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Notary Fees

Mortgage Borrower Pays AJD

Supreme Court Decision Person Taking Out Mortgage Pays AJD

Supreme Court Ruling Mortgage Borrower Pays AJD

The average set-up costs for a mortgage is around 3,000€ to 4,000€ depending on the amount borrowed. This is roughly broken down into a tax on notarised documents (AJD), notary fees, administration fees, land registry fees, stamp duty and copies of the notarised document. Back in December 2015 a leading case paved the way for people with mortgages to claim back the costs that they had been forced to pay. The Court decreed that mortgage lenders do not have the right to decide these should be paid for by the other party. It stated such costs should be shared but did not go on to stipulate percentages. The implication was that it should be an even split at least.

This led to claims against mortgage lenders and the flood gates opened. The Law Courts are always busy, and the last thing needed was additional workloads. Having said which, many judges in Autonomous Communities seemed to champion the little man, striking out clauses they deemed Unfair Terms and forcing the mortgage lenders to pay back what they had charged plus legal expenses of the claimants.

Mortgage Borrower Pays AJD

All has now changed again. On February 28th 2018, the Plenary of the First Chamber of the Supreme Court deliberated and decided two appeals in favour of the mortgage lenders. The Obiter Dictum, or wider generalisation to be taken from this, is that the Transmissions Tax on Documented Legal Acts (AJD) must normally be paid by the client, while the stamp duty on the notarial documents will be paid by both parties. Costs of copies of the mortgage will be borne by the party who requests them. In Andalusia the AJD is 1.5%. this leaves notary fees, administration fees and land registry fees up for grabs.

Mortgage Borrower Pays AJD

The Court’s judgment is based on a Statutory Regulation that says the loanee is the one who pays the tax and as a result the party mortgaging their home, the mortgagor, is liable. The full court decision has yet to be published, but as it stands, without the in-depth analysis of the Court’s findings, the court has used a Regulation to serve as a magic wand to restore order and quell rebellion. But a Regulation has less legislative force than a Statute conferred by Act of Parliament and is not of universal application. It wields the equivalent force of a statutory instrument.

A Supreme Court decision ‘trumps’ that of a lower Court. But, provincial courts in Autonomous Regions have consistently ruled in favour of the mortgagor since the leading case in December 2015. Until there is legal certainty, this political duel looks likely to continue. Let’s see what the Judgment proclaims when it is published in the next few days.

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Property Purchase Taxes Andalusia

Property Taxes in Andalusia when Buying a Property

Property Taxes when Buying a Property in Andalusia

Buying a property in Spain is a straight-forward process. Each autonomous region has the right to set its own taxes, so differences do exist, although small. We help people buy and sell properties in Andalusia, in the provinces of Málaga and Cádiz. So, we provide information from the Junta de Andalucia’s website regarding the taxes levied on purchase and you can find general information on taxes levied on the Seller by the Town Hall, here. On the whole, budget about 13 – 15% on top of property purchase price for attendant costs. (Buying at auction has different requirements, find more here.)

 

Tax Payable – New Properties

First Transmissions of properties attract 10% tax plus a stamp duty on the drafting of the first title deed which is 1.5%. Total is 11.5%

 

Tax Payable – Resale Properties

For most people you pay 8% up to the first 400,000€, 9% on next 300,000€ and 10% on all amounts accruing after that.

The amount owing is calculated by multiplying the relevant band with the applicable coefficient as follows:

  1. Transfer of Tangible Assets

a) Property Transfer:

  • As a general rule, in the transfer of immovable property, as well as in the constitution and assignment of rights in rem over them, except in the real rights of guarantee, the tax rate will be obtained by applying, on the basis of the liquidation, the rate that results from the following rate:
Band payable in Euros Total Fees Euros Amount Due Euros Rate Applicable
0.00 0.00 400,000.00 8.00%
400,000.01 32,000.00 300,000.00 9.00%
700,000.01 59,000.00 There after 10.0%
  • Garages attached to the Property Purchase are included in the rates above, with a maximum of two. After which, in the case of transmission of buildings classified as urban parking space, the following rates apply:
Band payable in Euros Total Fees Euros Amount Due Euros Rate Applicable
0.00 0.00 30,000.00 8.00%
30,000.01 2,400.00 20,000.00 9.00%
50,000.01 4,200.00 There after 10.0%

b) Transmission of movable property and livestock

(as well as the constitution of real rights over them other than the guarantee):

  • 4 %, in general
  • 8%, on the transfer of boats of more than 8 metres in length and on vehicles of more than 15 horse power and objects of art and historical antiquities.
  • 5% in the transmission of real estate where the real value does not exceed 130,000 euros and it is to be the Buyer’s permanent residence and the buyer is under 35 years of age, or 180,000 euros in the case of a permanent residence where the Buyer suffers from a disability which is registered and measured as being equal to or greater than 33%.
  • 2% in the acquisition of housing for resale by a natural or legal person who carries on a business activity to which the rules of adaptation of the General Plan for the Real Estate Sector apply. (Aimed at constructors, developers and banks with repossessions, for example.)
  • 1%, for financial instruments of real security rights, pensions, bonds, loans and cession of credits.
  • Leases are governed by the scale of tax fixed by Law.

