Downgrade on Energy Efficiency Rating for 43% of Dwellings in Spain

5/01/2015 – Cinco Dias

A year and a half ago (June 2013), a legal requirement on carrying out an assessment of energy performance of existing buildings came into force. The goal was clear: establishing a reliable parameter for property comparison, essential at the moment of marketing a housing unit in Spain.

Undoubtedly, experts criticized this Energy Performance Certificate (EPC) regulation as according to them the mandatory evaluation would restrict to homes for sale and let and would not apply to all the buildings with no exception.

As the domestic energy assessors said, the nuance, together with short validity time and little public disclosure about the law made ‘citizens assimilate the implications of energy efficiency grades (ranging from A to G) and therefore its impact on property values is not perceivable yet’, explains Marta Garcia Hernandez, chief of Tinsa Certify.

The assessor, leading in the sector, has produced around 36.500 energy certificates during the year and a half, of which 35.000 corresponded to dwellings. The result is heartbreaking.

As much as 43.07% was classified as G, the worst grade of all, and 36.9% was given an E, third-to-worst. Only the three least efficient grades (i. e. E, F and G) represent 95% of the stock. Approaching the data from the other side, mere 1.29% of the evaluations were closed with one of the best grades (A, B or C).

Another discouraging fact is that the number of issued document makes a tiny part of the total. It is estimated that they represent an energy performance of 6% of the buildings and 2.5% of all dwellings. The subterfuge about the assessment prices should also fall under the adjustment hammer of the sector if citizens are expected to respect the requirement.

Poor classification, Greater Consumption & Higher Costs

Some autonomous communities of Spain have commenced to impose first sanctions on individuals and companies who had dodged the obligation. Fines oscillate between 1.200 and 6.000 euros.

Tinsa defends that many citizens are unconscious of the mandatory nature of the law as it has not been made public widely enough. Moreover, private owners do not know how much they could save on an energy-efficient home.

Tinsa elaborated a table specifying requirements to be met for each grade. As an example, the assessor takes an average Madrid dwelling which, if having an A-grade, should consume energy for 200 euros annually, and if it had a G-grade, the cost would soar to 2.500 euros per year.

Final grade shall have an influence on the property price, pulling it down in case of poor performance and adding to value when it is efficient.

 

Original story: Cinco Días (by Raquel Díaz Guijarro)

Translation: AURA REE

Social Institutions of Catalonia Set Up a Rental Property Management Firm

18/12/2014 – El Periodico

Catalan social entities united in Taula del Tercer Sector (local Third-Sector Committee) established a different sort of real estate company, called Fundació Hàbitat 3. The unit will manage social housing leasing to low-income families.

Although the idea is not well-known in Spain, it is widely practised in other countries like the Netherlands (controlling all social homes) or France (60%).

The apartments will be granted to administrations and entites for people in need of social assistance. Entites will take care of the process, while in case of the public administrations, Hàbitat 3 can take on the responsability. Duration of the contracts will vary.

The Committee disposes of a supportive data proving that Catalonia needs 230.000 social rental homes to respond to the crisis-boosted demand. The entities say there are 450.000 empty properties, 100.000 belonging to banks, 80.000 completely new and 270.000 of private owners.

Hàbitat 3 will be chaired by Catalonia’s leading housing authority, Carme Trilla, with Xavier Mauri as the Director. Currently, there are no dwelling units on the list but it seems clear where they should come from.

The biggest share of empty homes is in hands of banks, especially in the areas of Terrassa (3.000 homes). The number causes headaches to local adinistrations. In fact, many fined the banks for holding vacant properties.

The rental prices will be set in line with the family situation of the applicants, selected by social workers with knowledge of the zones. Ideally, it would be of 100 – 150 euros.

Barcelona owns a very narrow stock of social and private units which would be suitable for the program.

When it comes to the REO properties, the request is crystal clear: the company demands occupation for the thousands of homes as thousands of people lose their houses being unable to pay.  But in case of the private owners it would be reasonable to ask who would cede their dwellings for 200 euros per month? Probably, no one. That is why the Committee is going to talk with owners who cannot rent their housing units.

