holidays with much change left over for the price of a 2-bed apartment.
A LIFETIME OF HOLIDAYS
The benefits work both ways: The recession means more owners are placing their homes on the rental market to make ends meet. Southern Comfit's boss says they are now generating more revenue through rentals than by sales. It is also an interim solution for those finding it difficult to sell their holiday homes.
Returns have been exaggerated by less responsible letting portals, which can lead to disappointment. If income seems too good to be true then beware.
Rents are now very competitive. A nicely located two-bed apartment on the Costa Blanca will typically rent long term at about €100 a week: A 4-bed villa for up to double that. Add fifty per-cent for the short term arrangements preferred by holidaying tenants, which helps compensate for the periods when the property is vacant.
Sometimes returns are confused with profits, which is being economical with the truth. The mortgage may still be active and the owner is still responsible for local charges and utilities. A two-bed apartment should, after costs, provide a weekly profit of about €200.
RENTING AS A BUSINESS
Many long term tenants are expected to take responsibility for the electricity and water bills. In Spain these costs are considerably cheaper than they are in the UK.
Pasting a pictured description of one’s property on the company’s notice boards, or putting the word around one’s family and circle of friends, is not necessarily a good idea.
Such tenants are notorious for emotional blackmail in negotiating the rent and can be cavalier as to their responsibilities. There will be the added frustration of cancelled bookings, arguments over seasonal rates, rows over their invited friends, and weeks when the property is empty.
OWNER – TENANT PARTNERSHIP
Some are willing to take these risks for cash-in-hand deals but this is self-delusion. By declaring your rental income you forfeit a little but you enjoy the peace of mind of knowing you are legitimate. Furthermore, if you are unfortunate enough to get a difficult tenant they will take advantage of your questionable arrangement. It is no use taking a tenant to court for breaking the rules if you yourself are disregarding them. For the same reason taking out insurance is prudent; it can also be a cost effective tax-reducing investment.
For these reasons holiday letting property portals have mushroomed to meet demand from both owners and tenants.
As with all else in life there is a good and bad mix. If registration is free or very low there has to be a catch which will likely mean little advertising being done. What use is an entry that too few see? Another trick to net the unwary is to exaggerate returns.
If the portal you decide on is heavily investing their clients’ registration fees in site promotion, and keeping hold of their clients year after year, the modest fee when set against returns is perhaps the best investment the owner will ever make.
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NOTARIES - AND LAWYERS. THERE IS A DIFFERENCE
The notary is often thought of as a specialist legal expert whose role makes a solicitor’s intervention superfluous. The two professions’ do complement each other but there is a marked difference in their responsibilities to both buyers and sellers. There is much justification in saying the solicitor’s role is more demanding.
Spanish and French notaries are appointed as state representatives after special examination in civil law. Their purpose is to place on public record formal documentation regarding certain legal transitions; especially relating to property conveyance and the setting up of companies. These procedures are signed in his or her presence, being the official state witness for the purpose of ensuring the identity of the parties and their legal capacity. This is to avoid fraud and to ensure that the parties involved understand what they are undertaking.
If the notary believes there to be reasonable doubt as to the identity of the parties; or that one of them is not of sound mind, or not acting freely, the notary will not authorise the signatures and the transaction will not take place.
This is why contracts, signed in the presence of a notary, are considered public documents or public deeds; contrary to private agreements where notaries do not intervene, as for example a lease agreement. A private agreement can be based on the English language but deeds have to be worded in either Spanish or French.
Another important role of the notary is to ensure that certain formalities are observed in the drawing up of deeds: In Spain for example to declare the means of payment. The notary will also retain the original document, as this belongs to the state. The buyer simply receives a copy but if it is lost another copy can always be obtained through the notary.
Whilst playing an important part in procedures the notary’s role is limited and is complementary to the solicitor’s role in conveyance.
The solicitor’s work begins long before the intervention of the notary. Initially there will be private agreement between the buyer and seller after which both parties prepare for the big day when they, or their solicitor with power of attorney, go before the notary.
Beforehand the solicitor will need to ensure that the property is legal and obtains several documents necessary for the transfer. The solicitor will also find out if there are any outstanding debts on the property, which need to be settled.
The solicitor will also act as facilitator between the seller’s and buyer’s banks, estate agents, and the notary offices. He will make certain that the property is free of any liens, encumbrances, or charges such as mortgages. There will also be several aspects relating to property taxation, especially for non-resident buyers and sellers.
If such matters are not handled competently, then the buyer and sometimes the seller may be exposed to serious risk.
On the day in which signatures are exchanged before the notary the solicitor will carefully peruse the draft of the deeds, which are written by the notary’s clerks, for the approval of the buyer and seller’s solicitors. He will also coordinate payments and the cancellation of charges; usually the mortgage; translate and explain the content to his client.
After the notary’s role has ended the solicitor still has work to do. These include satisfactory compliance with tax affairs, to make sure the title deeds are inscribed at the Land Registry, without which the property could not be subsequently sold.
Notaries never intervene in these procedures, essential to ensure the security of both the vendor and buyer.
As with most things in life conveyance can be straightforward or problematic. Almost daily the rules and regulations can change. For this reason it is simply not sensible to proceed without a solicitor even though doing so is not compulsory. As we have seen this has led to many problems: properties built without planning permission, the neglect of a 10-year guarantee, habitation certification, etc.
In my judgement transfer of property will not proceed in 90 per cent of cases without a solicitor’s preparation.
In summary the notary acts on behalf of the state and the law: The solicitor acts on behalf of his clients. By its nature it makes the procedure slower and a little more expensive. It does however provide legally binding security and prevents fraud. (copyright)
