The Rights Group

The Rights Group - The Home of Independent Advice

2017-08-29T11:38:00.001+02:00

The Rights Group - by Mark FR Wilkins

The expression “Conflicts of Interests” is not always properly understood by many in the local business community in Southern Spain.

It’s not at all unusual for a property sales company to suggest that a potential buyer should seek advice from a lawyer, banker or broker that they know - and arguably - owe allegiance to their referee (the estate agent) rather than the lay client (the potential buyer).

A minefield of risk is clear to be seen.

The words “Independent Advice” should be paramount in the minds of anyone seeking to purchase a property or establish a life away from their home country. Here in Southern Spain it should be the essential and often repeated mantra that must be followed if costly and time consuming mistakes are to be avoided.

In late August 2017 the media reported that online enquiries from Pre-Brexit Brits for information about homes on the Costa del Sol had rocketed. M are no mistake after years in the Doldrums the property market is back in full swing and the Builder’s Crane is again “The National Bird of Spain”!

Arguably, now is a great time to buy your Brexit Bolthole! But avoid being a “lamb to the slaughter” - yes we feel that strongly - by receiving Independent Advice from experienced bilingual professionals that are truly independent of your property purchase.

The Rights Group (TRG) is based in Gibraltar and active between Malaga (Western Costa Del Sol) and Tarifa (Costa de la Luz).

TRG is a best of breed group of bilingual professionals with many years of experience in providing independent professional advice to English-speaking property purchasers in Southern Spain.

TRG network members include Abogados (lawyers), Accountants, Mortgage, Insurance and Currency Brokers.

Contact Mark on mark@therightsgroup.com +34 600343917

TRG - The Home of Independent Advice - More than Fifteen Years serving English-speaking clients in Southern Spain

AC Units - Don't be AirConned!

2016-07-07T11:00:00.000+02:00

AC Units - Don't Be AirConned!

As the summer heat hits here in Southern Europe, I have been talking to some local suppliers about Air Conditioning (AC) and the maintenance of current AC systems.

It appears that since 2015 the use of Hydrochlorofluorocarbons (HCFCs) gases, such as the refrigerant gas R22, in AC systems has been outlawed.

Many homes on the Spanish Costas - where let's face it AC is essential - are likely to have had AC units using R22 installed.

From 2010, the EU-wide ODS Regulation banned the use of new R22 gas in order to "re-gas" existing AC systems allowing only recycled R22 - harvested from old AC equipment - to be used. However this all came to an end in 2015 when a ban on the use of all R22 in AC units came into effect.

The choice now seem a little stark, either a property owner can elect to scrap their existing AC units and replace them with new and more environmentally attractive/compliant versions or overhaul their existing AC system - often requiring the replacement of components - to allow an alternative and permissible refrigerant to be used, provided that a compatible one is available.

Whilst the latter seems more attractive this may be a false economy. The costs of conversion - which may only provide a temporary fix - are potentially high and require a through assessment of your current equipment for viability. Further, it is widely understood that the use of a replacement refrigerant in a converted AC unit is likely to reduce performance - the last thing you need when those warm winds are blowing!

Overall the attendant costs and inefficiencies involved in converting an existing AC unit may result in the conclusion that the installation of new AC units is the only viable option.

Our local suppliers whose companies have been handling these matters for many years with droves of delighted customers, have suggested that an "audit" should be carried out to assess the condition of current AC systems be they at urbanizations, comprising apartments and town houses, private villas or larger systems, such as hotels.

If you have any queries or would like an "audit" of your AC systems please let me know at mark@therightsgroup.com or on 0034 600 343 917 - we'd be delighted to help.

Spanish Mortgage Arrears 4 - You are Non-Spanish Resident What Can the Spanish Bank Do?

2015-01-22T13:27:00.000+01:00

Spanish Mortgage Arrears 4 - You are Non-Spanish Resident What Can the Spanish Bank Really Do?

So let's paint some pictures - based on the typical scenarios we see:

1. You are a Non-Spanish Resident but a Resident of, say, UK or Eire.

2. During the Boom Years you purchased a property - maybe more than one - in Spain on the mainland or the Islands.

3. You completed your "off plan" purchase several years after placing a deposit and your completion was funded by a Spanish Bank or Caja (Savings Bank) mortgage.

4. With the Economic Crisis the interest payable for the mortgage secured on your Spanish property rose and its market value fell to point of Negative Equity....where the mortgage is less than its value .....also known as "under-water".

5. You "dropped the keys" on the desk of the mortgage lending Spanish Bank - walked away - and thought that was an end to it.

6. You no longer visit Spain, the Spanish property or pay Community Fees.

7. After many months, even years, you have now received a letter from the Spanish Bank or a lawyer - may be even a local Solicitor working on behalf of the Bank - seeking payment of the outstanding mortgage etc.

8. You own a home in your home country which may have a mortgage but certainly has some equity - or market value in excess or above the remaining mortgage.

Ok so what can the Spanish bank do?

When you signed to buy your Spanish property with a mortgage it was usual that you would have been asked to sign a Mortgage Deed. The nature of the "guarantee" offered under the Mortgage Deed to the Bank in the event of your default - or non-payment of your mortgage - was to:

a. seize the Spanish property by a local claim in the Spanish Courts. The property could then be disposed of often by way of auction or re-sale and - and - this is an enormous AND -
b. you gave your personal guarantee - to the extent of your wealth including your UK/Irish Home - that if the sale of your Spanish property netted insufficient money to cover the total mortgage borrowed, accumulated interest, legal costs and expenses, then you'd be personally responsible for the remainder.

Popular legend suggests that market values of Spanish properties since the heights of 2007 have fallen between 45% and 60% in value. So you can see that if you borrowed a mortgage that was calculated on circa 60% of the then assessed value (Loan to Value/LTV) of your Spanish property it is highly likely that your mortgage is now "under-water".

So what can the Spanish Bank do?

Thanks to the good offices of the European Union, of which both Spain and UK/Eire are members, if your Spanish Bank obtains a judgment in Spain against you for the mortgage default then that judgment can be enforced against you in your Home country - in exactly the same way as a locally obtained judgment.

Equally, the Spanish Bank - via lawyers in your Home Country - can initiate a formal court action and pursue to obtaining a Judgment to recover the defaulted mortgage etc in your Home Country.

Whether it's a question of enforcing a Spanish judgment or obtaining and then enforcing a local Judgment in your Home Country, the Spanish Bank has at its disposal all manner of tools to secure your payment of the Judgment Debt.

Depending upon which part of the UK or Eire that you live, the Spanish Bank can obtain a Legal Charge over your Home - meaning that until paid you couldn't sell your Home - they can secure a share of your wages until their debt is settled or they could pursue you to Bankruptcy.

All circumstances vary and advice may differ depending on the facts of your case but burying your head in the sand is never a solution.

If you have received Notice of Intended Action - or similar - we have experienced colleagues who aim to help you understand the risks of the potential action that the Spanish Bank is proposing and, where possible, seek to work with you and the Spanish Bank to arrive at a viable solution.

If you need to discuss matters relating to the above in more details and in complete confidence please call or mail me at mark@therightsgroup.com or 0034 600343917

Mortgage Debts in Spain - How To Deal With Yours - Part 1 - Some Banks Are Listening!

2014-05-21T00:19:00.002+02:00

Mortgage Debts in Spain - How To Deal With Yours.

Part 1 - Some Banks Are Listening!

The word "Expert" is an expression that is bandied around in many and varied fields. The Oxford Dictionary helps us by defining the term as "A person who is very knowledgeable about or skilful in a particular area."

Take it from me that in the world of Banks and their Mortgage Debt Recovery Departments the operation and practice are somewhat a law unto themselves such that I don't feel it is possible to describe anyone as a true Expert!

As a specialist debt management consultancy we have worked in this market on the Western Costa del Sol (Malaga to Gibraltar) for several years. In our experience there is such a difference in approach between banks with a regional, national and international outlook – depending on their ownership and structure - that providing a one size fits all solution is simply impossible.

I should start with what "we are not". You'll see blogs refer to me as a Non-Practising Solicitor - as that is my professional standing - however my business is not a Law Firm nor does it give any form of legal advice - either on English or Spanish law. Our services are essentially practical and solution orientated.

I want to share with you a little of our day to day experience - on a strictly no names basis - of managing the mortgage debt recovery process on behalf of clients both from the bank's and mortgage debtor's perspective.

We have grown our skills base and experience of what a mortgage debtor needs and conversely we have been retained by banks which gives us a very much at first-hand view as to what the bank needs from their defaulting mortgagee in order to satisfactorily progress their case.

It is vital from the get go that we manage expectations. For a debtor client they are usually not a serial debtor and have found themselves in overstretched circumstances as a result of change of financial fortunes by job loss, illness, retirement or simple as a result of The Crisis. However, a patronising “it will be fine” approach is simply wrong and misleading.

We have seen situations where banks when faced with a mortgage debtor who appears to be a “good covenant” will prefer to wait and take no steps towards an amicable settlement because they see themselves with a relatively secure position.

Further, they are willing to take action in the UK or Eire where a client appears to be uncooperative or deceitful by seeking to hide their true Net Worth. Please be aware that the bigger banks – particularly those with more international ownership - have bought licences to access the international debt databases. They can see what property you own, how much it is mortgaged for and therefore can take a stab at the “equity” that you hold in the property. They are not shy of initiating recovery actions in the UK either to enforce a Spanish judgement, a Spanish Mortgage or to obtain a Charging Order (in England, Wales, Northern Ireland and the equivalent in Eire) or Inhibition (in Scotland).

Whilst the Tory Front Bench paints an "everything in the garden is roses" view of the "Recovery" our narrow view of client's circumstances suggests that there is no rapid return to great wealth.

Using marketing that says “don't worry we guarantee that the bank will be delighted to hear from us and they will fall over themselves in an effort to make life as easy as possible for you” is not only dangerous but simply foolish. As in many walks of life there are simply no guarantees when dealing with Mortgage Debt in Spain and the best and most informed one can be is by recent history of how a lender has dealt with a previous client.

Like the bank there must be more than an element of reason in a debtor’s approach. The take it or leave stance that some client’s adopt are unlikely to work in Spain. In the cold light of day it’s not the bank’s fault that you purchased a property in Spain and whilst it is often a bitter pill for a client to swallow that they have lost the majority of the equity they introduced into a purchase that is the reality of it.

In our experience the Spanish Cajas and smaller regional banks simply don't understand the issue of mortgage default. When a Spaniard is granted a mortgage their ability to avoid such a debt is minimal so as a result mortgage defaults in the Spanish community are far less prevalent than amongst Expat borrowers. Consequently, it is necessary in such circumstances to seek to offer a constructive and varied solution that works for the bank.

Those who have borrowed from major Spanish banking institutions or the local versions of International banks should at least expect to be heard. Most of the larger lenders now have dedicated Debt Recovery Departments that deal with mortgage defaults and are in regular contact with our office. They establish policies for dealing with borrowers who find themselves in difficulty and are generally realistic. However, in our experience those who work in these areas need to have a high level of competence in English - and not all do. Without this engaging with debtors is difficult – becoming tedious for both sides - and for us is a value add in dealing on the bank's or debtor's behalf with non-Spanish borrowers.

For such institutions they often have Credit Committees who consider cases on the recommendation of Recovery Department. In presenting the case to their Credit Committee the department’s personnel will often require a client to deliver basic details such as current employment status, copy bank statements and wage slips but it is increasingly likely that they will require a Statement of Net Worth showing your Assets/Liabilities/Income/Expenditure. Here we rely on the client to tell the truth. Any failure to be as transparent as possible is highly likely to be picked up and may well prove disastrous if it suggests that a debtor is being deceitful.

English branded banks are generally very conscious of what they call "reputational risk". They want to avoid being portrayed as heavy handed or overbearing in dealing with those who themselves in debt. This means that they are usually helpful and we have established quite regular models of what they expect to see and what we can ask a client to supply.

As a precursor to any engagement the bank will expect us to have the benefit of a Power of Attorney (POA) granted to us by each of the parties named in the mortgage. Without this they will not engage with us. Our hand in negotiation is given added strength by being granted an Instruction to Sell your property should all other elements be agreed. This means we can act promptly to catch current demand.

The fully legalised POA – which we will need to supply to the bank as proof that it has been granted - will allow the bank to disclose information to us that would otherwise have been subject to very strict Spanish data protection legislation. If you are based in the UK or Eire we have colleagues in the UK who can supply you with a draft POA and arrange for you to visit a conveniently located Notary to sign in their presence. This can be arranged and processed at your cost.