* With effect from January 1, 2015, tax rate offsets will be applied in the creation and exercise of purchase options in lease agreements related to certain payment operations.

Budget 13 – 15% on top of Property Purchase Price

In addition to the taxes there is also the need to pay stamp duty for new builds on the pages notarised for the Title Deeds, as well as general application of Notary’s fees, Land Registry fees and Lawyer’s / legal assessor’s fees (Gestor).  These days, most mortgage set-up costs are assumed by the lender. As a rough rule of thumb, allow 13% – 15% on top of the Purchase Price and note stamp duty for new builds.

Disclaimer: TMT Spain Real Estate has provided this information as a general guide only and it must not be relied upon in place of legal advice. Legislation is constantly updated and the reader must satisfy herself/himself of the accuracy of these contents.

 

“The ache for home lives in all of us, the safe place where we can go as we are and not be questioned.” 
Maya Angelou

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Judicial Auction in Spain

Judicial Auction in Spain

What is a Judicial Auction?

It is an auction authorised under Spanish Law and executed by the law courts to sell a property usually burdened with debts. Without this special action, the property cannot be sold because of a mortgage or other charge levied against it which acts to prevent its sale as you cannot buy good title.

Anything that has an economic value can be auctioned: real estate, vehicles, furniture (Jewellery, pictures, machinery, etc.) and any other class of goods or rights.

The asking price is agreed between the creditor and debtor or by reliance upon a Judicial Report and in practice calculates the amount outstanding on the debt plus interest and costs, in an unpaid mortgage for example.

A Judicial Auction can also be used in the case where there are co-owners so that it acts alike a Trust for Sale where the money is divided up and allotted by the courts on a case by case basis.

The auction is presided over by a court clerk, who is also responsible for transmitting and delivering the sale.

Buying Existing Debts

Clearly, you need to know if the item being auctioned is sold subject to or free of debts and third party rights.

In the case of several charges against the property or goods, it is straightforward to know which is the one that gives rise to the auction, because the registrar states with respect to it that “it subsists and is not cancelled.”

By the mere fact of participating in the auction, the bidder acknowledges notice of the charges or third-party rights which appear on the Property Registry Certificate which were lodged prior to the Creditor’s claim that is being realised by the auction.  These rights to property or money lent against the property remain valid. And if you are finally awarded the Property, you agree to place yourself in the place of the previous debtor, so you will have to honour those debts. Make sure you know what remains outstanding prior to entering into the auction.  You are not liable for any charges which accrue after the notice of auction of the property. Should such a situation arise the Court clerk may order the Property Registrar to cancel them. The only thing that you would have to pay is your fees and taxes for that cancellation.

What if No Bids at Auction?

When the auction is held and no-one makes any bids, this fact is declared by the auctioneer. The next stage is where the Creditor who brought the auction requests an adjudication by the courts to arrive at a price for sale.

Certain factors must be taken into consideration:

If it is the main home of the Debtor that has been auctioned, the Creditor cannot ask for an adjudicated selling price of less than 70% of the valuation price. An exception to this is when all of the debts levied against the property are less than 60% of the property valuation.

In the case of a second home or any property that is not the Main Residence, the Creditor cannot ask for an adjudicated price of less than 50% of the valuation unless total debts, as in the above situation, are less.

In the case of Goods/Chattels the Creditor cannot ask for less than 30% of the valued of the Goods.

If the Creditor did not ask for an adjudication, the embargo on the property would be lifted.

Charges Against Property.

The law requires that this certification be available to all interested parties at the Judicial Court where the right is lodged.

In some cases, it may also be available through the internet, in the Portal of Judicial Auctions of the Portal of the Administration of Justice.

Where applicable, the file will also contain information relating to any goods auctioned.

How Much to Bid at Auction.