The organization will pay the difference between the social rent and the final amount paid to the private owner which will be higher than the one paid to banks.

 

Original story: El Periódico (by Toni Sust)

Translation: AURA REE

Real Estate Companies Hope For Renewal of Their Life-Saving Law

16/12/2014 – Cinco Dias

Spanish real estate industry hopes that the Royal Decree-Law 10/2008 will be prolonged for at least one year more. Otherwise, we could witness ‘an haemorrhage’, as the new chairman of property developers association of Madrid (Asprima), Juan Antonio Gomez-Pintado, put it. His Barcelona counterpart from corresponding group Apce, Marc Torrent added that ‘a year of being in force is an absolute minimum’.

In 2008, the Government of Jose Luis Rodriguez Zapatero approved the Royal Decree as a preventive measure against massive losses of property managers triggered by value drop-off. ‘Impairment losses deriving from Tangible Fixed Assets, Real Estate Investments and related Stocks, Payables or Receivables shall not be recognized in annual corporate reporting’, the regulation states.

Disappearance of the law would have impacts on the article 27 of the consolidated text of the Corporate Law, as well as on the Bankruptcy Law 22/2003 from July 9th.

The regulation mentioned above indicates that if the losses take the equity down to below two-thirds of the social capital (for limited companies) and if during a year the firm does not recover, it must cut in the equity by necessary amount. The article 363.1. applies to all kinds of companies when the net worth posts below 50% of the share capital, which would mean either dissolution or balance recovery through the capital increase or decrease.

The Royal Decree-Law 10/2008 has been rolled over year after year, even if it was originally established for years 2008-2009 only. In 2011, a very similar regulation was approved, called the Royal Decree-Law 9/2011, which stretched the compensation period to three years.

Last March 7th, the Goverment approved the Royal Decree-Law 4/2014 with an aim to renew Zapatero’s ruling once more as ‘the exceptional period ends in 2014’.

The current Government of Spain has to decide until March whether it is going to prolong the law, which has saved many real estate firms from liquidation, or not. The authorities claim respective clauses were added to the Bankruptcy Law.

However, that regulation would not be enough to stop dissolution of the companies, reckons Mr Gomez-Pintado, as maintenance of the Royal Decree-Law is crucial while the norms on giving the second chance to viable firms are being negotiated for the other Law. Barcelona Developer Association Head Marc Torrent agreed that although the sector is surely experiencing a turning point, it is not capitalized sufficiently to face lack of the Law as the fight is also against becoming insolvent.

The Royal Decree-Law 10/2008 repeatedly appears in annual reports of real estate firms. When it comes to the listed ones, some of them managed to improve considerabe parts of their balances this year.

For instance, Colonial pointed out that if it hadn’t been to the Decree, its land affiliate Asentia would have been dissolved on 31st December 2013. The firm, now having Villar Mir as the majority stakeholder, sold the troublesome branch this year.

Furthermore, Martinsa Fadesa avoided liquidation in 2013, in spite of having net balance in the red. Quabit admitted an 18.8 million euro deficit in its accounts, but instead thanks to the Law it is planning to float its own Reit now.

Finally, Reyal Urbis, currently in talks with creditors, was shown a 429.9 million euro hole in 2013 but it defended itself from total bankruptcy by including the Royal Decree-Law 10/2008 in its annual reporting.

 

Original story: Cinco Días (by Alberto Ortín Ramón)

Translation: AURA REE

Government Says ‘No’ to Extension of Old CRE Rental Agreements

9/12/2014 – Cinco Dias

As usual on January 1st, many matters are bound to change. One of them could have an impact on old, historic city centers across Spain. On the upcoming December 31st, the Urban Letting Law approved in 1994 for 20 years is becoming invalid. The measure has been established to replace a great deal of old commercial property rental agreements signed before May 1985.