The terms of an exit from a Spanish mortgage arrangement are as varied as there are lenders but it is likely that you should expect to be challenged by the lender suggesting that they may well be happy for your property to be sold in a managed arrangement – which embraces the idea that the market value may have fallen - but that will not be the end of it. They may well suggest that they will seek a lump sum from you towards the unrecovered element or they may suggest a loan based arrangement to mop up an agreed percentage of the “under-water” portion. Knowing the banks tolerances is key here and whilst not all members of a team will react identically we have an increasingly good feel for what will be acceptable.

Finally, we have noticed in recent months others seeking to provide services to those who find themselves faced with mortgage difficulties in this market. This is good as completion is good. However, although we all charge fees I would stress that whoever you chose to appoint to represent your interests should also be motivated to work effectively. The best way to achieve this is by the payment of fees that are heavily skewed to a successful negotiation.

We charge a retainer to get a case moving but always agree to be paid the majority of our fees following a successful outcome being one that is satisfactory and the client can perform. This is not “no win no fee” but our incentive is hand in glove with the client’s ambitions.

Spanish Mortgage Arrears 3 - The "Under-Water" Mortgage

2014-01-28T09:53:00.000+01:00

Spanish Mortgage Arrears 3 – The “Under-Water” Mortgage – A Catch 22

……Ok so you have tried to speak to your bank - and if you have managed to engage with a responsible and sufficiently senior member of its staff - they have said that they won’t accept a Dación en Pago. Whilst certain advisors in Spain seem to insist that this is almost a matter of your right to demand such a settlement, in our experience, their willingness to consider such an arrangement is evaporating.

Why won’t they? The answer is reasonably simple in that there are just too many taxes and costs associated with the Dación en Pago processes – whereby the bank effectively become the new owner of the property – taking it from the current owner (the mortgage debtor) in settlement for the mortgage debt on it. The process requires the bank to shoulder the costs of a new owner and write off an old debt. As you probably already know the costs of purchase are quite high due to the taxes levied on the purchase and this process treats the acquisition in the same way as a regular change of ownership.

There are also certain implications for the lender from the Banco de Espana (Central Bank) relating to the currently imposed Solvency Rules and their Capital to Lending Ratios. Too much bad debt – with around 13% of all loans now being regarded as “doubtful” (January 2014) – paints a poor picture for the economy’s stability as it struggles out of recession.

At the end of the day it’s just not worth the bank throwing good money after bad! That’s cruel but fair.

Property values on the Spanish coast – including our core market of the Costa del Sol - have tumbled and, despite the positive marketing spin, sales of previously owned properties continue to be modest. In denying you a Dación en Pago, in our experience, the banker is actually trying – because his hands are tied - to makes a number of what are seen on the face as rather unrealistic suggestions these include:

Why don’t you try to sell your property? In the current economy, the property you purchased in any year which starts with the numbers 200X will probably now be worth less – anything up to 50% less than its valuation assessed at the time of sale. It has a mortgage that was calculated by reference to a percentage of such valuation – from 70% loan to value upwards - often plus furniture and completion costs etc. So the mortgage is not only “underwater” – as the US commentators describe it – i.e. it is significantly higher than the current value of the property – but our sense is that a huge number of properties are not only “underwater” but more completely water logged and in dire need of an aqualung!

So the “Catch 22” is seeking to sell your property in such circumstances where the value of the property is significantly lower than the mortgage and its current sales value.

Most Spanish bankers are not completely naive and they will realize that there is a position where the property you purchased isn’t even worth within whisker of the money that the bank lent on it.

Without being too pessimistic, unlike the UK market where the value of the property tends to be the “security” for your mortgage loan, the same does not tend to be the case in Spain. When – in the halcyon days of the emerging property economy you signed a Mortgage Deed you also signed a personal guarantee that acknowledged that you’d be personally responsible for the exposure to the mortgage no matter what its current. Trust me many of our clients don’t recall signing any mortgage application forms – and I suspect many didn’t - yet alone the commitment paperwork. The market’s priority in 2001 to 2007 was to sell, build and complete the property boom was on and the banks played more than an active role in driving purchasers into making purchases. We know, anecdotally, of certain branches of major lenders where the priority was to complete mortgages – it seems almost regardless of whether the underlying asset – it seems that the property purchased could rarely sustain the lending. It is said that “if you had a passport and a pulse” you could get a mortgage in the boom years! In Spain, the opportunities to appeal on the basis of such miss-selling are sadly limited.

“Why don’t you try to sell your property to someone who is prepared to take over your mortgage?”

To a Northern European, who in many cases has had a mortgage arrangement on their principal property for many years which is redeemed when you sell and a new mortgage is taken out for you “upsizing” purchase, the suggestion that your incoming purchaser may like to assume your mortgage on the property seems just odd. In the Spanish model the mortgage is portable in that, subject to the Bank’s prior approval of the new purchaser, it can be "subrogated” passing the risk and obligation to the new owner.

Not surprisingly the chances of having a clean and reasonably trouble free exit from you dealings with your Spanish mortgage lender are hugely enhanced if the incoming purchaser can be encourage to take over all or part of a former owner’s mortgage. In doing so the bank can “internally” write off any agreed reduction in the outstanding mortgage in order to stimulate a sale at a keen market price. This can make the sale “work” for all parties but only if your bank is prepared to play ball.

You will appreciate that any other debt such as Community Fees and Utility bills will continue to be your responsibility so you will need to make clear to any incoming purchaser if such debts exist to avoid the surprise of finding out when their lawyer conducts initial pre-purchases checks.

All too often we are gathering evidence that suggests a collective amnesia that fails to acknowledge the depth of the economic crisis of the last six plus years has happened/is happening.

A Tasador (the nearest equivalent in Spain to RICS Chartered Surveyors) historically provided the banks with the only valuation that they would accept for mortgage purposes worked for – you guessed it – the banks. The concept of a truly independent third party valuation simply doesn’t feature in the mortgage model in Spain.

So confronted with a swollen mortgage which mirrored a previously swollen valuation how can you demonstrate to your bank that the property isn’t worth what it was? How can you persuade you bank that unless they accept that the price has tumbled you are not going to be able to make a sale in the current market or have the hint of a possibility of a new purchaser taking on part of your debt?

Aside from unseemly begging the only compelling evidence that currently seems to be engaging to the banks are “comparables”. On your Urbanisation what are other properties selling or have sold for? This is compelling evidence of the old maxim that a property is only worth what somebody is prepared to pay for it.

Are you feeling out of your depth? Do you speak only limited Spanish and feel that the bankers are from another planet! You are worried by the prospect that you have or will soon default on the mortgage secured on your Spanish property and that your valued Credit Rating in your home market and/or your primary property may come under threat from a collection agent working for the Spanish lender. Whilst the economic conditions are clearly not of your making you are not dishonest and would rather confront a problem than hide away from it.

Perhaps we can help?

Our business is based on the Western Costa del Sol and we have reasonable relationships with most of the key mortgage lenders in this market. We have already dealt with many mortgage and community fee debt recovery cases and have had major successes – and some failures. Above all a dialogue needs to be continued with your lender and initiatives need to be explored. As in so many walks of life there are no guarantees in dealing with a Spanish lender but in our experience the first objective is to engage their team in a clear discussion which invariably helps the process. There is no one size fits all solution but it’s got to be worth a try.

Give me a call or drop me an e-mail in total confidence?

Mark@therightsgroup.com +34 600 343 917.

Spanish Mortgage Arrears Part 2 – What to do if the Bank won’t accept a Dación en Pago?

2013-03-23T08:28:00.001+01:00

Spanish Mortgage Arrears Part 2 – What to do if the Bank won’t accept a Dación en Pago?

For many, sadly the Spanish property honeymoon is over!

The love affair that brought Northern European Expats to the South of Spain in search of their perfect leisure property, tempted by alluring property shows on wet weekends in May and the availability of a high loan to value mortgage is – and it saddens me to tell you – well and truly over.

In the early 2000’s no weekend was without several estate agent organized flights from Manchester, Glasgow or Stansted arriving at Malaga airport brimming with expectant faces keen to sample the fruits of overseas property ownership. This democratization of the overseas holiday property market was quite simply achieved through the abundance of cheap bank funding. The well orchestrated property shows, the on and off line marketing and the endorsement of trusted celebrities from the world of Sports and TV all help wrap the prospective purchaser into a slumbering pain-free cocoon of innocence that many have sadly lived to regret.

Whether it was the developers, who had bought coastal view land in the post 1991 crash making ready a vast stock of apartments and townhouses “off plan” at newly planned urbanizations with the plentiful bank – or Caja - funding or the availability of high loan to value mortgages that enticed purchasers into making a purchase of one – or five – of the available properties no one can tell any longer. But the legacy of this “Gold Rush” can be seen today with a litany of repossessions, defaulted mortgages, unpaid Community Fees and an increasing number of debt actions in UK or other home country within the EU.

In August 2012, I wrote addressing a solution for those with mortgage debts on their Spanish property that envisaged negotiating with their mortgage lender - either the bank or Caja de Ahorros - with a view to agreeing that the debt would be cancelled if the property was returned to the bank - usually described as a "Dación en Pago".

Subsequent practical experience has shown me that many banks have found themselves handing their repossessed properties over to Sareb - the new Spanish bad bank - and they have little appetite to take in further property assets, placing them on their balance sheet - at the outstanding mortgage exposure - or as overvalued assets and adding them to the stock of already unsold property that they are promoting via their real estate arms.

For those who have tried to "hand the keys back to the bank" only to be refused we need to focus on an alternative strategy.

To establish whether you would qualify I need you to consider the following simple questions:

1. Did you buy in Spain’s Costa del Sol between 2003 and 2008? Yes/No

2. Did you buy on an Urbanisation of many newly constructed properties? Yes/No

3. For your completion, was your mortgage a high Loan to Value version – i.e. more than 70% LTV? Yes/No

4. Have your circumstances changed making repayment of your mortgage now impossible? Yes/No

5. Have you not paid three or more mortgage payments? Yes/No

6. Have you not paid your Community Fees? Yes/No

7. Has the Bank started recovery proceedings against you/your Spanish property? Yes/No

8. Has your Community started recovery proceedings against you for unpaid Community Fees? Yes/No

9. Do you plan to return to Spain at any point? Yes/No

10. Would you have preferred to “hand the keys back to the bank”? Yes/No

If you have answered Yes to one or more of the above questions I suspect you may have already sought to agree a Dación en Pago with your mortgage lender but it has not been successful.

As the old BT TV ad said "It's Good to Talk".

A dialogue needs to be continued with your lender as there are a variety of initiatives that can be explored which may mean that your lender is willing to consider that means they doesn't repossess the property. In not repossessing the property the bank will not take on the responsibility of the sale of the property, the commensurate adoption of and responsibility for unpaid Community Fees and the necessity to declare to the Bank of Spain that they have yet another mortgage failure. This is all good news for a Bank who would prefer to keep any further repossessed properties off their newly cleaned balance sheet.

And for you, the property owner/borrower, facing mounting pressure from your lender, probably your community and the risk that a debt recovery specialist in the UK/home EU country - who are now clearly able to issue recovery proceedings in your local Small Claims or County Court for debts in Spain - of obtaining an enforceable judgement against you in the UK, your earnings and/or your property assets, such a solution may be the very best that can be hoped for.

Naturally circumstances vary and one size clearly cannot fit all but it’s got to be worth a try.

Give me a call or drop me an e-mail in total confidence? Mark@therightsgroup.com +34 600 343 917.

Do You Have Unpaid Debts on Your Spanish Property

2013-03-22T12:30:00.000+01:00

Spanish Property Owner Questionnaire

As the owner of a property in Spain, is your answer Yes to one or more of the following questions?

1. Did you buy in Spain’s Costa del Sol between 2003 and 2008? Yes/No

2. Did you buy on an Urbanisation of many newly constructed properties? Yes/No

3. For your completion, was your mortgage a high Loan to Value version – i.e. more than 70% LTV? Yes/No

4. Have your circumstances changed making repayment of your mortgage now impossible? Yes/No

5. Have you not paid three or more mortgage payments? Yes/No

6. Have you not paid your Community Fees? Yes/No

7. Has the Bank started recovery proceedings against you/your Spanish property? Yes/No

8. Has your Community started recovery proceedings against you for unpaid Community Fees? Yes/No

9. Do you plan to return to Spain at any point? Yes/No

10. Would you have preferred to “hand the keys back to the bank”? Yes/No

If you have answered Yes to one or more of the above questions we need to talk in complete confidence. No tricks, no unrealistic promises just proactive and practical advice and services.

