Advice on choosing the title holder (owner) of a dwelling

The choice of the title holder or holders of a dwelling - that is, the persons who will sign the private contract of sale and mortgage loan - is an important decision that the parties involved in the purchase should consider carefully.

If the property is being acquired by a single person there's no problem, but if there are to be two or more owners it becomes necessary to take into account the legal system under which they come before signing the contract.

Generally speaking, the title to the property should be embodied in the private contract of sale and in the deed of sale, as well as in the loan application and in the public mortgage deed.

In this way, it will also show in the Land Register once all the formalities have been completed.

If, at the end of the day, several individuals are the title holders, it's necessary to set out to what extent each one is so.

For example, the title holders can acquire the dwelling as a jointly-owned property or as one owned by indivisible half-shares.

Now then, why is it important to bear this ownership in mind? Let's see how being the title holder of a dwelling has an influence in different situations.

a. Modification of ownership. Once the contract has been signed, changing the title holders of a dwelling may entail a high financial cost, because it will require a series of administrative formalities and will mean that the contract will have to be placed on public record again.

b. Deduction on the basis of investing in one's usual home. The title-holders of the dwelling will be able to claim a deduction on the basis of investing in their usual home on their Income Tax returns.

c. Separation or divorce. The ownership of the dwelling will be decisive in realizing the assets held under the marital property system.

d. Financial help for publicly assisted housing. Ownership is key to checking the fulfilment of the necessary requirements for receiving the available financial help for buyers of publicly assisted housing.

In brief, it's advisable to refer the matter to a solicitor or expert and to consider the most suitable ownership with him or her.

Ways of coping with the rise of the Euribor

The Euribor, the interest rate most commonly used to calculate mortgage payments in Spain, rose to 5.361% in June, 0.113 points above its previous all-time high.

This figure, which has yet to be confirmed by the Banco de España, means that mortgages that are adjusted annually, or every six months, will become more expensive.

Monthly mortgage payments on a typical 141,422 euros, 25-year mortgage which has an interest rate of 0.50% above the Euribor, and which is adjusted in June, will rise by 72 euros.

In light of the above, consumers will welcome any way of coping with rising interest rates. These measures include:

. Fixed interest rate. This type of rate, which is not very common in Spain, guarantees that monthly mortgage payments remain stable. This is an attractive option when there is a trend for higher interest rates, but not if this trend is forecast to continue for only one or two years.

The fixed rate mortgages currently offered by banks and savings banks stand at 6.5%.

. Mortgage extension. This is another way to ensure that mortgage payments do not rise substantially.

This option does not involve any additional costs provided that it complies with the bank's requirements.

In fact, 350 Spanish households have extended their mortgage term at no extra cost.

. Changing mortgage. As a result of changes which came into force a few months ago, consumers are now free to change their mortgage provider.

The Spanish government also reduced the costs of this operation, and established a maximum commission of 0.5% of the capital to be repaid, or to be assumed. Mortgage holders are free to look for more attractive mortgage loans offered by other financial entities.

. Get advice. Mortgage holders are advised to assess their financial situat ion before deciding on any of the options discussed above, in order to decide which option is to their best advantage.

Professional Mortgage Services in Murcia

Financial and accounting services

Tax payents are obligatory, and are also and expense that companies and property owners sometimes fail to take into consideration.

Your expert Accountants in Spain will tell you what your tax liabilitiesare, how much you must pay and when the payments are due.

Obligations of property owners within a residents' community

Residents' communities are legally defined by two texts; the Spanish Horizontal Property Act of 1960, reformed in 2003; and Article 396 of the Spanish Civil Code; as well as the Articles of Association drafted by the members of the community itself.

In accordance with the content of this legislation, the obligations of property owners can be summarised into the following points:

1. Obligations regarding conservation of the general installations

According to Article 9 of the Spanish Horizontal Property Act, property owners must respect the general installations of the community and all other communal elements, whether for private or public use and whether included or not in their property.

2. Participation quota

According to Article 9 of the Spanish Horizontal Property Act, property owners must contribute to the general expenses for the appropriate upkeep of the building, its services, charges and liabilities that are not subject to individual application.

3. Reserve fund

The reserve fund is a sum of money taken from the contributions made by all the property owners and which is set aside for extraordinary costs, maintenance work or repair to the property.

4. Communication obligations

Locating a resident to inform them that they are in arrears with their payments or to inform them of when the next residents' meeting will take place does not normally create serious problems in these residents' associations because their primary home is usually the property within the community.

5. Change of ownership

In the event that the property owner decides to change the ownership of the property, this must also be communicated to the secretary of the community.

If this is not done, the original owner shall continue to be liable for the corresponding economic obligations.

Steps being taken in Spain and the United Kingdom to return liquidity to banking

British banks and the Spanish Government are analysing the feasibility of certain emergency measures to provide liquidity to financial entities and to jump-start the capital markets.

In Spain, one of the initiatives on the table consists in requesting that the Central European Bank grants a greater term for financial operations with the purpose being to provide more stability to financial entities.

Another of the measures being discussed involves the Spanish Government and the Public Authorities being able to guarantee certain securitisations.

Specifically, this proposal has materialised in the form of the 3,000 million securitised VPO debts (subsidised housing) that have already been guaranteed by the ICO (Official Credit Institute of Spain).

In the United Kingdom, during the months of May, June and July, the Bank of England will exchange up to 50,000 million Sterling in securit ies in securities backed by mortgage debt by public debt, in other words, Treasury bonds.

With this action, the Central Bank of the United Kingdom intends to improve the liquidity situation of the banking system and raise confidence in the financial markets.

Authorised entities will have six months to exchange the assets for mortgage loans during an initial period of one year that may be extended to three.

Those interested in doing so, will also be required to pay a commission resulting from the difference between the three-month Libor rate and the official price of money at three months.

Costs Involved in the Purchase of a New Property: V.A.T.

VAT (Value Added Tax – “IVA” in Spanish) covers the entire construction process of a property, from the moment it is contract to the moment it is completed. The land, the construction works, its completion and the first delivery made by the developer are all subject to this tax.

Therefore, this tax is only applicable when a newly-constructed property is purchased from a developer. Subsequent sales of the property are exempt from this tax but are subject to another type of taxation, Property Transfer Tax (“Impuesto de Transmisiones Patrimoniales” in Spanish).

In Spain, VAT currently stands at 7% for freehold property, garages and annexes. The 7% is only applied to garages and annexes (basements, attics, storerooms) that are located in the same building as the property in question provided that they are purchased at the same time, on the same date and before the same notary. It should be mentioned that the number of garage spaces that can be subject to the 7% rate of VAT is limited to two.

For this reason, it is fundamental that the transfer of the garage and the annexes is done during the same act and on the same date. It does not matter whether this transfer is reflected in the same or a different private document or public deed.

The VAT is paid to the developer at the same time as the price of the sale.

Converting the document into a public deed

After the conditions of the sales agreement have been agreed upon it will be converted into a public deed by being executed before a notary.

The deeds will be registered at the Land Registry after all the expenses and taxes due have been paid. Only legal and administrative documents, not private contracts, may be registered at the Land Registry and this is why it is essential to convert the agreement into a public deed before a notary.

The deeds list all the points to be considered in the purchase of a property: location; specifications, boundaries; surface area; price; method of payment and all the pertinent contractual conditions.

The purchaser will keep the original deeds after all the expenses have been paid and the document has been registered at the Registry.