If the auction is brought because of an unpaid mortgage it’s generally just these debts and costs incurred. If a valuation has been placed on the property by a Valuer and it includes outstanding debts in effect at the time of the request for a Judicial Auction, these subsisting charges must be deducted from the auction price so the bidder knows what is outstanding from the Creditor bringing the action. You would be liable for the other debts itemised in the Property Register as still standing.

Bid Accepted. Now What?

If your bid is the highest you do not know for certain that you have acquired the Property/Goods until the Court Clerk issues a Resolution which is decreed and approved. Until that point, the debtor can claim back rights to the property by payment in full of the debt outstanding. Where you have underbid (less than 70% or 50% respectively,) and been the highest bid at auction the courts can offer the Debtor and the Creditor the right to raise the price and claim the auctioned property or goods.

If your bid has been successful, but you fail to come up with the money in a set time frame, the other bidders have the right to buy at the price settled at auction by your highest bid. (You have 10 working days to pay in the event of Goods/Chattels and 40 working days for property.) If you don’t put the money together in time you lose your initial stake and the auction is deemed ‘bankrupt auction’.

Transmission of Property and Tax Due from Assignment after Adjudication or Highest Bid

The Creditor bringing the Auction can avoid paying the Property taxes in the event that the property will be assigned by the Creditor to a third party via auction or adjudication. This can be done in the event where the Creditor is the sole bidder and also where there are no bids at all.

Buying at Less than Amount Owed

When you succeed at auction and your bid is less than the amount outstanding against the Creditor who brought then action you are not liable for the outstanding amount. The amount you pay is put towards the Debt and the Creditor then has the right to offset this outstanding amount by going after any other assets the Debtor may have.

Property Taxes

There is no pre-requirement of registering ownership in the Land Registry before receiving the property, but you must pay the taxes and it is this that allows the Courts to confirm the purchase and if necessary evict the previous owners. This also allows you to then register the property in your name at the Land Registry.

Queuing Creditors

Always be aware of outstanding Creditors waiting to be paid. That is why they have placed a charge against the property and in so doing have earned the status of Priority Creditor. In the case of a second or third mortgage against the property the Buyer is expected to pay the updated charges including interest. If you consider them to be excessive you can lodge an appeal.

If you think you might like to take part in a Judicial Auction and don’t wish to do it yourself, get in touch to find out more.

Please note this has been based on content redacted and informally translated from Guia nº 5 Subastas Judiciales. TMT Spain has provided no more than an overview and it is not in any way to be relied upon legally.

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Spanish Mortgage Costs Supreme Court Ruling – Lender Pays.

Good news for people buying Spanish Property with a Spanish Mortgage: Spanish Mortgage Costs Supreme Court Ruling – Lender Pays.

Spanish Mortgage Cheaper

In the past, buying a Spanish property by taking out a mortgage added up to 4% on the Property Purchase Price. This pushed the costs on top of the net property price to as high as 15%. Much of this happened because the mortgage lender forced you to assume the costs of the mortgage. Incidentally, this was a cost you could not claim against or offset as costs against income when you submitted your tax return because you were not the benefactor of the arrangement.

Spanish Legal System Defends Consumer

The Spanish Legal System should be applauded for its support of the ordinary consumer in this way and let’s hope it leads to renewed confidence in the property sector within Spain. Once more, the conclusion is that, with property prices still subdued, it is a Buyer’s Market and there has never been a better time to dip your toe’s in the market. This applies if you seek to take out a mortgage or pay for the property outright.

[Sentencia TS 705/2015]

The Supreme Court has analysed contractual terms between banks and consumer and adjudged them to be Unfair Contract Terms. As a result, all costs attributed by the bank to the consumer in which it is the bank who is the passive subject and could, in theory, deduct such costs from tax returns, must be borne by the bank.

Obiter Dictum

The Obiter Dictum of the decision looked at costs derived as a by-product of contracting the mortgage. This refers to Notarial, Land Registry (notifying the Charge against the Property  on behalf of the Mortgage Lender), Transmission Tax, Stamp Duty for documents drafted in the Notary and other costs stemming from the mortgage – including Mortgage Indemnity Protection.

The judgment is available here, (in Spanish only): http://www.poderjudicial.es/stfls/TRIBUNAL%20SUPREMO/DOCUMENTOS%20DE%20INTER%C3%89S/TSCivil%2023.12.15%20%282658-13%29.pdf

Minutes of the Decision here, (in Spanish only):

http://www.poderjudicial.es/stfls/TRIBUNAL%20SUPREMO/DOCUMENTOS%20DE%20INTER%C3%89S/Nota%20de%20la%20Sala%20de%20lo%20Civil%2021%20de%20enero%202016.pdf

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