Let’s see if we can end your Spanish Property Nightmare.

Please call or e-mail:

Mark FR Wilkins

+34 600 343 917

mark@iberianassets.com

Collecting Outstanding Community Fees - in Spain

2013-03-22T11:24:00.000+01:00

Collecting Outstanding Community Fees

Late spring/early summer brings for many members Spanish property owners the annual rallying cry to attend the Annual General Meeting (AGM) of their Community of Owners - the anglicised term for that body operated under the Spanish Horizontal Law of Property – but similar in character to a UK Resident’s Association as seen in blocks of metropolitan flats.

A notice is served on the co-owners announcing the forthcoming meeting and if you are not able to attend prudence suggests – if you are up to date on your Community Fees - that you should appoint someone as your proxy to vote in your absence – perhaps even to the President. Why? The reasons for holding the AGM are manifold, with some statutory, but perhaps the single most blood boiling item on the Agenda is the treatment of the Community’s debtors. Those owners who have a clear obligation to pay their “cuota” of the Community’s annual running costs but for reasons that often become painfully self evident are behind with their share.

Amongst the other elements of Community management business, the Annual Report will publish the names and amounts of those whose accounts are wholly or partly in arrears as at the date of the meeting - which in many cases results in those being “named and shamed”settling their accounts. During the AGM the President will ask the meeting to approve the Annual Report including the Debtors List. Only once the Debtor’s List has been ratified by the AGM will a note in the AGM’s Minutes grant permission to the President and the Community’s Administrador de Fincas – usually curious blend between a highly experienced managing agent, translator and social worker– to set in play debt recovery procedures.

Given these formal steps before the debt recovery process can be started – possibly separated by a year between AGMs in the event that the Debtor is only in early default by the previous AGM – many cases demonstrate just how far the horse has well and truly bolted and left the stable door flapping in the breeze! There is an Extra-ordinary General Meeting process which allows for Debtor action during the year but controlling the “debtor” problem is one key area of Community management that needs some attention.

The growth of residential tourism - as the phenomenon is now known - has become very usual and offers a cost effective way of maximising on a properties running costs whilst delivering an economical holiday destination for those on a budget. However, for a Community of Owners, the extensive use of properties for short or long term rental can bring its own logistical problems – particularly where the Community Fees are unpaid by the absentee landlord. The cost impact for the Community including additional cleaning, pool treatment, security and maintenance issues should not be underestimated.

Some Community’s Rules (Normas) seek to outlaw third party rentals. Others use more curious methods of control including the denial of access to Community pools or to remote control units (“mandos”) to garages.

The most drastic debtor solution, as permitted by The Horizontal Property Act 1999, laid out a framework whereby a Community - via the office of its President - could institute recovery proceedings that made it easier to seek an embargo over the property owned by the non-payer and ultimately force a sale by way of public auction. This seems disproportionate particularly where the debt may be comparatively small and the properties value large but it does highlight just what power it is envisaged the Community may need to have to enforce its collection.

As a formal legal process seeking an embargo over a co-owner’s property is, of course, lengthy, costly and requires extensive notification to the owner/debtor to ensure that no abuse of the process takes place. Naturally the notification process is made all the more complicated where the property’s owner is a non-Spanish Resident.

Reports suggest that such court proceedings can take around three months to become effective and the result will give the Community good title to the property which can then be passed to an incoming buyer - who takes the property free of accumulated Community Fee debts and other personal debts - as opposed to the property debts of the former owner which may still attach to the property.

Given the current "resales" market in Spain whilst the theory of an embargo and the costs related to its recovery may make some sense the practical reality is that there is likely to be material costs and some long time for the Community to wait to recover their cash.

So what other choices does a Community, its Administrator or President have?

It largely depends where the property owner hails from. If we focus on those from the EU –or more particularly UK and Eire - there are a number of initiatives that can be tried that need not cost the Community a fortune nor totally wreck the relationship with the non-paying owner. He/she is often a neighbour of those seeking recovery and unless he/she has abandoned their interest in the property they will, at some point, be lying on a poolside sun-bed next to the President swapping notes about the Urbanisation's management!

Relevant EU Directives have been incorporated into national legislation that allow for the recognition and enforcement of Spanish court judgements in other Member States. So if, having exhausted all available solutions, it has proved necessary to issue recovery proceedings in Spain and they have resulted in Spanish judgement against the debtor this can be enforced in the UK as though it had been issued by a British Court. Remedies including the seeking of a Charging Order over UK/Irish property assets or employment earnings are available.

It is very usual for an Administrator and his President to appoint an Abogado to issue local proceedings in Spain against a UK or Irish debtor with the address for service being at the owner’s property in Spain. This is an entirely reliable method if the owner continues to use their property – or even live in it full-time - but experience shows that this may be fruitless particularly where the owner is not only in default on his Community Fees, he is also in much deeper water, as his mortgage has remained unpaid for several months and his lender is seeking to recover the mortgage debt.

Other EU Directives allow for proceedings to be issued and progressed in the debtor’s home jurisdiction such as the UK without the need for a prior judgement in Spain.

The costs of taking any such action need to be very carefully considered before initiating such a strategy. These would include the costs of serving proceedings in Spain or the UK, progressing to judgement in Spain or the UK and, if initially issued in Spain, the transferral of a Spanish judgement to the English system, the costs associated with delivering the judgement to the local county court where the debtor is located including the provision of official translations of the paperwork evidencing the Spanish judgement and finally, the costs associated with an Bailiff action or similar.

Just imagine the costs that the Community would be put to in relation to each EU based debtor!

This isn’t a shipping dispute involving millions it’s a Community Fee debt of perhaps €5,000 to€10,000 – so some perspective needs to be retained. The current economic situation in Europe has left many Communities scared by defaults in their Community Fees and spiralling labour, maintenance and repair costs. Committing thousands of Community Euros to the fruitless legal actions has been a reality check for many they often just don’t work.

So are there other strategies that a Community could try? A couple of practical steps should be explored with the aim of a cost and time effective recovery of unpaid fees. These may include:

1. As in so many situations it’s “Good to Talk”.

A community needs to keep the lines of communication open in order to engage with all their owners – even those who may have been absent for some-time for all manner of reasons.

The first priority here is to make sure that you have – and continually check that you have - up to date personal and contact details both in Spain and in the owner’s home country. Where possible these should include name (including middle names and maiden name) age, full home country address, e-mail and webpage details, up to date passport and NIE numbers.

In the world of debt recovery there are specialists who are engaged to locate a debtor (in collection parlance “a skip trace”) who has absconded. The job is exponentially easier if there is compelling contact data and more costly if not! These recovery specialists can be retained to engage with the debtor by phone (preferably) or e-mail to discuss solutions and to negotiate the recovery. There are a series of solutions that can be explored cost effectively and as the discussion is conducted by a disassociated third party the ability to be able to offer each party mutually, attractive, beneficial and practical solutions does have its rewards. The recovery company can keep the recovery as business-like as possible limiting any lasting damage to the relationship between the parties.

The interests of the Community may be best served by retaining the services of such a specialist, particularly where the costs of the recovery are shouldered in whole or in part by the debtor themselves as part of the recovery. Few property owners when faced with a solution that brings to ahead their troublesome debt worries are unwilling to settle – with settlement envisaging payment over an agreed period. Making an agreement is only one element, making sure it is adhered to is another – so careful and regular monitoring of debtor performance is required.

2. As highlighted above, well located and attractive property has a ready rental potential. Why not agree with your defaulting owner that they will place their property into the rental market and an appointed agent – who may be well known to the Community -will be authorised to pay any resulting rental payments to the Community to be placed against the owners outstanding Community Fees?

Many highly reputable rental companies would be delighted – if correctly instructed by the property’s owner – to comply with the request to make payments to the Community. Depending on the sum due this may be all or a percentage of the rent paid.

The priority in managing the debtor function at a Community is a lesson in avoiding the problem getting out of hand. Whilst it is clear that any formal recovery action can only follow the AGM’s ratifying of the Debtor’s List, a careful watch should be kept on bouncing direct debts or other non-payments. It is much easier to prompt an owner to pay €500 than €5000.

Increasingly technology is playing its role in the management of Communities with systems being devised that can ensure that all those who need to know – Administrator, President and Owner - are prompted when a payment has been missed. This give the Administrator a head start in making sure that recovery takes place thus minimising the debt burden on the Community.

© Mark FR Wilkins Marbella 2013 mark@iberianassets.com 0034 600343917

Wide Brimmed Hats and Bare Legs!

2012-09-15T10:47:00.000+02:00

Wide Brimmed Hats and Bare Legs!

It’s early September and though the roasting heat of August is a thing of the recent past – like a light switch being turned off around the 1^st September which is entirely usual – but we are still enjoying daily highs of around 30⁰C.

Taking a break from mowing the lawn – it must be nearly 11.30 – I hear shrill voices coming from the two ladies of a certain age peddling recently hired push bikes down one of the connecting streets to the beach in San Pedro de Alcantara – near Marbella.

“I don’t like this” says one in a distinctly north of Watford Gap accent pushing heavily on the pedals, “I am getting hot and burnt!” They each wore identical Paddington Bear wide brimmed but floppy fine straw hats and beneath shorts of a more than sensible size protruded alabaster white legs.

At this end of the beach it’s a fair distance from the hotel that they were staying in. How do I know this? Their tell tale Day-Glo wrist bands that allows access to the hotel, its several buffet breakfast sittings and no doubt many compelling holiday delights, are the clear giveaway.

For some unfathomable reason, we British have an uneasy yet slightly addictive relationship with the sun. It’s not like the UK sees never sees the sun but we just don’t seem to know how to handle it to best effect.

Each year I learn more from the standard Spanish approach to enjoying a life in the sun.

The locals seem so much more cautions, certainly respectful, of the immense power of the sun’s rays. Their enjoyment starts either early in the day or later but rarely both.

From about 9.00 am there is a steady stream of those heading to the beach to enjoy the morning sun. It’s not so intense and has a fantastic warming effect. However, this group of sun worshippers will be off the beach well before their usual lunchtime at 2.00.

For those Spaniards not on holiday, they tend to head for the beach from about 4.00 pm being joined by those working in shops and offices later in the afternoon and they’ll all stay until dusk. With the equally soothing effects of the later afternoon sun to warm you and gently tan your skin prior to an evening stroll and light supper.

Like the UK teenagers who descend on Puerto Banus each summer to revel in the excesses of drinking and partying, paler skinned Brits – and probably their Irish counterparts – have only two settings when it comes to enjoying the sun - high and higher. Hitting the beach to sleep off last night’s excess around 10.00.

The prevalence of daytime beach clubs, playing cool tunes and serving yet more alcohol – punctuated by whooping and spraying champagne – hopefully not the vintage stuff – allows our partygoers to stay in the sun until it’s time to shower and get made up for a fresh night’s parting.

The months of July and August are peppered by sightings of sore, red or burnt skin on display in the supermarkets, banks and most often of all, the chemist. Blistered and raw skin bears testimony to the “we’re here for two weeks so let’s get a deep tan” overdose of Vitamin D and UVB.

As the two weeks of their vacation progresses their damaged skin peels to be replaced by darken patches – akin to a slightly damaged Dalmatian. However, by the end of their fortnight they will have sufficient colour to prove to those back home that they’ve been away – as this, along with a healthy sunshine glow that seems to be the main reason for the comprehensive roasting.

For those dedicated to making an extra effort a “bikini buff” toning in their home gym before hitting the airport is vital. Often their preparatory regime will be accompanied by a spray tan – so they look the part when they arrive. They seem to overlook the fact that a spray tan is simply a skin colouring and offers no sun protection – so the resulting effect of fading tea coloured skin accompanied by burnt or peeling skin can be a disaster.

So how can our happy holidaymakers protect themselves? After all from about Christmas the tanning product advertisers go into overdrive – to crest in about July – delivering new forms of oil or cream based coatings and increasingly complex Protection Factor numbering. Whichever is used – unless it’s a 50 factor complete block (which we used to use on our kids noses when they were young and is often blue in colour making them look like US football pros) – some caution needs to be exercised.

I remember speaking to a lady who grew up in Africa. Her comment related to sun creams. Whilst I have no way of knowing whether this is true, apparently many products that purport to be sun protection, in fact contain fat. Her comment was that the very idea of drenching yourself in fat and then sitting in the sun to fry – seemed just ludicrous. In Africa she behaved just like our Spanish neighbours – never being in the sun for too long, never at mid day and never returning before 3.30.