Small and medium-sized enterprises (up to 2.500-square meter area) underlie the regulation, as larger premises have been already freed. Moreover, the amendment is directed to the commercial units developing any of the business activities stated in the part number 6 of the Trade Tax (IAE by its acronym in Spanish) document, i.e. retail trading, catering, hotels or vehicle or home appliances workshops, among others.

Basically, the main impact will focus on business premises rental contracts of legal persons – companies which have not relocated in the last 20 years. On the other hand, if the tenant is a natural person – freelancer, the law allows to maintain stated terms and conditions until their retirement or death, the same as in case of the old residential rental system. However, the new regulation considers several exceptions for terms which prolong the agreements for additional five years, until January 1st 2020.

How many small businesses will feel the impact of disappearance of the old system? Although exact estimations are difficult to carry out, appraisal firm Tinsa gives a number ranging from 65.000 to 85.000 properties. The figure should be extended to the premises which will become vacant due to shrinking population.

And even if a tenant enjoys a life-long lease-out, most of them should be now at the verge of retirement as since 1985 almost three decades have passed. Another source of information, the Spanish Confederation of Small and Medium-Sized Enterprises (abbreviated to Copyme by its name in this language) says the number may reach 200.000 trading premises that employ between 300.000 and 500.000 workers. In addition, the Spanish Trading Confederation calculates that one in ten leased properties may fall under the law.

Opposition has proposed several amendments on putting validity of these contracts at least five years forward in favor of overcoming the recession, as well as enhancing regional mediation and arbitrary systems which could quickly resolve possible emerging conflicts between landlords and lessees.

Experts predict that most of the parties will opt for price re-negotiation and adjustment to the current market. Obviously, this is the beneficial option for the lessor. In fact, the businesses paying now 4.500 euros per year may see their rent skyrocketing to 15.000 euros in reference to the regulation. And if the most iconic properties located in Madrid or Barcelona involved, the difference may spread farther out.

Tinsa provided a practical example of the gap between the net revenues (average expenses excluded), inside the old rental regime, posting 43.189 euros and the free-market profits of 187.631 euros in the last 20 years.

In this context, a survey by the Official Association of Real Estate Agents in Spain (Coapi in short) presented by its chairman Jaime Cabrero concludes that 74.20 per cent of the experts reckons the best move is to renovate the expiring agreements. Of the percentage, 48.39 per cent foresees that owners and tenants will rectify their contracts still this year, while 25.81 per cent thinks the lessors will employ the present market price to the renovation agreement.

 

Original story: Cinco Días (by Raquel Díaz Guijarro)

Translation: AURA REE

Spain Exchanges Subsidized Housing For Rent Subsidy Program

5/12/2014 – Expansion

Goodbye, subsidized homes! Welcome, rental subsidies for unsubsidized apartments! This is the new policy of the current Government which assumes promotion of rental assistance for low-income families.

The measure has been included in the 2013-2016 State Plan on home leasing, building rehabilitaion and town regeneration and renovation. The scheme seeks replacing so-called VPOs (subsidized housing units) because currently their prices post much higher than many free and available properties across Spain.

Thus, the Government foresees granting up to 200 euros per month, until 2016, to 200.000 families that find it diffcult to make the ends meet. The Ministry of Public Works will pay betwen 33 per cent and 40 per cent of monthly rentals to households whose incomes are lower than 22.365 euros annually and who rent homes for less than 600 euros per month. Total annual payment must be inferior than 2.400 euros.

The new assistance will be provided for 12 months, extendable until the end of the Plan’s effectiveness. However, as the approval arrived a bit late, the applicants will have a chance to enjoy the support until 2017.

Not in vain, the Ministry has already foreseen 48.000 beneficiaries of the assistance in 2014. Will it be done just in four weeks? The eligible people in need cannot earn more than three-times the Iprem (Spanish Public Indicator of Multiple Effect Income) but the quota may vary in accordance to the number of family members. Moreover, priority will be given to the evicted.

