The current mortgage mess in Spain

A dynamic, growing mess in   mortgage Law and enforcements exist in Spain at present. Most interesting.


Possibly  (1) the fact that Spain was a great place to  real estate investment in Europe  when euro was born and American subprime mortgages were flying infecting the globe plus  (2)  the lack of regulation by our  financial guardians at the time. The fact is that the whole experience related to property investment in Spain since Euro came, from publicity standards to contracts of the off plan units through the posterior mortgages, has been a crazy mess, a lesson for history, I hope.

As lawyers we have been witness of the entire experience through the lives of our clients.  

We sawhow developers breached the off plan contract and refused to admit, then when witnessed at first row, when they had to refund due to Judges requesting them to do it with no fruit to our clients due to the cascade of bankruptcies of these developers.  We also have full records from minute one, as pioneers and main promoters, of the success of redirecting those claims against related Banks and Insurance companies.

What are we seeing now?

The story is not finished, I would say it is just at the middle of it, as the fight regarding contracts and guarantees is almost conquered but the new fight on mortgages is vibrantly alive.

We are seeinghundreds and hundreds of relieved victims-- both foreign and national: there is no nationality when being the victim of financial unsanity---, getting their fair refunds with all interests from day one from Banks and Insurers.

We are also seeing the tears and laments of those who, pressed by agents, developers and their very same lawyers, completed on off plan properties and acquired developer´s mortgages in a hyper inflated market before the threat of losing their life- earned investments. We are seeing how they have their lives captured on non-real, bubble created property purchases.

The good news if any? Yes, of course

Good news is that because of our belonging to the European Union, main bodies of this, Commission and European Court are placing some order in the current mortgage scenario of our now international Spain, which luckily is not subjected to old interests of one or other but under higher instances who can help us to achieve the balance and professionalism that the finance market of a civilized country demands.

It was Floor clauses, then claims on expenses related to mortgages and  illegals interests index like IRPH, and it is now a deeper battle on two more important abusive clauses in my opinion.

These two clauses are (1) Anticipatedmaturity of mortgage contracts and (2) Renounce to being informed of cession of debt to third parties: clauses which were created by the financial monster and included for its sole protection and benefit in every deranged mortgage contract of those times

Both clauses allows the business of the vulture funds to arrive and grow and both are being under examination by Europe

What is Europe revising?

Next week, it starts in the European Court the to decide on the matter that the Spanish Supreme Court submitted to it:  what  do Judges need to do when facing a mortgage contract which allows a bank to request full debt to the debtors after a 2-3-4  months default. Till this is decided, all mortgage enforcements are currently paralyzed in Spain Courts.

There is also a current claim before the European Commission on the unfair mechanisms of cession of mortgage debts to vulture funds as the current scenario makes very difficult for mortgage debtors to have the benefits that Spain Law (provision 1535 of Civil Code) provide for them, by allowing them to buy the debt once it is being reduced to be sold to vulture funds.

Most interesting scenariofor a more balanced, person-centered financial system in Europe.

Starting a business in Spain

Starting a business in Spain? Choosing between Limited and Autónomo

There are different economic, legal or images sake reasons in order to choose between one or other form of trading. You need to choose the legal form that best suits your needs. 

·         Disclaimer: In the case of a self-employed, the liability is unlimited while limited liability companies´ liability is limited to the capital. Thus, when a limited company goes bankrupt, only respond with his possessions, and never will with the properties of their owners. 

·          Financial requirements: A limited requires a minimum capital of € 3006.00. 

·          Taxes: Self-employed individual can obtain directly the benefits of their business and be taxed in the income tax. However, the limited is taxed through corporation tax. 

·         Number of members:More than one person trading together usually makes a company, although law envisages the possibility of one-person limited companies, consisting of a single person or entity. 

Social Security and Taxes formalities: To commence a business as a sole trader is much faster and easier than opting for a limited company. As a self-employed you just need to register within the Treasure Department and start paying taxes and social security fees. As a limited company, you need to first establish the company- through the granting of a Notary deed and register it in the Commercial Registry- and also perform registration at Taxes and Labour departments, basically.


Questions and Answer on Tourist Rental and Property Rental

The rules that as owner you have to follow to rent your property to tourists in Spain are a complete hieroglyph today.

What is the law that regulates tourist rental?

 Currently, there are 43 different Tourism regulations in the Spanish national territory. The City Councils can also add requirements from the competences they have in planning matters.

Can the Community of Owners prohibit tourist rental?

 The Community of owners does not have the power to limit the owner's rights, among which is to rent the property. They can regulate and enforce the statutes that regulate the use of common elements of the community.

Is it always necessary to communicate your renting to tourists to the regional government?

Yes, it is, this being the only point where all the autonomic regulations coincide, together with the need for registration at Tourism Registries.

Is it foreseeable that the regulations will be unified in the future?

Yes, in fact, the National Commission of markets and competition has created a working group with regional authorities. This commission is meeting with each Community and City Council for discussion and work on this common regulation.

How profitable is it to rent your property in summer to tourists?

It depends on the location: some examples: € 36,000 in Barcelona, ​​€ 33,000 in Ibiza, € 21,000 in San Sebastian, € 20,000 in Tarifa (Cádiz), € 18,000 in Marbella, € 9,000 in Gandía, Calpe or Denia.

How much can fines reach those who do not comply with the regulations?

Fines can, in some regions, reach 60 thousand euros

European Wills

On European wills

On August 17 2015, a European Regulation on inheritance law came into force. This regulation allows European citizens to choose for their inheritance to be regulated by either country of residence or country of nationality. Therefore if you are currently a Spanish resident but you have a different nationality that will provide you with better conditions for your heirs, you can choose this by simply stating it in your will.

This came into effect in 2015 along with the European Certificate of Succession (ECS). This document has been designed to make international probate procedures easier in Spain as it will be a valid title to enter the land registry.

As a result of this legislation those EUnationals residing in Spain will need to have a Spanish will if they decide to choose their country as the country that will govern their inheritance affairs after they die.

You can also opt to have a Spanish title of will with regards to your assets in Spain. This does not mean that Spain will govern your inheritance – this is simply a tool to make probate easier

Testators can either specify properties or assets to be destined to specific individuals, or simply make general statement on who their heirs are. Under Spanish law it is also possible to designate one or more people to deal with the inheritance as executors. You can also appoint guardians if there are minor children. It should also be noted that the will is always revocable which means you can change it at any time.


Get your Plusvalia tax back. Supreme Court in Spain confirms

What  is Plusvalía tax?

The Plusvalía (or Tax on the increase of value of the lands of urban nature) is a municipal tax that taxes the profit obtained with the sale of a property, taking as references of the calculation, the original acquisition value and the price at the time of sale.

What can I claim?

If you sold at loss but still were forced to pay a tax to the Local Council in the last four years, you can claim that tax back.

Is it a safe action?

It is, after this recent decision by the Supreme Court where this Court states that when there is an increase in value, it must be taxed according to the objective rules of the tax, and if there are losses, there is no taxation possible.

Should the tax be presented and liquidated, in any case?

Yes, sellers are obliged to present liquidation where they accredit this principle of proof that there is no increase in value.

It will be difficult to prove to the judge this situation of losses?

No, after this Decision by the Supreme Court as the High Court has affirmed that the deeds of purchase and sale are sufficient to prove the loss without ruling out the expert report. If the Administration has something to oppose, it must prove it. That is, Supreme Court places the burden of proof in favor of the taxpayer.


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