My own recollection is of my Mother using Ambra Solaire oil on us during the sun holidays in my childhood. She would certainly be unaware that that marvellously smelling oil may not in fact have been totally sensible protection! However, we certainly looked great when returning to school in September! Aaaaagggh will we never learn!

If you have access to a music site on the internet, please listen to the song “Sunscreen” by Baz Luhrmann. It is perhaps the very best advice delivered in an altogether self-deprecating way about Life - oh also the use of some skin protection. The core of Baz’ advice is “Use Sunscreen”!

Are You Getting Value for Money from Your Spanish Community Fees?

2012-08-19T13:28:00.001+02:00

Are you active in the running of your Community of Owners in Spain?

Are you concerned to realise the full value from the Community Fees that you and fellow co-owners are paying annually?

Can we present a menu of services designed to maximise on your Community Fees whilst preserving and enhancing the capital value of your Spanish property?

We are confident that your Community could benefit from a truly bi-cultural service that can alleviate most of the stresses associated with being an owner. You may have heard that before, as experience has shown us, and we wouldn’t blame you for being cynical.

Do any of the following sound familiar?

· Are your Administrators reactive, inefficient and un-commercial? Do they need a fresh and strategic direction?

· Is your Community owed unpaid Community Fees? Who is actually collecting the debts owed by your neighbours?

· Does the “too do” list just keep growing? Does it need rationalising?

· Is your Community looking at all tired? Does it need tidying up?

· Are maintenance and repairs no longer being dealt as a priority? Would a diarised – and adhered to - maintenance schedule help?

· Are your swimming pools legalised?

· Are your team of gardeners and technicians not being properly driven and motivated? Does the mañana culture need a kick in the gracias!

With my wife, Andrea – a former Selfridge Buyer and fluent Spanish speaker – we have a long established, highly professional and English run, multi-lingual and multi-disciplinary team that has, for nearly a decade, successfully assisted Presidents – usually non-Spanish nationals – of Communities based in Marbella and Nueva Andalucia with the above.

How do you know that you can trust our team? Why? Because all of the above bullet points have been dealt with, managed and/or resolved by us within the last month on behalf of existing clients!

We’d appreciate the opportunity to meet you to discuss further. Please contact Mark on mark@therightsgroup.com (+34 600 343 917) or Andrea on andrea@therightsgroup.com (+34 600 343 900) to progress.

Spanish Mortgage Arrears

2012-08-18T11:30:00.000+02:00

Spanish Mortgage Arrears – Is “handing back the keys”a solution?

In the recession of the early 1990’s it became a cliché that certain banks were the UK’s largest private house holders as many owners “handed back the keys” to their properties upon which they could no longer continue to service the mortgage payments.

The concept of a “non-recourse” mortgage is usual in the UK – as the lending is secured on the property. In Spain it is vastly different. Effectively the mortgage lending bank has two bites of the cherry with the mortgage debt being secured over the property and a personal guarantee being given personally by the borrower for the mortgage loan. Therefore the concept of “walking away” or “handing back the keys” is not viable as there is still the issue of the personal exposure to the debt. Make no mistake the banks can and will pursue this even into your home country potentially giving you all manner of credit rating grief no to say the risk of a County Court judgment and bailiff’s visit!

A couple of years ago, when I was writing the TRG Handbook "Buying Distressed Property in Andalucía" (www.distressedpropertyhandbook.com) I was told that certain Spanish banks were anticipating an avalanche of clients –particularly expats – who were in difficulties and would need to seek to resolve their position. More recent reports suggest that the prediction is coming true. All over Spain the level of non-performing loans (NPL) – including mortgage debt secured on local property are soaring to record highs

From the banks point of view progressing with formal repossession proceedings is both expensive in terms of time and money. It can take several years and cost the bank many thousands of Euros in lost interest, “new cash” and professional fees to recover a property enabling them to acquire the legal right to sell to a third party passing full title.

It appears for those facing such miserable circumstances and a potential calamity that other options may exist to defaulting on their mortgage and exposing themselves to a long term battle with their Spanish lender and having a potentially damaging effect on their credit history.

The solutions:

1. Negotiate with your Bank/Caja de Ahorros (Savings Banks who lent a lot to Expats).

· They have enough problems and through dialogue there are several potential opportunities.

· At one level minimizing your payments by a “mortgage holiday” may be possible.

· Asking the Bank to freeze the interest or reduce the interest rate applied has also got to be sound strategies.

· If all else fails and alive to the attendant costs of formal recovery whilst the banks do not necessarily need another property on their sales books agreeing to what is described as a “Posesión Pacifica” will be attractive– particularly where the Bank has sold its portfolio of NPL to an “Institutional Investor” who will have paid only Cents in the Euro. If this is entered into then a Certificate of Discharge should be supplied confirm that the mortgage debt is cancelled.

2. For some a solution may lie in a legal procedure known as a “Dación en Pago”.

In very simple terms this means handing back the keys to the bank, signing in the bank’sfavour a formal Deed before a Notary under which the bank agrees to cancel the balance of outstanding mortgage debt and releases the mortgage debtor from any continuing liability to the lender in respect of the old debt.

The Deed should also involve the bank’s waiver of any right that it may have to pursue the Ex-Pat in their home jurisdiction for the debt.

This formal procedure is established by Article 1.175 of the Spanish Civil Code (SCC) whereby the defaulting mortgage (the borrower) transfers their property asset to the creditor (mortgagor – lending bank) in settlement of their debt. It is important to note that such a transfer, unless agreed otherwise, only releases the borrower from the liability – usually the value of the mortgage - which corresponds to the value of the asset handed over.

As always, when a potential solution is highlighted there seems to be a downside. In order to consider whether a Dación en Pago is a potential solution there are three important provisos.

Firstly the borrower should – where possible – have not already defaulted in the payment of any mortgage installment.

Secondly, the lender should not have commenced any formal repossession proceedings – neither Judicial (usually only available where the debtor is not in residence) not Notarial (where the debtor is still resident) and finally the target property – vis a vis the mortgage debt - should not suffer from any negative equity. This broadly means that the currently appraised value of the property must not exceed the mortgage lending on it.

If the mortgage loan when purchased was based on a high loan to value then there is a clear risk that the value of your property may have fallen since completion such that there is a negative excess of mortgage over current value. It has been suggested by other experienced commentators that headroom of at least 25% (depending on the lender’s criteria) between the debt and current value is necessary for a bank to consider the viability of such a scenario.

For many who have purchased in recent years this is going to be the stumbling block as high loan to value mortgages were the norm and given to many when they completed on their purchase.

It should be understood that the typical costs associated with a property purchase will apply to a Dación en Pago as for a usual sale and will need to be shouldered by the bank. These will include the usual Transfer Tax, Notary and Land Registry fees etc. and there will need to be further discussion with the bank in relation to Capital Gains Tax – if any - and the municipal Plus Valia which would usually be paid by the “seller”.

If any of the above routes fail it should always be noted that by the operation of the provisions of Article 1.911 of the SCC, that following the repossession of their property, the borrower will be held personally liable to the full extent of their assets for any excess over the sums owed to the bank – which will include their professional fees, unpaid interest etc. and the value of the property realized following repossession.

Remember that until a mortgage debt has been formally written off in the manner envisaged above there is an enduring liability of the borrower for the debt. It may be that the bank chooses to explore the possibility of enforcing the debt in a debtor’s home jurisdiction and whilst seemingly unlikely given the commensurate costs if the volume of debts increase the banks may be more willing to consider this kind of solution.

The other side of the equation for the bank is if they progress by way of this “writing off” procedure will need to find a new purchaser to liquidate their “cash” out of the property they have re-acquired and into whose name the property will be registered.

By acquiring ownership – before it is re-sold - will also mean that the bank acquires their borrower’s responsibility for the “cuota” for the property– if on an urbanization – being the ongoing and associated share of Community fees that run with that ownership.

We know that those banks that are using both “Posesión Pacifica” and Dación en Pago arrangements are keenly looking for “end user”purchasers to take over the property from the bank. As a result, the banks prefer tofinalise their Dación en Pago arrangements in tandem with the standard Compraventa paperwork once a purchaser has been identified. This will mean that the “new” purchaser pays the final “purchasing” costs in the usual way. To attract the “new” purchaser the banks seem, with some reluctance, to be starting to agree to discount their outstanding exposure on the relevant property in order to liquidate their position. This should result in the “new”purchaser getting a heavily discounted property that may well be priced at substantially below market value.

It is important to understand that neither the Bank nor Caja de Ahorros are compelled to accept your proposal – of any of the above solutions - but if the case is commercially good for the bank is likely to consider it.

Community Fees Debts - Recover them!

2012-08-16T18:29:00.000+02:00

It’s the middle of August and the streets of Marbella are buzzing with excited tourists of all ages - from Spain, UK and further afield keen to relax and enjoy a couple of weeks of leisure at this location of choice for more than just the cast of TOWIE!

The growth of residential tourism - as the phenomenon is now known - has become very usual and offers a cost effective way of maximising on a properties running costs whilst delivering an economical holiday destination for those on a budget.

Put simply a property is owned by A and B to Z rent on a short term basis to top up their tan and escape the colder Northern Europe "summers". This model envisages that an owner agrees to rent their property to family members, friends from work or complete strangers for - depending on the location of the property - week or two weeks stays for several months of the year. Whether the "tenants" pleasure is beach, mountains or golf there are many properties to choose from.

However, for many Communities of Owners - as translated from the Spanish - akin to UK Residents Associations - the extensive use of properties in such a way can bring its own logistical problems. There are some Community rules that completely outlaw the renting to third parties. Additionally, there may be a costs impact for the Community including additional cleaning, pool treatment, security and maintenance issues. This is compounded to where an owner is delinquent in paying their share - their cuota - of the annual upkeep of the Urbanisation - their Community Fees.

At the obligatory Annual General Meeting a list is included in the Annual Report which highlights those owners who have not paid their Community Fees in whole or in part by the date of the meeting. There are two reasons for this. One is to "name and shame" those no-payers into settling their account and the second and more formal reason is to allow the publication to constitute notice that further non- payment may result in recovery sanctions.

The most drastic solution permitted by a change in domestic legislation (the Horizontal Property Act) in 1999 laid out a framework whereby a Community - via the office of its President could institute recovery proceedings that made it easier to seek an embargo over the property owned by the non-payer and ultimately force a sale by way of public auction.

Reports suggest that such court proceedings can take around three months to become effective and the result will give the Community good title which can be passed to an incoming buyer - who takes the property free of associated community fee and other personal debts (as opposed to the property debts of the former owner which may still attach to the property).

Given the current "resales" market in Spain whilst the theory of embargo and costs recovery makes sense the practical reality is that there is likely to be material costs and some long time for the Community to wait to recover their cash.

So what other choices does a Community Administrator, Treasurer or President have?

It largely depends where the property owner hails from. If we focus on those from the EU –or more particularly UK and Eire - there are a number of initiatives that can be tried that need not cost the Community a fortune nor totally wreck the relationship with the non-paying owner. He/she is often a neighbour of those seeking recovery and unless he/she has abandoned their interest in the property they will at some point be lying on a poolside sun-bed next to the President swapping notes about the Urbanisation's management!

Certain EU Directives have been incorporated into national legislation that permit the recognition and enforcement of the court judgements of Member States in fellow Member States.

Just imagine the costs that the Community would be put to in relation to each EU based debtor!

The costs of taking such action need to be very carefully considered before initiating such a strategy. These would include the costs of serving proceedings in Spain/UK, progressing to judgement in Spain, transferral of the Spanish judgement to the English system, the costs associated with delivering the judgement to the local county court where the debtor is located including the provision of official translations of the paperwork evidencing the Spanish judgement.

This isn’t a shipping dispute involving millions, it’s a Community Fee debt of perhaps €5,000 to €10,000 - some perspective needs to be retained.

So is there an alternative strategy?

We believe that a Community of Owners interests may be best served by retaining the services of a third party specialist recovery company. This may be particularly true where the costs of the recovery are shouldered in whole or in part by the debtor themselves as part of the recovery.

The role of such recovery specialist is to find the debtor (collection parlance “a skip trace”) should they have disappeared, engage the debtor by phone (preferably) or e-mail to discuss solutions and to negotiate the recovery.

In our experience few property owners when faced with a solution that brings to ahead their troublesome debt are unwilling to settle. Above all such an agency representing the Community's interests is a third party to the process and can keep the recoveryas business-like as possible limiting any lasting damage to the relationship between the parties.

If you’d be interested to discuss the collection of your community's unpaid community fees please call Mark FR Wilkins - in confidence - on 0034 600 343 917 or e-mail me at mark@therightsgroupdotcomto discuss.