On the other hand, from the real estate market news, recent report by Tinsa states that the industry predicts decrease in yields on prime assets, as well as a cut in incentives for office rentals. Also, it says interest will boost about vacant or for management assets.

 

Original story: Expansión (by Juanma Lamet)

Translation: AURA REE

New Rental Assistance Program In Effect Today: Who May Apply?

4/12/2014 – Expansion

Today opens the acceptance period for applications for the rental, building rehabilitation and town regeneration and renovation assistance program, included in the Government’s Housing Scheme for years 2013-2016.

Previous reform dating back at July 4th 2013, prolonged all rights to the help of that time ‘until new program comes into force’. Once amended, the document elaborated by the Ministry of Public Works and various regional authorities includes a 40% support for rents which do not exceed 600 euros monthly and 2.400 euros annually.

Moreover, beneficiaries of the new basic income support (Renta Basica de Emancipacion in Spanish) can apply when their previously indicated validity period is over.

Furthermore, tenants whose personal income is lower than three times the Public Indicator of Multiple Effect Income (known as Iprem in Spain) would show, are eligible for the program in line with their households’ composition. The assistance is given for a year and it could be extended until the end of the Plan, i.e. 2016.

 

Original story: Expansión 

Translation: AURA REE

Crobeco, the Online Platform For International Real Estate Transactions

2/12/2014 – El Mundo

ELRA: European Land Registry Association, to which the Colegio de Registradores de España (the Spanish Registrars School) also belongs, has run a project called Crobeco (Cross Border e-Conveyancing) to facilitate online real estate transfers.

The non-profit organization said in a statement that the new online platform will use electronic signatures in processing acquisition documents. The signatures will serve for the parties’ identification purposes.

The project is financed from the EU funds. Crobeco’s manager Wim Louwman assured ‘the system streamlines the process, enhances legal security of the real estate transactions and acts in favor of free document circulation’.

 

Original article: El Mundo

Translation: AURA REE

No Tax Benefits For Property Buyers Or Tenants

1/12/2014 – Cinco Dias

Tax incentives for property purchase undoubtedly contributed to the real estate bubble inflation which became one of the main culprits of current Spanish economical situation. The Government decided to eliminate tax deduction for acquisition of a main residence which will be preserved retroactively but will not apply from January 1st 2015 onwards. The same reform approved ten days ago rules out taxable profits arising from main home rental and decreases benefits from the buy-to-lease scheme.

Now, tenants can deduct 10.05% of the annual rental amount in their tax filing, given it does not exceed €9.040 in case of a taxable base below €17.707,2. The allowance is also applicable to higher basis until a €24.107 cap, however, once the previous limit trespassed, the incentive is progressively reduced to zero.

Once the new year begins, tax deduction for both property purchase and lease will disappear but it will apply in a retroactive way, i.e. for the homes acquired before 2013 and the rental contracts signed by the end of December 2014.

In 2015, acquiring a property to lease it afterwards will assure an up to 60% deduction for landlords but they will lose the 100% allowance for renting to under-35 tenants.

Pressured to relax the new taxation conditions for capital gains proceeding from property sales, the Ministry of Finance has amended the reform originally eliminating revaluation rates and abatement coefficients, reduced for homes bought before 1995. The latter decreases the tax liability of the capital gain accumulated from the moment of purchase to January 2oth 2006, turning out extremely beneficial for old property sales. The coefficient goes up back in time. For example, if a home was bought before 1986, accrued capital gains as of January 2006 become exempt to the taxation rules. And if it was acquired in 1987, only 11.12% of the revenue will be a subject to the contribution.

Revaluation rates are set to disappear in 2015. The abatement coefficients will remain in force but will only apply to houses sold for less than €400.000. There will be no allowance for an amount above this topline which additionally will be accumulative. This means that the abatement coefficients enjoyed at a sale for €300.000 may be prolonged only to another sale for €100.000.