To The President of a Community of Owners

2012-06-16T11:29:00.000+02:00

Dear Mr/Ms President,

Was your idea when you ran for President of your Community of Owners to influence its policy and to maintain its quality for the good of all?

Are you now hidebound by day to day time consuming drudgery of the “job” of being The President?

We are confident that you could benefit from a truly bi-cultural service that can alleviate most of the stresses associated with your role as President.

You’ll have heard that before? Experience has shown us that we wouldn’t blame you for being cynical. So just who can you trust?

Do any of the following sound familiar?
• Are the Administrators of your Community reactive, inefficient and un-commercial? Do they need a fresh and strategic direction?
• Is your Community owed substantial sums in unpaid Community Fees? Who is actually collecting the debts owed by your neighbours?
• Does the “too do” list just keep growing? Does it need rationalising?
• Is your Community looking run down and tired? Does it need tidying up?
• Are maintenance and repairs no longer being dealt as a priority? Would a diarised – and adhered to - maintenance schedule help?
• Are your swimming pools illegal? If so, do you understand your personal – ex officio - liability for any accidents?
• Are your team of gardeners and technicians not being properly driven and motivated? Does the mañana culture need a kick in the gracias!

Start2Finish is a long established, highly professional and English run, multi-lingual and multi-disciplinary team who for nearly a decade have successfully assisted Presidents – usually non-Spanish nationals – of Communities based on the Costa del Sol.

How do you know that you can trust Start2Finish? Because all of the above bullet points have been dealt with, managed and/or resolved by Start2Finish within the last month on behalf of existing clients.

Please contact Andrea Wilkins on 0034 600 343 900 or at andrea@therightsgroup.com

Spain's - Bailout Too Lite or Too Late

2012-06-09T09:46:00.000+02:00

There is a popular belief that "Pride will have a Fall".

In the last two years I have met many, many Madrid and Barcelona based bankers and the one thing they all share, to a lesser or greater extent, is a classic - and perhaps stereotypical - tendency towards the vice of "Pride".

Who wouldn't be proud of this great nation, its cultural diversity, its majestic scenery and historical richness?

Now I have no problem with vanity until it becomes the problem.

For many months the party line has been our house may not be in complete "Apple Pie" order but we have developed innovative strategies and have taken steps to resolve the problem and it's only a matter of time before the corner is turned and happy days will be here again.

Facing unsustainable sovereign debt bond demands, the continual loud and clear message from the international banking community - for all but the Spanish bankers to see - was that Spain's economic house was built on sand with shifting foundations and cracked breeze block walls. Consequently, the news that was leaked yesterday, by nervous "sources", that a teleconference of EU finance ministers would today receive the "call" that has long been expected from Spain that a bailout was needed was no huge surprise.

A week ago the Spanish Finance Minister was assuring the international market that all was tickety-boo and no such bailout would be needed. Was that merely being "in denial" or was the need to "save face" just too great?

The nationalisation of the banking dinosaur "Bankia" was necessary to "restore market confidence". It hasn't.

The information as supplied to the market at the time of Bankia much pushed stock market float in summer 2011 was seen as scant and misleading such that it was suggested that the perceived hole in its finances had been down played until it became evident for all to see.

What place does "Pride" have in the cut and thrust of the international money market?

A pride in ones country, one’s family, one's taste and one's football team would all score highly on the typical Spanish banker's psychometric profile. But the Pride associated with not facing up to the truth of a situation that is clear for all to see becomes denial which has no place in multi-national banking. Denial is the parent of "deceit" and the cousin of "cover up".

Even the reports of the potential outcome of today's teleconference meeting - have politician only just realised they don't need to jump on planes or trains to meet - suggest that there needs to be a post meeting communiqué that satisfies the rigour of the clinical - involving making funds available - whilst more tender words are necessary to assuage Spanish Pride in asking for the support. This is popularly known as a "Bailout Lite". Not quite Greek nor Irish but a warmer less strident EU production.

I am waiting with bated breath - and more than a slice of self interest - to know which way this goes.

My hope is that in providing financial support there are several strings attached aimed at ensuring that the supported Spanish Banks and Bankers do not sit back in the plumped up comfort of the EU provided cushion and feel that the worst is over. The Spanish economy needs stimulation to get Spain back to work, the real estate market needs a root and branch overhaul and this doesn't need to come at the costs of terminally denting Spain's Pride.

2012-04-02T15:57:00.000+02:00

Owner's Advice - Are You Considering Your Rental Options?
Please see a piece by our Mark FR Wilkins as it appears on El Blog http://blog.espanabreaks.com/2012/04/renting-costa-del-sol/

2012-03-30T12:38:00.000+02:00

For some months we have been analysing the Spanish Banking sector - prompting them to see the logic of a sale of their real estate assets to fund investors. It seems that more pain is on the way for the Spanish Banks as the few remaining routes to cash dry up. http://www.reuters.com/article/2012/03/30/us-spain-banks-idUSBRE82S0KE20120330

Property Buyers - make sure you use an Independent Lawyer in Spain?

2012-03-27T16:16:00.000+02:00

Buying a property in Spain is for many the culmination of a long term ambition. Vast amounts of research and planning go into identifying where you want to be located, what sized or configuration of property suits your needs but often, sadly, precious little time is spent making the key decision of selecting the lawyer who will represent you in the purchasing process.

Given the last few years of well documented horror stories being staple fodder of UK midweek television “Homes from Hell”, “House-trapped in the Sun” etc it still amazes me that few property buyers take more heed of the important messages being made clear. The phrases that occur most often in such TV shows are those along the lines of “Mr and Mrs Smith were introduced to their lawyer by the property sales agent” Or “The estate agent said to Mr and Mrs Smith that it was not usual for lawyers to be used in property transactions.”

The mantra of most information services about the process of purchasing a property in Spain is clear - make sure that you retain a truly independent - most often a lawyer – from the start of your purchase process.

What lawyer is “truly independent” of the buying process? The concept of conflicts of interest is reasonably clear but it embraces the idea that your lawyer has no economic interest in your purchase other than providing you with the best advice, ensuring that your interests are fully protected, and receiving the agreed legal fee for his/her services following completion.

If “your” lawyer is connected, by way of example, to the sales agent by the referral of buying clients and that source of new clients would dry up in the event that the lawyer did something to “offend” the estate agent then the lawyer cannot be regarded as “yours” or truly independent. This is a regular scenario in Spain and you should ensure that you quiz your lawyers as to the extent of their relationship with the sales agent.

If you take on board no other advice, please heed this basic pearl of wisdom.

Practical Checklist:

1. A simple conflicts check with your new advisor should suffice. Ask the question: Have you or any other lawyers within your firm ever represented or been referred buying clients by the Sales Agency/Developer/Bank/Caja de Ahorros?

2. Ask for a translation of any documents you are asked to sign in your mother tongue and a full explanation of terms – preferably in writing.

3. Ask whether any of the terms of the Private Purchase Contract (“PPC”) can be negotiated?

4. Are all the particular “deals” offered by the Sales Agent specified in detail in PPC? These may include additional equipment over and above the usual Specification, particular wall or floor finishes, a furniture pack, sports club membership or the terms of any rental guarantee.

5. Ask for clear proof that any cash deposit that you have made is logged and signed for by either the seller or their lawyer upon their behalf.

7. Check to see whether any cash deposit that you have paid is refundable. If so, in what events or circumstances will it be repaid? If you need mortgage funding for your purchase – something that is currently rare in Spain – make sure it is stated in the receipt that if you are unsuccessful in obtaining your borrowing then the deposit will not be forfeited as

8. Take photocopies of all important documents and keep them handy at home –with your lawyer keeping originals on your file.

TRG's Spanish/English Property Glossary

2012-03-18T15:15:00.000+01:00

As part of continuing the education process, please see below, a glossary of the usual vocabulary – ok so some would call it jargon - that we come across in our daily work in Spain.

We started this in 2007 and see this as a “living” glossary, so if you come across words and phrases that could usefully be added please let me know.

Abogado – Lawyer

Adosado - Semi-detached or town house

Aire acondicionado – Air conditioning

Agua/potable – Water /drinking water

Albanil - Bricklayer

Alfombra - Carpet

Amortización - Depreciation, Redemption

Antigüedad(es) / tienda de – Antique/Antique shop

Aparcamiento - Parking

Architecto - Architect

Armario – Cupboard/wardrobe

Assesoria Economica/Contable – Accountant

Aval Bancario - Bank Guarantee

Balcon – Balcony

Banco/cuenta de/targeta de - Bank/bank account/bank card

Bańo – Bath/WC

Barbacoa – Barbecue

Basura - Rubbish bins and rubbish taxes

Bombilla – Light bulb

Buzón - Mailbox

Caja de Ahorros - Savings bank

Calefacción central – Central heating

Campo - The countryside

Cargas – Land charges registered against the property

Casa unifamiliar - Detached house

Casita – Cottage

Cedula de Habitabilidad – Habitation Certificate

Cemento - Cement

Certificado Registral - Certificate showing debts attaching to a property

Chalet – Villa

Cocina – Kitchen

Comedor – Dining room

Comunidad de propietarios – Committee of property owners/Residents association

Contrato de Builder – Constructor Compraventa Private - Property sales contract

Constructor - Builder

Construido - Built area, of property

Construir - Build

Costa Azahar - The Orange Blossom Coast

Costa Blanca - The White Coast

Costa del Sol – The Sun Coast

Costa del la Luz – Coast of Light

Costa Blanca – White Coast

Corriente or la luz - Electricity

Cortijo - A country property inland with farming roots.

Cuarto de Bano – Bathroom

Documento Informativo Abreviado – Property Information Pack

Documento privado - Private document

Documento público - Public document

Dormitorio - Bedroom

Ducha – Shower

Duplex – Apartment over two floors

Ebanista /carpintero – Joiner

Edificio – Building

Electrician – Electricista

Escayolista/Yesero - Plasterer

Escritura - Deeds of ownership

Escritura pública de compraventa - Title Deeds

Estatutos – By-Laws of the Resident’s Association

Euribor – Variable interest rate set by European banks

Fontanero – Plumber

Ficha Informativa - Home Inventory

Finca – Farm house or small estate

Fin de Obra – Formal Completion of Works on a new property

Fuente - Fountain

Garaje - Garage

Gas Butano – Butane gas often used for cooking and water heating

Gestoría – Specialists used to obtain official authorisations, permits and licences

Habitación – A Room

Hipoteca - Mortgage

Hormigon - Concrete

Impuesto extraordinario sobre el patrimonio - Wealth Tax - extraordinary tax on assets

IBI: Impuesto sobre Bienes Inmuebles - Property tax levied yearly

Impuesto sobre el Incremento del Valor de los Terrenos - Tax on the increase of land value

Impuesto sobre el patrimonio - Capital gains tax

Incremento de patrimonio – A Capital gain

ITP – Impuesto sobre Transmisiones Patrionales - Property Transfer Tax of 8% levied on all re-sale property.

Impuesto sobre Actos Juridicos Documentados – AJD - Stamp Duty

Inmobiliaria/agente - Estate agent

Inversion en terreno - Land investment in

Spain

“IVA” - Impuesto sobre el Valor Añadido – “VAT” – Value Added tax

Jardin - Garden

Ladrillo – Brick

Libre de Cargas – Debt free

Libro del Edificio - Documents from the promoter when building is finished

Licencia de prima ocupación – Licence to occupy a completed property

Licencia de obra - Building permission

Limpiadora – A Cleaner

Madera – Wood

Mármol - Marble

Martillo - Hammer

Metros cuadrados – Square metres – units floor area is measured in

Mortero - Mortar

N.I.E. - Número de Identificación de Extranjero- Identity Number for Foreigners – required for a property purchase

N.I.F. - Número de Identificación Fiscal – A Spanish citizen’s Fiscal Identification Number.

Notario - Notary – records the legal details of property and land sales

Nota Simple - Certificate from Property Registry

Obra Nueva - Document certifying a new building

Oferta vinculante - Bank document specifying mortgage conditions

Ordenador – Computer

Pago en efectivo - Cash payment

Parcela - Lot or plot

Pestillo – Door lock

Pintor - Painter

Piscina - Swimming pool

Piso - Apartment

Playa – Beach

Planta Baja – Ground or first floor

Plusvalía - Municipal Capital gains tax on the sale of property

Poder – Power of Attorney

Pozo - Well

Préstamo/ con techo – Loan/with variable interests with fixed minimum and maximum

Préstamo hipotecario - Mortgage loan

Pueblo - Town or village

Puerta - Door

Registro de la Propiedad - Register of Property Ownership

Representante fiscal – Foreigner’s official tax representative

Resale Property – A second hand property, already registered at the property register in

Spain

Residencia - Residency permit

Residente - Resident

Reforma – To renovate a property

Sala/salon - Lounge

Se vende or en venta - For sale

Se alquila – For Rent

Sevillana - Electricity company

Seguro de amortización de préstamos - Loan repayment insurance

Seguro Multirriesgo Hogar - House insurance

Señal – Deposit or down payment

Solar - Lot for building

Sótano – Basement

Subasta – Auction

Suelo - Floor or surface

Tasación - Independent valuation of property

Tasa de cambio – Exchange rate

Tasadores – Official Bank Valuers

Techo - Roof

Teja - Roof tile

Terraza - Terrace

Terreno - Land

Terreno en venta - Land for sale

Terreno - Plot of land

Terreno para construir - Building land on the Costa del Sol

Tipo de interés - Rate of interest

Título de propiedad - Deeds stating the ownership of property, date of sale etc.

Trastero - Storeroom

Valor Catastral - Assessed value of property for tax purposes

Ventana - Window

Vidriero – Glazier

Yeso – Plaster

TRG's “Bespoke” Services

2012-03-18T14:55:00.002+01:00

TRG and its Advisors can assist at every stage of your property ownership: From searching for the perfect property, to survey and valuation, seeking mortgage funding, handling the purchase process, refurbishment, property and rental management and sale.

Prospective Purchasers

If you are just starting your property search why not let TRG have your specifications and we will use our local connections to locate properties that are closest to your brief. Let TRG and its Advisors help you to find the right property for you in the right location and at the right price! See below TierraFirma.

Purchasers facing Completion

If you have already placed a cash deposit or, possibly, made some stage payments towards your purchase, let TRG’s Advisors assist you in completing your purchase. Mortgage funding, currency exchange services, snagging surveys and a variety of interior design solutions are readily available.

Resident Owners

TRG can help in your dealings with your local Town Hall, your Urbanisation or Community of Owners. TRG Advisors have assisted many clients by handling lifestyle issues such as Tax, Residency and Fiscal advice, healthcare, property and pool maintenance, gardening and property updating and refurbishment – within the necessary planning regulations. We have access to dedicated interior designers who can help with the finishing touches.

Non-resident Owners

If you are seeking an income from your property TRG can arrange maintenance and managed rental arrangements. We can provide the services of a property manager who will oversee your property, co-ordinate its rental use and ensure that your property is properly cleaned and maintained. We have TRG Advisors who are Accountants who work with clients to provide tenure and tax solutions together with book keeping and filing services for the myriad of formal paperwork involved in property ownership in Spain.

Vendors

If you are seeking to sell your property on Spain’s Costa del Sol why not engage a TRG Advisor to prepare the important valuations and Decree 218 materials in “staging” for a sale, refurbishment work to update bathrooms and kitchens or otherwise to lessen the effect of different era paint effects, floor coverings etc. TRG Partners also handle the dressing or staging of your property for the sales agency’s feature photography.

TierraFirma

The Costa del Sol is currently a "buyer’s market". There are many discounted or distressed priced buying prospects. Buyers, who only five or so years ago felt that a dream property on the Costa del Sol was beyond their financial reach, are now seeing prices tumbling making good property increasingly affordable.

Access to good value well-priced stock is at a premium. TRG sifts the good deals from the bad – those that offer real “value for money” and are not just re-packaged poorly built property that has proven difficult to sell.

TierraFirma is strictly for serious buyers - whether you are an investor or a would be retiree - who is looking to purchase on Spain's Costas del Sol but has, to date, been daunted either by media negativity, concern for their investment or a previously bad experience.

TRG’s Advisors are on hand to provide you with due diligence and valuation advice as required to avoid wasted time and money.

TierraFirma continues the ethos of TRG - to be fiercely independent and above the conflicts of interest that bedevil this market. We represent your interest – and no one else.

TierraFirma is a "seek to complete" - and beyond ... service:

· We will locate properties in response to your very specific brief with minimal sales input. Our aim is to find the RIGHT property at the RIGHT price - that's where we can be most effective.

· We will negotiate on your behalf with sales agents and owners to hammer out the best deal.

· We will provide access to our test driven professional services colleagues -TRG Advisors - will provide legal, mortgage, insurance and surveying services needed in completing a purchase and delivering security.

· We will assist you to optimise your purchase on the Costa del Sol to realise your short, mid and long term investment and/or leisure property goals.

We are not exclusively linked with any estate agents or other property provider.

To avoid any later difficulty we usually ask you to demonstrate to us, in confidence, your ability to complete at your chosen price point.

Often we receive payment for services by way of a share of the sales commission which is paid by the seller that results from a purchase by TierraFirma client. In all cases, we will always fully discuss and agree our remuneration arrangements with you ahead of any action being taken on your behalf.

We do hope that TierraFirma will be of interest to you and provide you with a purchasing solution for your property in the Sun!

Costs

To assist with your budgeting, TRG and/or its relevant Advisors will provide quotations in advance of the supply of any of the above services.

Please contact:

Mark FR Wilkins

e: mark@therightsgroup.com

tel: 0034 600 343 917

The Rights Group in Spain – What do we do?

2012-03-15T21:12:00.003+01:00

The Rights Group in Spain – What do we do?

For many, buying a property on Spain’s Costa del Sol is the fulfilment of a lifetimes dream. Proper guidance from a dedicated and experienced team ensures that your dream becomes reality.

Having chosen the property you want to buy who can you trust to look after your best interests? The Rights Group (“TRG”) was established in Marbella in 2003 to solve just this problem.

TRG helps you to select those professional advisors who will best represent you. For good professional reasons, you will always directly appoint your chosen TRG Advisor.

The Sales Agent seems keen to help, directing you towards his local contacts, but is it prudent for you to rely on his recommendations – are they truly independent?

TRG does not sell any property nor work for any Estate Agency.

TRG’s role is to recommend you to TRG’s network of independent and bi-lingual professional advisors. Why? The selected TRG Advisors have already demonstrated their ample ability to represent clients, just like you, who found themselves challenged by the Spanish property and legal system.

Which TRG Advisor do you need to assist you in your property purchase? You’ll certainly need TRG Advisors such as Lawyers, Accountants, Surveyors, Mortgage, Currency and Insurance Brokers.

TRG will continue to assist you throughout your purchase by way of “driving”, as necessary, your chosen TRG Partners. This will enable TRG, in tandem with your selected TRG Advisor, to keep you fully informed on the progress of your property purchase.

In most cases, TRG provides its services to you at no additional purchasing cost.

TRG doesn’t promise that it will always be plain sailing – an overseas property purchase can be highly bureaucratic – but the TRG Advisors will seek to alleviate as much of the stress as possible.

Please contact:

Mark FR Wilkins

mark@therightsgroup.com

0034 600 343 917

Is Spain For Sale?

2012-03-10T13:35:00.000+01:00

By Mark FR Wilkins
Please note that the information provided in this article is of a general interest nature and intended as a basic outline only. You are well advised to contact a professional for advice specific to your circumstances. Nothing contained in this article should be seen or taken as the writer or the publisher providing legal or financial advice.

In the process of analysing various Bank owned bulk-buy real estate opportunities in Spain recently, I thought it may useful to share the fruits of some of my research into the new provisioning rules as released by the Ministry of the Economy in early February.

Make no mistake these rules, when their impact is fully felt, will materially affect the sales prices at which properties in Spain will be offered for sale.

Contrary to various sales pitch press releases circulating in Twittershire, Luis de Guindos, the Spanish Minister for the Economy (Spain’s Chancellor of the Exchequer), has not sought to impose upon the banks, who took real estate assets in the settlement of defaulted property developer debt, a blanket discount of 25% to 50% (depending on the length of time held by the bank) based on current market prices thereby delivering compelling sales price points that are ..."once in a lifetime" or "never to be repeated".

The prevailing view, which I share, is that there has to be a real price based incentive sufficient for those willing to buy in Spain to take the plunge. I firmly believe that this opportunity will exist but it does require a "wake up and smell the coffee" moment by the banks. Revising current offer prices could be very attractive to potential buyers but the selling banks need to fully appreciate the impact on their books. The disaster scenario would be to adopt the tried and totally untrustworthy ostrich head in the sand approach.

Don Luis’, the steward of the Spanish economy on behalf of the new right of centre Partido Popular government elected by a landslide in November 2011, primary objective is to restore confidence in the Spanish banking sector. The aim being to bring realism to the balance sheets of those financial institutions that have, until recently, doggedly held onto five plus year old valuations of their real estate assets that gave the appearance of everything going swimmingly – which it clearly was not. But the figures don’t lie – how could they!

Unfortunately many Santander, Madrid and Barcelona based banks got rich, very rich indeed, from the property boom that followed the recession of the 1990’s. They held onto distressed property stock – often acquired from collapsed developers - in the firm belief – which proved to be correct - that it could be sold very well in the final years of the old Millennium. In 2007 the management teams of the banks had not appreciably changed and the idea of squirreling their property assets into hastily set up real estate divisions would provide them with the same big pay days. Bankers as estate agents devil the thought.

The best laid plans....etc. met with the wall of the post Lehman crash. The coincidence of a deeper than considered recession, a squeeze on mortgages - partly due to an international lending market drought - and cynically swollen property valuations issued by bank owned valuers, resulted in the banks – and many of the Caja de Ahorros/Cajas (savings banks - often regionally biased) – facing near collapse due to their holding onto a life raft of their completely distorted balance sheet.

With an appreciable shrinkage in demand from those Northern European economies that had fuelled the "Off–Plan" real estate "bubble", the banks and cajas were left holding – and the estimates vary - in the region of €175bn of bad real estate lending.

The market shrunk along with the number of cajas from going from 45 to 15 through merger and collapse. A new body was created in June 2009 by the Bank of Spain to avoid total meltdown. The Fund for Orderly Bank Restructuring ("FROB") was formed to either take over or strategically invest in the cajas in order to provide a banking bailout and reconstruction program.

The FROB had €99bn in funding, which it has used to incentivize the nations cajas to merge or acquire struggling kin in an effort to stave off systematic financial instability. Those who have benefitted from FROB’s support have included the mighty Caja de Ahorros del Mediterraneo (CAM) – now Bank CAM which was sold by FROB to Banco Sabadell in late 2011 for €1 – and Banco de Valencia, Catalunya Banc and Unnim.

The FROB is, of course, tax payer funded and Don Luis has made it clear that if the banks and cajas fail to toe the line in the current provisioning exercise after the proscribed four months – from February 20102 - they too will be subject to the FROB’s attention and whilst they may get further support the lending conditions will be far from attractive.

The practical reality of the new rules appears to operate in the following manner:

A Real Estate Asset with a book value - in the hands of the Bank - of say, €500k that has been held by the Bank for 36 months or more then the Bank will be require to provision at 50% - of "new money" - or €250k by the end of the proscribed four month period. Consequently, provided the sales price achieved by the Bank is around 50% of their book value then the Bank is not losing anything other than the need to provide the new money. Rather they are gaining cash flow from the sale.

The rules impose a lesser percentage provision (starting at 25% for those held for 12 months) where the Real Estate Asset has been held by the bank – as a consequence of foreclosure of mortgage or other arrangement with the underlying with the debtor - for a period between 12 and 36 months.

It must be remembered that if a bank has held the asset for more than 12 months they should have provisioned at circa 20% of its book value per year - as permitted under the previous, Socialist government’s regime, via Banco de Espana. This gives should give our €500k Real Estate Asset a current book value of say €300k (assuming 2 years at 20% pa) before the 50% provision (for the third year) is applied. This means that the bank should be able to sell at €150k without making a net book loss!

Now you are starting to talk. A property that was €500k in 2007
should now be available at €150k – or less!

That makes perfect mathematical and practical sense but how can a purchase be funded? Any keen student of the current Spanish property market will know that if a bank has property to sell they will fund the sale of their own stock but they are less likely to fund the purchase of a resale property that they don’t control. By and large this is true but there are a couple of banks who have realised that they only make money by lending to people who can properly service their debts – even if they don’t buy one of the bank’s own repossessed properties. So whilst the qualifying criteria for such mortgages are hefty and the "loan to value" calculations are modest, funds are available for the right clients.

The current market is decked with apparent "Bank Repossession" opportunities – which are not repossessions at all – that are not really very attractive as often their current sales price is based on let’s say a 30% reduction on original list prices. Such original list prices were already significantly over the then current market price when set. Even the government’s own statistics suggest that the market has tumbled in the region of 25%-30% from "original price" highs – over the last four to five. So the apparent "discount" only reflects the market position so not really a discount after all.