Given the amendments, it would be to recommendable to sell a house still this year. One must also crunch the numbers as the complete removal of revaluation rates and the restriction of abatement coefficients will be compensated by a reduction in taxes on capital gains. Thus, proceeds from a home sale now are subject to 21% tax for first €6.000, 25% for next €24.000 and 27% above that amount. From 2015 on, the contribution will be reduced to 20% (first €6.000) and to 19% in 2016, furthermore to 22% for following €50.000 and to 24% for the rest (23% in 2016).

Therefore, an owner should take into consideration that if they sell in 2015, they will pay less taxes and if for less than €400.000, there will be no handicap, except for the elimination of the coefficient recognizing the inflation effect.

 

Original article: Cinco Días (by Nuria Salobral)

Translation: AURA REE

Madrid Office Space Demanded by Law Firms

25/11/2014 – ExpansionPro

Economical and real estate improvement soaks in the law office market. The latest report by Jones Lang LaSalle (JLL), titled Law Firm Perspective Global 2014 states that the city of Madrid had left the ‘slump stage’ and entered in the ‘growth phase’ – just where it was before the boom.

Thus, as the study explains, rapidly shrinking supply of office space in Madrid makes many lawyers look for another location before the prices rise.

Further on, JLL points out that the most-desired Castellana street (aerial picture) may at most see refurbishment and redecoration, unless any new office project comes up. When it comes to the law firms, the company says they still show a traditionalist approach to picking a representative location, selecting compartmentalized, highest-quality buildings.

Speaking of the global market, the report informs the rental prices are expected to rise in 77% of markets of the Northern America, in 56% of the European ones, and in 43% of markets in Asia. Only 15% of all forecast some advance in tenant conditions or fall in prices.

Madrid Primary Area

The capital-based lawyers offices focus their search on the aforementioned Castellana avenue and areas nearby: the Salamanca neighbourhood in the east, and the Almargo and Zurbano zones in the west.

The smallest firms choose mixed-use and residential buildings. In turn, 96% of the 25 largest are found in one of the areas specified above.

To give a few examples of recent relocations, Hogan Lovells has occupied a 4.608 square meter office at numbers 36-38 Paseo de la Castellana, and White & Case a 1.142 square meter one at number 7 on the same street. Next to change premises was Dentons (number 53), as well as Amat & Vidal-Quadras (21 Ortega y Gasset street) and Martínez-Echevarría (33 Principe de Vergara street). Second Spanish branch of Arochi & Lindner opened at 28 Serrano. Also, Herbert Smith will move its team to a 4.000-square meter old office of Cuatrecasas, Gonçalvez Pereira situated at 43 Velazquez street. Finally, CMS Albiñana & Suárez de Lezo and Bird & Bird are currently eyeing the market in search of new premises.

 

Original article: ExpansiónPro (by Mercedes Serraller)

Translation: AURA REE

Santander Branches of Oleguer Pujol Foreclosed by Creditors

25/11/2014 – Expansion

A group of creditors led by Santander, CaixaBank and BNP Paribas capitalizes debt of Samos, renames the company and hires the president of Barclays, Carlos Martinez Campos.

The banks seize 1.150 Santander branches (one-fourth of all in Spain) sold to a group of investors for more than €2 billion in 2007 and prepare them to go public. According to financial sources, a banking consortium which financed the purchase renamed Samos Servicios y Gestiones the ‘Uro Property Holdings Socimi‘.

The operations put an end to the relation of the company owning the offices with its former managers, Oleguer Pujol and his ex-partner from Drago Capital, Luis Iglesias, both being investigated by the Supreme Court for money laundering and fraud. Precisely, the origin of the equity with which Mr. Pujol had paid for the branches was quite shady.

The new Socimi (Spanish counterpart of a REIT vehicle) is expected to go public in January 2015. In order to clear the name of the new investment trust and dissociate with the youngest son of Pujol Ferrusola, the new owners of 91% of the firm asked for an official statement proving that Uro Property Holdings is free from any irregularity. According to the acquisition agreement, Santander preserves a right to repurchase some of the offices.

 

Original article: Expansión (by Jorge Zuloaga), Bolsamania

Translation: AURA REE