Of course the banks are keen to sell on a "one by one" basis but even with the promise of 100% - or higher loan to value financing no one is doing you a favour. Generally the real market value of such properties is way lower than the "distressed price" being offered by the bank and with a 100% LTV mortgage the banks has just swapped a poor performing overpriced asset for the covenant of a new borrower who – hopefully – will hold the property for long enough – and that’s the "how longs a piece of string" question - for it to rise sufficiently in value to mop up any negative equity incurred when it was purchased.

So how’s the market responding...have the floodgates opened? I suspect that Don Luis’ avowed aims of increasing liquidity and repairing tattered balance sheets will not become a reality until the pressure valve to sell is turned to full steam.

So far the Partido Popular has resisted opposition calls for a Bad Bank – along the lines of US and Irish equivalents – making it clear that tax payers should not be charged with bailing out the bankers. Consequently, Don Luis has placed his faith in the actions of responsible bankers. Time will tell whether that was misplaced.

We have noticed a recent change in approach at senior levels in certain financial institutions with which we have contact at Board level. Spain is very hierarchical and there will be great

"first mover advantage" for the brave banker who grasps the nettle and makes the first move......either that or they risk being nationalised.

Many estate agents seem to be noting some demand returning for well priced, well built and well located property from the "traditional" markets of Northern Europe ....come on bankers wake up and smell the Cafe con Leche!

© Mark FR Wilkins 2012 - for www.therightsgroup.blogspot.com

2010-11-10T19:19:00.004+01:00

The Costs of Buying A Property In Spain – November 2010

This is a breakdown of the costs of buying in Spain and is in relation to the “usual” purchase. It is intended as a guide for your sales staff to illustrate the process to your clients. It must only be used and clearly marked as being non-contractual. It is illustrative of the elements that constitute the costs of buying in Spain but there are several variables that depend on what, where and how a client seeks to buy. It envisages that a purchaser is buying in their own name – or that of co-purchasers – as opposed to that of a nominee or company.

For many the costs of making a property purchasers in Spain comes as somewhat of a shock. It is not unusual in a mortgage funded purchase that the costs of completion will be an additional sum in the region of 11% to 13% calculated on the purchase price of the property.

In an era where the prices of well located and well built properties in Spain have fallen significantly its important that a purchaser approaches the market with their eyes open. We believe that there is a need to be clear and transparent - even when a buyer is taking a mortgage based on 100% of the purchase price as is increasingly usual with purchases of former bank owned stock.

We set out below a guide to the costs that need to be computed in reaching a buying decision in Spain.

Power of Attorney and NIE:
The purchaser, who is buying at distance, will probably choose to nominate their own lawyer (“Abogado”) as one of the signatories under a Poder (Power of Attorney) to a bank account in the client’s name. This will allow monies to be withdrawn from their nominated bank account upon the satisfactory completion of the agreed stages of the property transaction. They may also elect to grant their lawyer the right to conclude the purchase on their behalf to avoid visiting Spain.

The Poder will also often include appropriate wording enabling the lawyer to obtain for the purchaser an “NIE” which is essential document for the completion of a purchase in Spain. If the purchaser is a non-EU citizen it is necessary when applying for an NIE to have a document proving the need for the NIE, this will require disclosure of the sale and purchase contract or reservation document together with a copy of the document proving the payment made.
The lawyers will only be able to apply for the NIE if the Poder has been correctly executed abroad and the lawyers have been supplied with a fully legalized copy of all pages of the purchaser and co-purchasers passports. Dependent upon the Purchaser’s location, their lawyer will be able advise on the process necessary to formally complete and sign the Poder.

The Costs
Once the price of a chosen property is agreed it is usual that a reservation deposit is requested. This will be deducted from the purchase price at completion. Usually circa €6000, it will need to be lodged with the developer’s agent and is often non-returnable.
As a yardstick, in Spain, the client should budget for purchase costs of approximately 10% to 13% in addition to the agreed purchase price. This will cover legal fees and expenses, notary public fees, land registry, stamp duty and “IVA” (local VAT).

Assuming an agreed Purchase Price of €250,000 the Purchaser is usually responsible for the following:
Taxes:
• IVA - which is levied on a newly developed property - is charged at 8% calculated on the agreed purchase price of a new property and prices are usually quoted as excluding IVA (€20,000)
• Stamp Duty around 1% for new properties when buying from a developer (circa €2500)
Fees:
• Notary Public Fees. Scale of fees dependent on the price of the property.(circa €600)
• Property Registration Fees - Land registry. Around 40% of the Notary’s charges. (circa €400)
• Legal Fees: 1% of the agreed purchase price plus 16% IVA. Plus a further fee depending upon the precise dealings in relation to the client’s mortgage needs and the financing of their purchase usually circa €1500. Plus a fee of circa €175 for processing the NIE application. (Total €4575)

Mortgage:
• Mortgage: If the purchaser is taking the property developer’s or selling bank’s mortgage the buying costs can be mitigated. There will be an administration fee circa €1,200 for a local mortgage broker to handle the “subrogation” process or mortgage transfer into the name(s) of the purchaser. There will be usual status enquiries as to the purchasers suitability as a borrower. Buyers must be prepared to provide Experian or similar credit report, P60’s showing annual earnings and probably three months salary advises.
• It is likely that an up to date Bank Valuation will be required: Bank Valuation Fee - a percentage of the valuation for smaller properties usually in the region of €750 plus IVA. (circa €870)
• Subrogation commission: Charged on developer mortgages at usually 0.5% to 1% of the outstanding mortgage – assuming €175,000 and 0.75% commission (circa €1313)
• Mortgage Notary Public Fees - Notary’s fees for witnessing the Mortgage Deed are calculated as a percentage of the mortgage liability. (circa €500)
• Property Registration fees for the Mortgage will be due based on a percentage of the mortgage liability. (circa €300)

Additional Costs:
Connection costs Water, telephone and electricity. (circa €700)
• Law Agent fees for dealing with the registration of the documents such as the Purchase Agreement and Mortgage deed (circa €350 per document).
• Plus Valia Tax – unlikely on any new build but worth noting.
Other ongoing annual costs:
• Impuesto Sobre Bienes Inmuebles or “IBI” is a local Town Hall charge and effectively an annual real estate tax.
• Community charges. These charges will be set and levied by the legally defined Community where the property is located often referred to as an Urbanisation.
• Basura - Rubbish Collection tax. An annual tax is payable by all property owners to the local Town Hall. This is set by the Town Hall and is calculated on the basis of the properties Catastral value as periodically updated.
• Insurance - It is compulsory to have at least fire insurance when requesting a mortgage. Most lenders will only release the funds to complete the purchase when evidence is given that an insurance policy in place with their interests noted on it.
• Income tax which is payable annually. It is based on the Catastral value of the property – often different to the sales price and income – either notional or actual - derived from the property such as from renting.

Schedule of Costs:
Assuming an agreed Purchase Price of €250,000, a mortgage of €175,000 and a Reservation Deposit: €6,000.

Costs
Transfer Tax – €20,000
Stamp Duty - €2,500
Notary Public Fees - €600
Property Registration Fees - €400
Legal Fees - €4,575
Total: €28,075

Mortgage Subrogation
Bank Valuation Fee - €870
Subrogation Commission - €1,313
Mortgage Notary Public Fees - €500
Property Registration fees for the Mortgage - €300
Total: €2,983

Additional Costs:
“Subrogation” – Mortgage Broker’s Subrogation Admin fee - €1,200
Connection costs - €700
Law Agent fees - €700

E&OE

Is NOW the right time to buy a home in Marbella?

2010-09-29T15:57:00.003+02:00

“Is NOW the right time to buy a home in Marbella?” - Part One

I guess at this point in the economic cycle the answer to that question depends on who’s asking it and who’s answering!

From many years of dealing with property buyers in Southern Spain, I understand that the pre-requisite is the need for a buyer to be genuinely interested in the prospect of buying. As a result, the answer to this question reinforces – or not - their planning.

Let’s confront the general perception of Spain through in the eyes of an interested buyer.

The media has had a high old time kicking the “Spanish Costas” with their indignant headlines and generally wallowing in the misery of those Brits embroiled in planning scams etc. Of course, I am not going to pretend that there haven’t been some awful cases featuring the most appalling rip offs. But for me, nearly three years after the bloodletting started the mid-term prospects for the market are starting to brighten. A host of the charlatan element has been eradicated and the shady operators have been forced to move onto easy picking pastures new. Sharp practices delivered by in those in sharp suits is now old hat, as clichéd as the “bag of cash” purchaser.

The municipalities – the local Town Hall’s – in places like Marbella have confronted their past transgressions. Under the intense spotlight of the world’s media, they have been dissected by the microscopic investigations of sophisticated professionals, police and regulatory bodies. The legacy of greater transparency and accountability has been the result. After having their collective backsides kicked by regional, national and supranational governments – some even being carted off to prison for their sins – I am now – and frankly only recently - getting the distinct impression that the winds of change are blowing and drying the ink on the Town’s strategy to revive Marbella and its image.

The certainty delivered to the real estate market by the extensive, and costly clean up, now means – and I believe this to be no exaggeration – that Marbella may now be regarded as one of the securest places in Spain to buy a property. I simply couldn’t have said that three years ago.

The planning issues of the majority of previously questionable developments have been resolved - there is now clarity. Sadly for the owners of properties in those developments where it has proved impossible to regularise – and we all know which they are - the advice is simple - avoid them.

The effects of the turmoil in world banking post the sub-prime market collapse; have been felt in Spain as elsewhere. Along with most of the known world, the tendency to over value was widespread here and reached its peak in spring 2007.

The attendant borrowing that mirrored the swollen valuations and the subsequent decline in the market has left many Spanish lenders out in the cold. Let’s not forget that they fought tooth and nail for market share, allegedly providing mortgage funds to anyone “with a pulse and a passport”. I don’t have huge sympathies but their marketing strategies worked – probably too well. The major Spanish Banks and Cajas (Savings Banks) have been left them with the Mother and Father of all hangovers.

The risks of Bank and Caja failure, state intervention and merger to avoid total meltdown have characterised the last two years in Spain. Mortgage and developer debt has been moved on and off the balance sheets of the lenders to protect share prices or parked in subsidiary companies.

The overwhelming sense is that despite the best efforts of the bank to portray “business as usual” the reality is that all was not well. A major cause of this continuing hiccup was the insistence of the National Bank - the Bank of Spain –under its operational liquidity rules that if a debt was declared by its lender as “bad” – or morosidad – then the declaring bank must place a deposit with the Bank of Spain. A major cost bearing in mind the amount of bad debt being held.

So the banks have tried to sell their seized real estate through branded on and off line sales operations. Let me give you a second to consider the farce that ensued with bankers playing estate agents...yes, I am sure you can picture it! The net result has been that they have conjured with all manner of incentives to induce a purchaser to take over the mortgage and buy a bank owned property effectively replacing a defaulting borrower with a new purchaser who appears to be a better risk. As you can imagine, in this way only penny numbers have been sold.

Fraught because of the sheer volume of great – but seriously overpriced - property stock, the banks have turned to certain long established real estate agents to help. This has resulted in the selected agents being allowed treasured access to the banks defaulted mortgage lists, cherry picking some of the regions primmest real estate and making it available at severely reduced, very attractive prices, to would be purchasers.

Here we need to import some reality. I am firmly of the opinion, that until relatively recently, a view prevailed amongst an interested market – particularly in the UK - that there was a clear possibility that you could get on a Malaga bound flight armed with a budget of €75,000. On arrival the plane steps would be mobbed by property owners waiving details of their four bedroom villas in Golf Valley Nueva Andalucía and begging you to take it off their hands for the sterling equivalent of £62,000. Sorry guys ....reality check number one. Even a burnt out ruin in Nueva Andalucía would have a land value in excess of €75,000.

Realty check No.2 - in our current experience of distressed price, bank held real estate, we would confidently expect that you should not pay more than between 25% to 40% less than their previous selling price. We have many examples of two and three bed properties that had previous sales prices in excess of €300,000 and €350,000, respectively that should now cost you no more than €220,000 and €249,000.

May be something of a barometer is my own experience and interest. For many years my loyal readers will have been regaled with tales of my family’s experiences in Spain. As a former lawyer, my interest has always been in advising, providing information and helping clients to assess and consider their actions. Even in operating my property services portal my main obsession was the quality of the advice and care and attention being received – the hand holding. I have testimonials attesting to the fact we provided a great service – and it’s not really that difficult.

So recently when a couple of my colleagues and I were asked to join a team that had been operating very successfully in the Spanish real estate market for over twenty years, my concerns were that we’d have a clash of cultures.

I am delighted to report that we seem to have been using the same “song sheet” and the paramount interests of service and respect for client are ingrained in the business of Crest Group International (CGI) as they had been in my business. Moreover, CGI is a preferred agency partner for the majority of the banks and Cajas from whom great deals are being unearthed.

Over the course of the next few weeks my intention is to demonstrate to you that, as with most things in life, the presentation of bold facts result in the recipients needing to interpret their meaning without spin, pitch or motive. As far as I can tell I don’t have a crystal ball but my senses are often correct. My assessment is that the answer to the question invariably lies in the hands of he/she who receives the information. Solid information and supporting data is the key! I intend to make available to you challenging nuggets of property intelligence from the Andalucía region which you can digest and evaluate and, who knows, you may wish to act on.

If you’d be interested to sign up to receive further information from our discrete property advisory service, please contact me on the following e-mail: mark@crestgroupinternational.com

© Mark FR Wilkins 2010

Real Spain

2010-03-06T09:26:00.007+01:00

So often the ill-informed scoff that the Costa del Sol – located to the left and right of Malaga (Andalucía’s second city) – is not “Real Spain”.

Let’s not forget that this is the Spain – part of then Hispania Ulterior – the birth place of Hadrian and governed by Julius Ceasar - which nearly 2000 years ago was extensively colonised by the Romans, who built thermal baths at Manilva, a basilica on the beach at San Pedro de Alcantara and villas with magnificent mosaics in Rio Verde (Marbella). How much more “Real” do you want to get!

This is the part of Spain that I know best but I am not blind to the over development of poorly designed apartment blocks thrown up over the last ten years; some of which, let’s be honest, have irreparably bruised parts of this beautiful region.

Nor am I immune to the observation that the influx of expats, who have chosen to make their home here, has led, by way of example, to the arrival of the dubious delights of the UK’s “Iceland” and Germany’s “Lidl” supermarkets, curiously aimed at satisfying an insatiable appetite for anything “from home”. A notion that I always find rather endearingly confusing as I cannot recall being in the UK and hankering after a frozen Eccles Cake!

In some rather snobbish way the Costa del Sol is seen as falling short. Whether this is because it’s not regarded by the readers of Vogue as quite as “cool” as its French Mediterranean cousin, the Cote d’Azur, or because it isn’t perceived as delivering the “age” of Italy’s Amalfi coast, no one has yet been able to explain to me. Having the requisite depth of history – being old enough - to have Sunday supplement appeal is simply no longer sufficient. What counts is the endorsement of a style guru whose taste barometer is no doubt as faulty as his features editor’s patience.

Yes, but are these the real concerns of those who knock the Costa del Sol. I am as inquisitive as the next man, to understand the prejudice and the perceived shortcomings of this jewel of the Spanish Costas and happy to speak in its defence.

In the 1970’s it was given the cheeky and most pejorative moniker as the “Costa del Crime”. Coined back then when the lack of an extradition treaty between the UK and Spain meant that it was regarded as a safe haven for gangland members fleeing the UK police. True they came and drenched themselves in cheap booze and sunshine but I am told many returned home “for a nice cuppa tea” when the delights paled.

Let’s not forget that prejudice, the exclusive preserve of no particular era, enjoyed some vintage years in the late 1960’s and early 1970’s with Enoch Powell’s “Rivers of Blood” and “Love Thy Neighbour” as their nadir.

This gingham table clothed view of Spain, with recollections of Dictatorship, Donkeys and Thursday night Paellas – accompanied by flamenco with Raul and Carmen – is now as out dated as those pictures of white Seat 600 cars on the dusty ”Englishman’s Graveyard” coastal road, the N340.

The suggestion that the Spain as depicted in “South from Granada” or “Driving Over Lemons”- interestingly both being centred on Andalucía - is the only Spain that we should aspire to visit is just as blinkered as the tourist visiting the Parthenon with the singular purpose of picking up a set of worry beads.

What is certain is that the Costa del Sol occupies some prime European real estate. It presides over the shimmering and often turquoise Mediterranean whilst busily reconciling the cosmopolitan Marbella, with its brash neighbour, Puerto Banus, and the picture perfectness of Nerja. Marbella is at the heart of the Costa del Sol and was established by, and used to be, the playground of the privileged few. With improved communications and Spain’s integration into the wider community its role within the new Europe is much more proletarian – it’s just a really nice place to spend some time.

Whilst living in London a radius of about an hour and a half – M25 permitting - by car was considered as sufficient distance to travel on a Friday evening to have a weekend away. I will continue to adopt this measure as my journey along and away from the Costa del Sol to discover yet more Real Spain.

© Mark FR Wilkins 2010 (Marbella)

Mark FR Wilkins
The Rights Group SL
mark@therightsgroup.com
www.therightsgroup.com
www.therightsgroup.blogspot.com
0034 600 343 917
Skype: markandytrg

Sellers in Spain

2010-02-28T17:02:00.003+01:00

Please note that the information provided in this article is of a general interest nature and intended as a basic outline only. You are well advised to contact a professional for advice specific to your circumstances. Nothing contained in this article should be seen or taken as the writer or the publisher providing legal or financial advice.

I have discovered an excellent cobbler’s shop in Old Town Marbella. Jose skill and artistry with leather are exceptional and his soling and heeling are brilliant and above all very reasonable.

High on the shelf above the polishing wheels and strange smelling glues are two pairs of beautiful English shoes gathering a deepening layer of dust. Jose tells me that these fine shoes are the property of one Juan Antonio Roca Nicolás – the now disgraced planning chief of Marbella.

They have sat there since S. Roca’s detention nearly four years ago as part of the Operacion Malaya mounted by Central and local government in Madrid and Seville to clean up the Costa del Sol’s act. In part the action was aimed at restoring confidence to the property and tourism sectors that had been damaged – though certainly not beyond repair - by the excesses of the latter years of the Gil administration in Marbella.

If you read the back of any repair ticket issued by any cobbler from Birmingham to Bombay you’ll see that there is usually a three to six months window after which unclaimed shoes can be sold to recover the costs of their repair.

When questioned as to why he has not put these shoes on www.Ebay.es – the local Spanish version of the Internet auction house phenomena - Jose laughs as if to say that their current owner will soon return to claim his shoes. This reluctant owner of what is prosaically called in English law “an unpaid seller’s lien” acquires good title under contract from the owner of the shoes to enable them to make a sale to a third party. In S. Roca’s case, I suspect few would willingly step into his shoes ... perhaps worse for Jose I suspect he'll be waiting a while longer for S. Roca to redeem his shoes. On current form - as the Spanish government ensure that the book is thrown at him for his crimes of excess - a reasonable estimate has got to be a further five years.

In January this year, after many months of gestation - passing ping pong like between Marbella's Town Hall and the Junta de Andalucía in Seville, a new PGOU (Urban Plan) was approved. To the greatest extent this new Plan draws a line in the fine beach sand resolving the vast majority of uncertainties in the planning denomination of Marbella's properties including some of the best known developments of apartments, townhouses and individual villa properties.

Increasingly we are seeing property owners who are keenly looking to sell their apartments and older re-sale properties. Invariably these are multiple purchasers who have been required to complete and who are seeking to recover their investment.

Whilst the number of estate agencies has dwindled in the last eighteen months or so those that remain are noting some embryonic green shoots of recovery in their businesses. Particularly, national groups such as the Germans and Russians seem to lead the buying lists. So this year’s new spring buyer may not be just the traditional purchaser who has weathered yet another freezing winter in Northern Europe and who now feels that their bones could use some year round warmth. May be they are attracted by prices that clearly reflect the “correction” that has taken place in this market over the last couple of years.

However, the laws of simple economics come into play when supply exceeds demand. The net result is a “buyer’s market” where only the fleet footed and well-prepared sellers can attract the spoilt-for-choice buyers.

Are you a serious seller?

It's said that the majority of more mature Spanish property is always for sale. The thinking being, given the rise in values over previous years, that a seller with substantial equity in their property may chose to sell if a purchaser came along and offered the right price. Well, for a serious estate agent such a seller is a complete nightmare. They are not committed to working with their agent to make a sale and seem ambivalent as to whether they should sell or not. They are just testing the water. In the current market such an attitude will not result in a sale.

So just how does a Seller place his/her property head and shoulders above the rest – and how can they close that sale?

1. Instructing an effective marketing and sales estate agent.

What should a seller look for?

a. Find a specialist in the region where your property is located or a more major business that has a local office. In either case the staff should have regular experience of the current values of properties in your region.

b. Look at the estate agents web presence – are they able to provide a professional and focused service for buyers?

c. Rate – much has been written about the costs of retaining the services of an estate agent. In their defence costly marketing has a very important role to play and an agent often has to work a lot harder to sell a property in Spain. A sales commission of 5% plus local VAT is not at all unusual.

d. Price – Your agent should be an expert on current market value which is currently the best barometer of price. You may also want to ask a Surveyor to give you an accurate valuation based on comparables.

This may be useful for two reasons. Firstly, it should be accurate and bring you the comfort you may need that the resulting asking price is realistic. Moreover you may have heard of stories in the current market whereby the Spanish Tax Authority (known as the "Hacienda") is carefully looking at "under valued" sales primarily in the effort to weed out a tax fraud based on the practice of under declaring the sales price of a property to reduce the tax paid and to hide the "black money" cash handed over at completion.

Given that many properties are now being sold for significantly less than they would have changed hands for a couple of years ago having an authenticated record from a professional valuer is good and timely evidence to deal with any subsequent claim from a naive - and perhaps uncommercial - Hacienda official who may seek to argue that you sold your property and under declared its price.

e. Review – Insist on regular reviews from your estate agent showing the work done by them to market the property, the leads that have replied and visited the property. It is also vital to get feedback from those who have visited as to why they haven’t offered.

f. HIPs – I have been exploring with a couple of estate agents the idea of a seller funded Home Inspection Pack - prepared under Decree 218 of the Spanish Property Law Code. The idea is that all documentation relating to the house, its deeds, (Escritura), any building licenses obtained for renovations, its services – electricity and water bills and local taxes – the equivalent of the Rates - should be collected together in one pack to ease the buying process. There is nothing worse for the purchaser’s lawyer than the need to request endless different documents that a serious seller could collect together in an efficient way from the start of the sales process.

2. Retaining a good Abogado – a lawyer:

Given the effectiveness of the Spanish Land Registry some believe that the cost of retaining an experienced property lawyer to process a sale is an expense worth saving. My advice is that such thinking is flawed and may risk the sale and generate consequential expense. Your Abogado will:

a. Prepare and processing the sales contract.
b. Deal with the redemption of any mortgage and other outstanding sums required due on the property, including as local taxes.
c. Complete and correctly file all necessary tax returns.
d. Try to minimise the seller’s exposure to Capital Gains Tax.
e. Obtain a Tax Certificate from the local “Hacienda” – tax office - to negate the buyer’s necessity of making a 3 % retention of the purchase price.
f. Assist the sale - All parties that comprise the buyer need to hold NIE number to make a purchase. We have seen examples where the lawyer has been able to obtain an NIE number for a purchaser at very short notice thereby potentially saving the sale.

3. Dressing the Property for sale:

“Unloved” or over designed interiors are – along with price – one of the most noted “turn off’s” for a potential purchaser. Consider employing the services of a “House Doctor” who will stage your house in the best possible light for sale. A TRG Partner is such a service who is very active in the Marbella region of the Costa del Sol. They visit resale properties with a view to neutralising bad or outdated taste and “dressing” them for potential buyer interest. Time after time “Start2Finish” is required to advise it owner clients to bin tired or outdated furniture which has been brought over from their previous home by the purchaser, often many years before.

Below is a simple guide of the costs of selling in Spain – what the seller is responsible for:
• The Seller’s own Capital Gains Tax – based on 18% of any increase in Escritura or Deed value declared to the Hacienda at purchase.
• Plus Valia Tax – This is a local municipality (Town Hall) tax based on the increase in the value of the land from when it was last sold. This is a one off payment. We have seen circumstances where this tax is paid in an agreed division between the buyer and seller. To avoid any confusion is important to decide at the outset of the purchase whether the buyer should be asked to shoulder none, part or all of it.
• Selling Agent Fees – plus IVA - as agreed with the Estate Agent – these can range from 3% to 10%
• Legal Fees – between 0.75% and 1% (plus IVA and disbursements) of the purchase price.

© Mark FR Wilkins 2010 (Marbella)